Friday, March 7, 2008



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Here's the written evidence
… and - please say it ain't so! - Obama and Hillary attack Ecuador

Note: Saturday, Bobby Kennedy hosts Greg Palast on "[1] Ring of Fire" on Air America Radio. Sunday, catch Palast with Amy Goodman on WABC Television (New York), hosted by Gil Noble, Channel 7 at 1 pm(est).

Friday, March 6, 2008 for [2][3]
By Greg Palast

Do you believe this?

This past weekend, Colombia invaded Ecuador, killed a guerrilla chief in the jungle, opened his laptop – and what did the Colombians find? A message to Hugo Chavez that he sent the FARC guerrillas $300 million – which they're using to obtain uranium to make a dirty bomb!

That's what George Bush tells us. And he got that from his buddy, the strange right-wing President of Colombia, Alvaro Uribe.

So: After the fact, Colombia justifies its attempt to provoke a border war as a way to stop the threat of WMDs! Uh, where have we heard that before?

The US press snorted up this line about Chavez' $300 million to "terrorists" quicker than the young Bush inhaling Colombia's powdered export.

What the US press did not do is look at the evidence, the email in the magic laptop. (Presumably, the FARC leader's last words were, "Listen, my password is ….")

I read them. (You can read them [4] here) While you can read it all in español, here is, in translation, the one and only mention of the alleged $300 million from Chavez:

"… With relation to the 300, which from now on we will call "dossier," efforts are now going forward at the instructions of the boss to the cojo [slang term for 'cripple'], which I will explain in a separate note. Let's call the boss Ángel, and the cripple Ernesto."

Got that? Where is Hugo? Where's 300 million? And 300 what?at the request of the Colombian government. Indeed, in context, the note is all about the hostage exchange with the FARC that Chavez was working on at the time (December 23, 2007)

Indeed, the entire remainder of the email is all about the mechanism of the hostage exchange. Here's the next line:
"To receive the three freed ones, Chavez proposes three options: Plan A. Do it to via of a 'humanitarian caravan'; one that will involve Venezuela, France, the Vatican[?], Switzerland, European Union, democrats [civil society], Argentina, Red Cross, etc."

As to the 300, I must note that the FARC's previous prisoner exchange involved 300 prisoners. Is that what the '300' refers to? ¿Quien sabe? Unlike Uribe, Bush and the US press, I won't guess or make up a phastasmogoric story about Chavez mailing checks to the jungle.

To bolster their case, the Colombians claim, with no evidence whatsoever, that the mysterious "Angel" is the code name for Chavez. But in the memo, Chavez goes by the code name … Chavez.

Well, so what? This is what . . . .
Colombia's invasion into Ecuador is a rank violation of international law, condemned by every single Latin member of the Organization of American States. But George Bush just loved it. He called Uribe to back Colombia, against, "the continuing assault by narco-terrorists as well as the provocative maneuvers by the regime in Venezuela."..more-->

Well, our President may have gotten the facts ass-backward, but Bush knows what he's doing: shoring up his last, faltering ally in South America, Uribe, a desperate man in deep political trouble.

Uribe claims he is going to bring charges against Chavez before the International Criminal Court. If Uribe goes there in person, I suggest he take a toothbrush: it was just discovered that right-wing death squads held murder-planning sessions at Uribe's ranch. Uribe's associates have been called before the nation's Supreme Court and may face prison.

In other words, it's a good time for a desperate Uribe to use that old politico's wheeze, the threat of war, to drown out accusations of his own criminality. Furthermore, Uribe's attack literally killed negotiations with FARC by killing FARC's negotiator, Raul Reyes. Reyes was in talks with both Ecuador and Chavez about another prisoner exchange. Uribe authorized the negotiations. However, Uribe knew, should those talks have succeeded in obtaining the release of those kidnapped by the FARC, credit would have been heaped on Ecuador and Chavez, and discredit heaped on Uribe.

Luckily for a hemisphere on the verge of flames, the President of Ecuador, Raphael Correa, is one of the most level-headed, thoughtful men I've ever encountered.

Correa is now flying from Quito to Brazilia to Caracas to keep the region from blowing sky high. While moving troops to his border – no chief of state can permit foreign tanks on their sovereign soil – Correa also refuses sanctuary to the FARC . Indeed, Ecuador has routed out 47 FARC bases, a better track record than Colombia's own, corrupt military.

For his cool, peaceable handling of the crisis, I will forgive Correa for apologizing for his calling Bush, "a dimwitted President who has done great damage to his country and the world." (Watch an excerpt of my interview with Correa [5] here.)

Amateur Hour in Blue

We can trust Correa to keep the peace South of the Border. But can we trust our Presidents-to-be?

The current man in the Oval Office, George Bush, simply can't help himself: an outlaw invasion by a right-wing death-squad promoter is just fine with him.

But guess who couldn't wait to parrot the Bush line? Hillary Clinton, still explaining that her vote to invade Iraq was not a vote to invade Iraq, issued a statement nearly identical to Bush's, blessing the invasion of Ecuador as Colombia's "right to defend itself." And she added, "Hugo Chávez must stop these provoking actions." Huh?

I assumed that Obama wouldn't jump on this landmine – especially after he was blasted as a foreign policy amateur for suggesting he would invade across Pakistan's border to hunt terrorists.

It's embarrassing that Barack repeated Hillary's line nearly verbatim, announcing, "the Colombian government has every right to defend itself."

(I'm sure Hillary's position wasn't influenced by the loan of a campaign jet to her by Frank Giustra. Giustra has given over a hundred million dollars to Bill Clinton projects. Last year, Bill introduced Giustra to Colombia's Uribe. On the spot, Giustra cut a lucrative deal with Uribe for Colombian oil.)

Then there's Mr. War Hero. John McCain weighed in with his own idiocies, announcing that, "Hugo Chavez is establish[ing] a dictatorship," presumably because, unlike George Bush, Chavez counts all the votes in Venezuelan elections.

But now our story gets tricky and icky.

The wise media critic Jeff Cohen told me to watch for the press naming McCain as a foreign policy expert and labeling the Democrats as amateurs. Sure enough, the New York Times, on the news pages Wednesday, called McCain, "a national security pro."

McCain is the "pro" who said the war in Iraq would cost nearly nothing in lives or treasury dollars.

But, on the Colombian invasion of Ecuador, McCain said, "I hope that tensions will be relaxed, President Chavez will remove those troops from the borders - as well as the Ecuadorians - and relations continue to improve between the two."

It's not quite English, but it's definitely not Bush. And weirdly, it's definitely not Obama and Clinton cheerleading Colombia's war on Ecuador.

Democrats, are you listening? The only thing worse than the media attacking Obama and Clinton as amateurs is the Democratic candidates' frightening desire to prove them right.

As Goes Vermont

As Goes Vermont

Officials Lean Toward Keeping Next Iraq Assessment Secret

Officials Lean Toward Keeping Next Iraq Assessment Secret

By Walter Pincus and Karen DeYoung

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A new National Intelligence Estimate on Iraq is scheduled to be completed this month, according to U.S. intelligence officials. But leaders of the intelligence community have not decided whether to make its key judgments public, a step that caused an uproar when key judgments in an NIE about Iran were released in November.

The classified estimate on Iraq is intended as an update of last summer's assessment, which predicted modest security improvements but an increasingly precarious political situation there, the U.S. officials said.

It is meant to be delivered to Congress before testimony in early April by Army Gen. David H. Petraeus, the top U.S. commander in Iraq, and U.S. Ambassador Ryan C. Crocker, according to a letter sent last week by Director of National Intelligence Mike McConnell to Sen. John W. Warner (R-Va.).

Since the Iraq invasion in 2003, the intelligence community has been more cautious than the military and the White House in assessing political, economic and security gains in Iraq. And the war's progress has been a prominent issue in the presidential campaign.

In his letter to Warner, McConnell said that separate estimates are also being prepared on the "terrorist threat to the homeland" - focusing on al-Qaeda and Pakistan - and on "the tactical and longer-term security and political outlook for Afghanistan." Both are scheduled for publication by early fall.

Warner requested all three estimates in January, describing them as key to upcoming policy discussions in Congress.

Intelligence officials said that the National Intelligence Board - made up of the heads of the 16 intelligence agencies plus McConnell - will decide whether to release the Iraq judgments once the estimate is completed. But they made clear that they lean toward a return to the traditional practice of keeping such documents secret.

In internal guidance he issued in October, McConnell said that his policy was that they "should not be declassified." One month later, however, the intelligence board decided to publicly release key judgments from an NIE on Iran's nuclear weapons program, saying that it had weighed "the importance of the information to open discussions about our national security against the necessity to protect classified information."

The estimate, which said Iran had halted the weaponization element of its nuclear program, appeared to undermine the Bush administration's position on Tehran's overall effort. With Bush arguing that Iran remained "a danger," McConnell publicly said the NIE judgment was poorly written because it emphasized a halt in the weapons program rather than Iran's continuing nuclear enrichment.

Key NIE judgments on Iraq had previously been made public, beginning with a highly controversial October 2002 assessment warning that Saddam Hussein possessed weapons of mass destruction. That estimate was later proved wrong, with no such weapons discovered in Iraq after the U.S. invasion, and the matter led to charges that the intelligence community had been politicized by the Bush administration.

"Overall, professional life is less complicated if nothing becomes public, and one doesn't have to organize classified assessments always having in the back of one's mind, 'If this is ever leaked, how would it read' " in the news media, a former intelligence analyst said.

Spain Drops Extradition Attempt Against Guantanamo Torture Pair

Spain Drops Extradition Attempt Against Guantanamo Torture Pair

By Paul Hamilos and Vikram Dodd

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Spain yesterday dropped its attempt to extradite two British residents who had been freed from Guantanamo Bay, after accepting that torture they suffered during five years of American custody had left them too weak to stand trial.

Jamil el-Banna, 45, and Omar Deghayes, 38, who were accused of being members of an al-Qaida cell in Madrid, were detained on their return to Britain in December on a European arrest warrant issued by Spain.The Madrid judge who issued the warrant, Baltasar Garzon, accepted British medical reports which found the men were suffering from post traumatic stress disorder (PTSD) and other serious medical conditions.

Banna is said to be severely depressed, suffering from PTSD, and to have diabetes, hypertension and back pain, as well as damage to the back of his left knee. Deghayes is also suffering from PTSD, and depression, is blind in his right eye, and has fractures in his nasal bone and his right index finger. Both men are said to be at high risk of suicide.

The report on Deghayes concludes: "Given all these factors, I don't see how Mr Deghayes would be able to give instructions to his lawyers, listen to evidence and give his own accurate testimony". A similar conclusion was drawn in the case of Banna, adding that were he to be separated from his wife and children again, he risked a deterioration of his fragile mental health.

Deghayes, a Libyan national whose family fled the Gadafy regime, said from his home in Brighton: "It's good - it's happy news. I always knew they would realise their mistake and give up the case. I still have problems with immigration as the authorities have taken away my resident status, but this is a relief."

The Home Office refused to guarantee to let the pair stay with their families in Britain and said: "Their immigration status is under review."

Deghayes and Banna arrived back in Britain with a third British resident, Abdennour Samuer. Banna, from north-west London, was arrested in the Gambia in 2002 after he did not accept an MI5 request to become an informant.

Irene Nembhard, a lawyer for the men, said it was time for them to be allowed to rebuild their lives.

Commander warns of al-Qaida threat to US

Commander warns of al-Qaida threat to US


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Al-Qaida terrorists may be plotting more urgently to attack the United States to maintain their credibility and ability to recruit followers, the U.S. military commander in charge of domestic defense said.

Air Force Gen. Gene Renuart, chief of the U.S. Northern Command, also told reporters Thursday he has not seen any direct threats tied to the U.S. presidential elections. But he said it would be rash to think that such threats are not there.

"We need only to look at Spain and see that they're certainly willing to try to do something that is significant that could affect an election process," Renuart said. "I think it would be imprudent of us to let down our guard believing that if there's no credible threat that you know of today, there won't be something tomorrow."

While he said that U.S. authorities have thwarted attacks on a number of occasions, he said terrorist cells may be working harder than ever to plot high-impact events. He did not point to any specific intelligence that authorities have received but said the "chatter" they are hearing "gives me no reason to believe they're going to slow down" in their efforts to target the U.S.

"If an organization like that is to maintain credibility and continue to grow more of its extremists, it has to show tangible results," Renuart said. "So I think there may be a certain sense of urgency among that organization to have an effect. So it would tell me that they're trying harder."

Asked about the terror threat, Homeland Security spokesman Russ Knocke said, "There continues to be no credible information telling us about an imminent threat to homeland at this time."

In July, U.S. intelligence analysts, in a threat assessment, concluded that al-Qaida had rebuilt its operating capability to a level not seen since just before the Sept. 11, 2001, terrorist attacks. The report said the terror network had regrouped along the Afghan-Pakistan border, but it also noted that officials knew of no specific credible threat of an attack on U.S. soil.

About the same time, Homeland Security Secretary Michael Chertoff raised eyebrows when he said he had a "gut feeling" that the United States faced a heightened risk of attack.

On Thursday, however, Chertoff said the U.S. has successfully lowered the risk of a large-scale domestic terrorist attack for the near future.

"We have significantly reduced the risk of a major attack in the short term," Chertoff told a group of editors at The Washington Post in a report posted online Thursday.

Chertoff said the U.S. effort was one of the reasons there has been an increase in attacks by Islamic extremists in Europe. Improvements in U.S. traveler screening and border security have shifted the focus of al-Qaida operatives and sympathizers to Europe, he said.

Renuart said that of the more than a dozen daily events that Northern Command responds to — ranging from natural disasters to threats — two or three may have the potential to be terrorist incidents.

The chatter, which included public audio and video tapes released on the Internet by al-Qaida leaders, suggests that they are looking for a way to have a big impact again, he said. Pressed for details, he said the chatter was more common but "whether that's louder or more ominous, I'm not sure I'm ready to draw that conclusion."

He did, however, repeat his assertion — which he first made in July — that he believes there are al-Qaida cells or sympathizers within the United States.

President Bush, in a speech Thursday, also said the United States remained under threat from terrorists. Marking the fifth anniversary of the creation of the Homeland Security Department, Bush said that in the aftermath of the Sept. 11 attacks "it was hard to imagine that we would reach this milestone without another attack on our homeland."

Yet he said, "On this anniversary, we must also remember that the danger to our country has not passed. Since the attacks of 9/11, the terrorists have tried to strike our homeland again and again. We've disrupted numerous planned attacks — including a plot to fly an airplane into the tallest building on the West Coast and another to blow up passenger jets headed for America across the Atlantic Ocean."

Bush said the lesson is clear: "The enemy remains active, deadly in its intent — and in the face of this danger, the United States must never let down its guard."


AP White House Correspondent Terence Hunt and AP writer Eileen Sullivan contributed to this report.


On the Net:

U.S. Northern Command:

Fired U.S. attorney says colleague told him politics was behind his ouster

Fired U.S. attorney says colleague told him politics was behind his ouster

Marisa Taylor

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WASHINGTON — A longtime protege of President Bush told former U.S. Attorney David Iglesias that he was fired for political reasons and that he shouldn't fight his ouster, Iglesias says in a new book.

"This is political," Iglesias recalls Texas U.S. Attorney Johnny Sutton telling him shortly after he was ousted. "If I were you, I'd just go quietly."

Iglesias, a former U.S. attorney in New Mexico, is one of nine federal prosecutors whose firings triggered a yearlong controversy at the Justice Department and led to the resignations of Attorney General Alberto Gonzales and 11 other Justice Department officials.

Iglesias cites the exchange with Sutton in his upcoming book, "In Justice," as further evidence that he was forced out because Republicans were displeased with his refusal to prosecute Democrats.

"I couldn't believe what I was hearing: a U.S. attorney all but admitting that a colleague was being hung out to dry for reasons that had nothing to do with performance or professionalism," he wrote in a draft of the book, which McClatchy obtained.

Sutton, who's the top U.S. attorney in San Antonio, didn't return phone calls Thursday seeking comment.

As a result of Iglesias' and several other prosecutors' accusations that they were fired in December 2006 for improper political reasons, the Justice Department turned over thousands of documents, and Congress forced top officials, including Gonzales, to testify.

No one has determined who decided which prosecutors should be fired and why. Democrats say that must mean the White House was calling the shots, while the administration has said it demonstrates that the firings were blown out of proportion.

Iglesias said he asked Sutton how he knew about his firing.

"I saw your name," he quoted Sutton as saying.

Iglesias said in an interview that Sutton refused to elaborate, "but to have one of the most powerful U.S. attorneys tell me my firing was political was confirmation, in my view, that I was fired for the wrong reasons."

During a congressional investigation of the firings, department e-mails revealed that Sutton was given a heads-up about the firings because he was the chairman of the Attorney General's Advisory Committee of U.S. Attorneys.

Justice Department officials said they couldn't comment on Iglesias' account because of an ongoing probe of the firings by the department's inspector general and the Office of Professional Responsibility.

"The department is cooperating with that investigation and has no further comment," said spokesman Peter Carr.

Sutton, whose ties to Bush date back to the president's Texas gubernatorial campaign, has been singled out himself by Republican critics who have called for his resignation. So far, he's weathered the political storm.

The critics have accused Sutton of leading an overzealous prosecution of Border Patrol agents Ignacio Ramos and Jose Alonso Compean, each sentenced to more than 10 years in prison for shooting a Mexican drug courier as he was trying to flee back to Mexico.

"The type of protection from political pressure that Johnny has gotten was the kind of protection that I thought we would get," said Iglesias, who said he bears Sutton no ill will. "And we didn't get it, I think largely because we didn't have a personal relationship with the president."

Iglesias' book, co-authored by Davin Seay, is due out in early June.

Fed Boosts Lending to Banks as Credit Rout Continues

Fed Boosts Lending to Banks as Credit Rout Continues

By Craig Torres and Vincent Del Giudice

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The Federal Reserve moved to add as much as $200 billion to the banking system over the next month to offset a deepening credit crisis that may have already pushed the U.S. economy into a recession.

The central bank raised to $50 billion each from $30 billion the amount intended for auctions of funds on March 10 and March 24. The Fed also said in a statement in Washington today that it will make $100 billion available through weekly 28-day repurchase agreements, where the central bank will lend cash in return for assets including mortgage-backed bonds.

The decision is the central bank's latest attempt to reduce the threat to the economy from banks curtailing loans to companies and households. Banks and securities firms have posted losses exceeding $188 billion since the start of last year as the impact of surging defaults on subprime mortgages rippled through world financial markets.

``Given what we have seen in terms of illiquidity in the financial markets in the last four or five days, this came right in time,'' Ajay Rajadhyaksha, head of fixed-income strategy at Barclays Capital in New York, said in an interview with Bloomberg Television.

The Fed said it will increase the sizes of both the so- called Term Auction Facility operations and the repurchases ``if conditions warrant.''

Interest Rates

Traders increased bets that the Fed will lower its benchmark interest rate by three quarters of a point this month after a government report showed the biggest job loss in five years, adding to evidence the economy is contracting. Odds of a smaller, half-point reduction fell to 6 percent from 26 percent yesterday, futures prices showed.

Fed officials said today's announcement wasn't related to the jobs report, and instead was aimed at addressing the deterioration in credit markets. The officials, speaking on condition of anonymity in a conference call with reporters, also said the measures won't expand the Fed's balance sheet.

At the same time, the central bank's balance sheet will likely change in composition as a result of today's announcements. Changes in the way the Federal Reserve Bank of New York accepts bids for repos will probably boost the level of mortgage-backed debt the Fed holds, while reducing the level of Treasuries, a Fed official said.

In effect, the Fed is using its own balance sheet to help banks and bond dealers finance assets riskier than U.S. government debt.

Investor Exodus

The move comes as investors are questioning the worth of even the highest-rated securities after Standard & Poor's and Moody's Investors Service assigned AAA grades to bonds backed by mortgages to borrowers who are now struggling to make their payments.

Carlyle Group's mortgage-bond fund was suspended in Amsterdam today after creditors forced the sale of some holdings, jeopardizing shareholders' capital. The fund borrowed to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac.

Citigroup Inc., the fourth-largest U.S. home lender by new loan volume, said March 6 it plans to pare its mortgage and home-equity loan holdings by about $45 billion, or 20 percent, over the next year.

Federal Open Market Committee members are next scheduled to meet on March 18. As credit stresses increased since the last gathering on Jan. 29-30, speculation has increased among traders that officials will consider lowering rates before the next meeting, as they did on Jan. 22.

Rate Target

Officials said they will keep the benchmark federal funds rate target around the level set by the FOMC, indicating they don't plan for the liquidity measures to drive the rate lower.

The central bank introduced the TAF, a lending tool that allows banks to give the Fed a range of collateral in return for loans, in December. The TAF loans for this month have a 28-day maturity.

``What the Fed's saying with the TAF changes is, `We hear you and we want to ensure everybody has financing for good collateral,''' said Joe Tully, managing director of the money- market desk in Newark, New Jersey, at Prudential Investment Management, which oversees about $55 billion.

The New York Fed said in a statement that the first of the 28-day repo operations will be conducted today, in the amount of $15 billion. It also said it will sell $10 billion of Treasury- bill holdings, ``to maintain a level of reserves'' consistent with keeping the federal funds rate around the current target.

Helping Banks

Repos allow the central bank to inject funds into primary dealers, a group of 20 banks that trade securities directly with the New York Fed. By contrast, the TAF operations offer funds to deposit-taking institutions; the most recent auction included 72 banks.

The Fed said it is ``in close consultation'' with other central banks. In December, the Fed loaned $24 billion to the European Central Bank and Swiss National Bank through a swap agreement to make more dollars available to banks in Europe.

``If need be, we could certainly continue'' to coordinate with the Fed, ECB spokeswoman Regina Schueller said, citing remarks by President Jean-Claude Trichet.

The SNB said it has no plans to join in dollar auctions, spokesman Werner Abegg said.

Job Losses

The Fed is also trying to contain the fallout on the broader U.S. economy, which is moving closer to recession. Employers cut payrolls by 63,000 after a loss of 22,000 in January, the Labor Department said today.

The central bank said that the TAF operations will be continued for at least the next six months. Fed Chairman Ben S. Bernanke said in January that officials may make the resource a ``permanent addition to the Fed's toolbox.''

Former Fed Chairman Alan Greenspan yesterday said March 5 that the credit markets won't recover until house prices stop falling. He said in a conference call organized by Deutsche Bank AG that home construction needs to decline to clear a surfeit of unsold properties and stabilize home prices.

``I don't think there's that much the Fed can do about this,'' Harvard University economist Kenneth Rogoff, a former chief economist of the International Monetary Fund, said in an interview in Paris. ``It's very limited what monetary policy can do in the wake of a once-in-many-decades housing-price crash.''

Carlyle Group Scorched by Mortgage Fund's Blowup

Carlyle Group Scorched by Mortgage Fund's Blowup

By Edward Evans

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The collapse of the subprime- mortgage market has engulfed Carlyle Group, the world's second- biggest leveraged-buyout firm by assets.

Carlyle Capital Corp., the firm's mortgage-bond fund, was suspended from Amsterdam trading today after it failed to repay lenders, who in turn sold assets held as collateral. The fund expects more margin calls, which may deplete capital. The pool may be liquidated and the stock left worthless, Bear Stearns Cos. analyst Keith Baird said in a note to clients.

``This marks a further savage step in the ongoing credit implosion of recent months,'' Baird wrote today.

The blowup is a rare set-back for Carlyle founder David Rubenstein, who created the fund and tapped public markets for $300 million as part of efforts to expand his Washington-based firm beyond LBOs. Though not obligated, Carlyle Group has extended $150 million in credit to Carlyle Capital since August. It hasn't said how much of that has been used.

If Carlyle Group doesn't provide more financing, the fund ``could be forced into significant asset sales into a weak market or could face bankruptcy,'' Citigroup Inc. analysts including Donald Fandetti in New York wrote yesterday in a note to investors.

Carlyle Capital is ``considering all options,'' the fund said in its statement. Carlyle Group, which has about $30 billion in uncommitted capital across its funds, has no financial ties to Carlyle Capital beyond the $150 million credit line.

No Impact

``We believe the challenges facing CCC will have no material impact on the Carlyle Group or any of Carlyle's other funds,'' Carlyle spokeswoman Ellen Gonda said today.

The fund plunged 58 percent yesterday to $5 after first disclosing it couldn't meet lenders' demands for more collateral to offset a decline in its holdings. Carlyle sold the shares for $19 in an initial public offering in July.

The fund, run by John Stomber, originally delayed and then cut the size of the IPO by about 25 percent as the subprime contagion began. It then added the money raised in July to a private $590 million pool opened in 2006. For every dollar of equity, the pool borrowed $32.

Guernsey, U.K.-based Carlyle Capital bought about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, notes that it says have the ``implicit guarantee'' of the U.S. government.

The effect of the U.S. subprime-mortgage market collapse has spilled over into top-rated agency debt, knocking down the value of the residential mortgage-backed securities.

Hoarding Cash

The agency mortgage-bond market has about $4.5 trillion of securities, according to estimates from UniCredit SpA. The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points this week, the highest since 1986, according to data compiled by Bloomberg.

Carlyle's counterparties are Wall Street firms, which use repurchase agreements to lend money and require securities be put up as collateral. As the perceived credit worthiness of asset-backed bonds declined, the amount of money that can be borrowed using them as collateral fell.

``Banks are hoarding cash, they're having difficulty funding themselves,'' said Willem Sels, a credit strategist at Dresdner Kleinwort in London. ``Our concern is that market moves in price lead to mark-to-market losses, which lead to margin calls and forced selling, and then more losses in a vicious circle.''

KKR Financial Holdings LLC, Kohlberg Kravis Roberts & Co.'s debt-investment affiliate, said yesterday it's in ``good shape'' and can weather the credit-market slump.

``We are not cavalier, we clearly admit the environment has deteriorated,'' Saturnino Fanlo, chief executive officer of the San Francisco-based company, said on a conference call with investors. ``KFN is in good shape for tumultuous markets.''

U.S. Stocks Drop on Unexpected Loss of Jobs; Energy Shares Fall

U.S. Stocks Drop on Unexpected Loss of Jobs; Energy Shares Fall

By Elizabeth Stanton

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U.S. stocks fell for a second day after the biggest drop in jobs since 2003 sent energy and mining shares lower, overshadowing a Federal Reserve plan to make more cash available to lenders.

Chevron Corp. and Alcoa Inc. led declines that sent the Dow Jones Industrial Average below 12,000 for the first time since January. Boeing Co., the second-biggest maker of commercial aircraft, slid the most in two months on concern a new plane will be delayed. Bank of America Corp. rose, leading financial shares to their first advance in seven days.

The Standard & Poor's 500 Index retreated 10.2 points, or 0.8 percent, to 1,294.14 at 12:39 p.m. in New York. The Dow average lost 107.62, or 0.9 percent, to 11,932.77. The Nasdaq Composite Index decreased 9.37, or 0.4 percent, to 2,211.13. Three stocks fell for every one that rose on the New York Stock Exchange.

``This is definitely bad news,'' Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $25 billion, said of the jobs report. ``It increases the chance for a real recession happening if consumers start to pull back significantly.''

The S&P 500 extended its weekly decline to 2.7 percent after the Labor Department reported a loss of 63,000 jobs last month, defying economists forecasts for a gain of 23,000. The benchmark for U.S. equities is down 12 percent this year on concern that the first decline in home prices since the Great Depression and record foreclosures will increase bank losses and limit lending.

Alcoa, Freeport

Alcoa fell $1.95, or 5.1 percent, to $36.42 for the biggest decline in the Dow average. Analysts at Friedman, Billings, Ramsey & Co. lowered their recommendation to ``market perform'' from ``outperform,'' citing concern metal prices will decline. The brokerage also downgraded Freeport-McMoRan Copper & Gold Inc. to ``market perform,'' sending shares of the world's second- largest copper producer down $4.34 to $100.

Energy companies contributed the most to the S&P 500's decline, led by providers of services to the oil industry. Schlumberger Ltd., the biggest oilfield-support company, slipped $2.98 to $84.68. Smith International Inc., the fourth-largest, dropped $2.60 to $61.19. Chevron, the second-biggest energy company, slumped $2.03 to $85.77.

Boeing slid $2.30 to $77.21. The world's second-biggest maker of commercial jets may further postpone delivery of its 787 Dreamliner by several months to the second half of 2009, according to Goldman Sachs Group Inc. analyst Richard Safran.

Banks Rally

Banks and brokerage firms limited the decline. Before the jobs report, the Fed announced additional measures to enable financial institutions to make loans. Banks and securities firms have posted losses exceeding $181 billion since the start of last year as the impact of surging defaults on subprime mortgages rippled through world financial markets.

Wells Fargo, the biggest bank on the U.S. West Coast, added 38 cents to $28.21. Bank of America, the largest U.S. bank, climbed 6 cents to $37.66.

The central bank increased to $50 billion each from $30 billion the amount intended for auctions of funds planned for March 10 and March 24. The Fed also will make $100 billion available through weekly 28-day repurchase agreements, where the central bank lends cash in return for assets such as Treasuries.

Financial shares also gained as traders boosted bets the Fed will cut the benchmark interest rate by three-quarters of a percentage point by March 18, the date of its next scheduled monetary policy meeting. Interest-rate futures show 98 percent of wagers are on a reduction to 2.25 percent, up from 74 percent yesterday. The remaining bets are on a half-point cut to 2.5 percent.

Ciena, National Semi

Ciena Corp. rose the most in the S&P 500, adding $2.68, or 11 percent, to $27.62. The maker of networking equipment said first-quarter profit more than doubled as phone companies spent more on upgrades, and boosted its sales forecast.

National Semiconductor Corp. gained 95 cents to $17.29 for the second-biggest advance in the S&P 500. The maker of chips for devices such as Apple Inc.'s iPhone reported third-quarter profit that beat analysts' estimates and said profitability probably will improve in the current period.

February Payrolls Unexpectedly Decline

February Payrolls Unexpectedly Decline

By Shobhana Chandra

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The U.S. unexpectedly lost jobs in February for the second consecutive month, adding to evidence the economy is in a recession.

Payrolls fell by 63,000, the most in five years, after a revised decline of 22,000 in January, the Labor Department said today in Washington. The jobless rate dropped to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.

``All the lights are flashing red,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. ``We're in a recession. I don't think there is any doubt about it at this point.''

The weakening labor market, combined with lower home prices, higher fuel bills and a global credit squeeze, may force consumers to further reduce spending. Minutes before the figures were released, the Federal Reserve said it will expand two short-term auctions this month to $100 billion in an effort to address a deepening credit crisis.

The Democratic presidential candidates used the report to hammer the Bush administration's record. New York Senator Hillary Clinton called for more measures to shore up the economy, including an extension of unemployment insurance coverage. Illinois Senator Barack Obama said the presumptive Republican nominee, Senator John McCain of Arizona would bring ``four more years'' of President George W. Bush's policies.

Market Reaction

Treasury notes soared following the jobs report and the Fed financing announcement, trimming gains later in the day. The 10- year note yielded 3.55 percent at 11:15 a.m. in New York compared with 3.59 percent late yesterday.

Traders now anticipate Fed Chairman Ben S. Bernanke and his team will cut the benchmark interest rate by at least three quarters of a percentage point at or before their March 18 meeting.

``We now think the economy can be described as having entered a recession in early 2008,'' said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. In a note last week, he wrote that some of the forces that signal the start of a recession ``have not taken hold.''

Economists had projected payrolls would rise by 23,000 following a previously reported 17,000 drop in January, according to the median of 76 forecasts in a Bloomberg News survey.

Job Losses

Service industries, which include banks, insurance companies, restaurants and retailers, added 26,000 workers last month. Retail payrolls fell by 34,100, the biggest drop in more than five years.

Payrolls at builders fell 39,000, the eighth consecutive month of cutbacks. Homebuilders are trimming staff as the biggest housing slump in a quarter century deepens. To make matters worse, commercial construction projects are now also on the decline, indicating firings at non-residential builders are likely to increase.

``This is going to be a weak quarter,'' Edward Lazear, chairman of the White House Council of Economic Advisers, said in a Bloomberg Television interview from Washington. He said the Bush administration expects ``close to a zero quarter'' in terms of gross domestic product growth. ``I wouldn't say negative, that's still up for grabs,'' he said.

The Cambridge, Massachusetts-based National Bureau of Economic Research, the official arbiter of when U.S. expansions begin and end, defines a recession as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in gross domestic product, payrolls, production, sales and incomes.

Recession Arbiter

Harvard University economist Martin Feldstein, a member of the NBER committee that monitors economic cycles, said in a Bloomberg Television interview last week that evidence available so far showed the six-year expansion stalled in December and January, possibly marking the beginning of a recession.

The real estate recession and meltdown in financial markets have led to growing dismissals at banks, mortgage and management companies.

Still, investors would be mistaken to assume the Fed will continue to cut rates as deeply as it has already this year, Dallas Fed President Richard Fisher said in an interview with Bloomberg Television in Paris today.

``I would discourage you from thinking that simply because of a significant action in the credit markets, like we had yesterday, that suddenly we're going to have an Open Market Committee meeting, and that suddenly we're going to move fed funds rates in response,'' Fisher said. ``It doesn't work that way.''

Manufacturing Downturn

Manufacturing payrolls dropped by 52,000, the biggest decline since July 2003, after falling 31,000 a month earlier. Economists had forecast a drop of 25,000.

Government payrolls increased by 38,000. That means the total decline in private payrolls for the month was 101,000, the biggest drop since March 2003.

The average work week was unchanged at 33.7 hours. The average factory work week and overtime hours were unchanged. Average weekly earnings rose $1.68 to $599.86.

Workers' average hourly wages rose 5 cents, or 0.3 percent, to $17.80, in line with forecasts. Hourly earnings were up 3.7 percent from February 2007. Economists surveyed by Bloomberg had forecast a 3.6 percent gain for the 12-month period.

Americans, whose spending accounts for more than two-thirds of the economy, are less upbeat about finding work, a Conference Board report showed last week. The share of consumers who said jobs are plentiful fell and the proportion who said jobs are hard to get jumped, pushing consumer confidence down to a five- year low in February.

Bernanke Outlook

``The economic situation has become distinctly less favorable,'' Bernanke said in testimony to Congress last week.

The Fed chairman referred to ``downside'' risks for the economy four times, including ``the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.''

The central bank's regional economic survey this week said ``the hiring pace slowed in various sectors and labor markets loosened somewhat in many districts,'' as economic growth cooled in eight of 12 regions since the start of 2008.

Adecco SA, the world's biggest temporary-employment company, said this week that fourth-quarter profit declined as hiring slowed in the U.S. The Swiss company also said it may miss its long-term goal of sales growth of 7 percent to 9 percent.

``We've been seeing a weak U.S. market for more than a year now,'' Chief Executive Officer Dieter Scheiff said in a March 4 interview.

Foreclosures Set Records as Housing Troubles Worsen

Foreclosures Set Records as Housing Troubles Worsen

By Kevin G. Hall

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Washington - More than one of every 20 home mortgages was delinquent during the last three months of 2007, the highest level in 23 years, according to a report Thursday by the Mortgage Bankers Association.

The group's National Delinquency Survey also found that the rate of foreclosures and the percent of loans in the process of foreclosure reached record levels during the period.

Homeowners with adjustable-rate subprime mortgages, loans given to borrowers with the weakest credit records, were particularly hard hit. One in every five outstanding subprime ARM was delinquent in fourth quarter 2007; one in every 20 already was in foreclosure.

The percentage of overall home loans in delinquency, 5.8 percent, is second only to a period in 1985, when low oil prices caused an economic downturn in the nation's oil-producing region.

More than 938,000 home loans were in foreclosure nationwide in the fourth quarter of 2007, a record 2 percent of all outstanding home loans. In all, more than 3.6 million mortgages were past due or in foreclosure proceedings across the country during the final three months of last year. Of those, nearly 381,700 entered foreclosure in the quarter, another record.

Borrowers with good credit weren't immune. About 5.5 percent of all adjustable-rate prime mortgages were past due in fourth quarter 2007, more than double the rate at the beginning of 2006, shortly before the housing market became unhinged.

California and Florida, which together account for one of every five home loans nationwide and 30 percent of new foreclosures, are dragging down the national housing numbers. Their housing problems matter to the rest of the nation because together they account for about 18.5 percent of the nation's economic activity.

"To the extent that there is an intermingling of economics of the housing market and the economy ... it will have an effect on the broader marketplace," said Doug Duncan, the chief economist for the bankers' group.

More than 5.3 percent of the nearly 6 million outstanding home loans in California were delinquent in the fourth quarter, and more than 7.4 percent of Florida's 3.5 million loans were past due. Mississippi, Michigan and Georgia have the highest overall delinquency percentages (11.07, 8.97 and 8.37, respectively), but California and Florida drag down the national average by their sheer size.

The outlook grows more complex when Arizona and Nevada are added to California and Florida. The four states suffer from a glut of new and existing homes, have a higher-than-average number of adjustable-rate loans and are seeing the biggest price drops.

Late last year, Treasury Secretary Henry Paulson secured a pledge from mortgage lenders to work expeditiously to modify loans and prevent foreclosures. The effort began in December, so the fourth-quarter data don't reflect its results.

Federal Reserve Chairman Ben Bernanke on Tuesday called on lenders to be more aggressive in modifying problem loans. It was seen as a rebuke of Paulson's efforts with lenders.

Modifying loans is no easy task. Banks no longer hold loans on their books; instead, they sell them into a secondary market where loans are bundled with others and sold to investors as mortgage bonds. It's a process called securitization or syndication.

Securitizers have stopped bundling loans given to the weakest borrowers. Federal Reserve Governor Frederic Mishkin on Tuesday described subprime lending as "already dead as a doornail."

And the resale of loans representing anything but the best credit also is drying up.

Investors right now have little appetite for mortgage bonds since the collateral that backs the loans - the homes themselves - are falling in value.

And since investors, not banks, now hold mortgage bonds, it further complicates a workout to prevent foreclosure.

"What's unusual now is so much of the housing debt has been syndicated, placed in complex structures, so you cannot have face-to-face negotiations between the bankers and the homeowners," said Martin Feldstein, a Harvard University economist and head of the National Bureau of Economic Research.

Thursday's numbers confirm a downward spiral. Lenders have tightened their underwriting standards, making it harder to get loans. That also makes it harder to sell a house, and the longer a home sits on the market, the more it drives down local prices.

The Federal Housing Administration announced on Wednesday higher limits for the loans it guarantees in 14 hard-hit California counties. The FHA now will be able to guarantee loans worth up to $729,750 in California, and the agency is set to announce new loan limits nationwide.

This temporary increase in loan limits was part of a fiscal stimulus package passed by Congress and signed by President Bush last month. The package also allows government-sponsored mortgage bundlers Fannie Mae and Freddie Mac to increase the maximum loan value they can purchase to up to $729,750. Actual limits will vary nationwide based on median home prices.

But the effects of the stimulus package won't be felt anytime soon.

"It won't start affecting the marketplace for three to six months," said Duncan, the chief economist. "That will not be a near-term solution, but will provide some assistance down the road."

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As Foreclosures Rise, Investors Pull Back
By Vikas Bajaj
The New York Times

Friday 07 March 2008

Washington - Defaults on home mortgages touched another historic high late last year as foreclosures on adjustable-rate mortgages surged, an industry group reported on Thursday.

The figures are expected to increase pressure on policy makers and the mortgage industry to move faster to contain losses and help homeowners. In recent days, regulators and lawmakers have begun suggesting that the federal government might need to take a bigger role in the mortgage business.

The Mortgage Bankers Association reported Thursday that loans past due or in foreclosure jumped to 7.9 percent of the total in the fourth quarter, from 7.3 percent at the end of September and 6.1 percent from December 2006. Before the third quarter, the rate had never exceeded 7 percent since 1979, the earliest year for which figures are available.

The report, along with news that some investors were having trouble paying back their banks, helped drive down the stock and credit markets on Thursday. The Standard & Poor's 500-stock index fell 2.2 percent and the Dow Jones industrial average fell 1.8 percent.

Though defaults increased across the country, much of the rise came from a handful of large states like California and Florida. Those two states account for about 21 percent of all mortgages but 30 percent of the new foreclosures. Nevada, Arizona, Michigan and Ohio also had high default rates.

Defaults were highest on adjustable-rate mortgages, those that start with lower fixed interest rates but reset to higher, variable rates after a few years. The mortgage bankers group, however, said the "bulk" of the troubled loans have been defaulting even before rates have been reset.

"The massive wave of foreclosure and delinquencies is overwhelming," said Rod Dubitsky, who heads asset-backed securities research at Credit Suisse. "A large percent of people didn't have equity to begin with, and their ability to pay was stretched because of stated-income loans," for which lenders do not verify borrowers' incomes.

While more than a quarter of loans made to people with blemished, or subprime, credit were past due or in foreclosure, the number of prime adjustable-rate loans in trouble also rose rapidly, to 8.1 percent from 4.3 percent in 2006. By contrast, only 3.1 percent of prime fixed-rate loans were past due or in foreclosure, up from 2.7 percent a year earlier.

The Mortgage Bankers figures are based on a survey of 46 million first mortgages, about 85 percent of all home loans. Among the loans surveyed, about 3.6 million were past due or in foreclosure.

Analysts and industry officials say they expect default rates will continue rising as home prices fall and banks and investors remain unwilling to lend and buy mortgage securities. Reinforcing that view, Citigroup, one of the nation's largest mortgage lenders, said Thursday that it would reduce its holdings of mortgage and home-equity loans by about 20 percent over the next year.

The Federal Reserve, meantime, released data on Thursday showing American households' combined net worth fell by $532.9 billion, or 3.6 percent, in the fourth quarter. Falling real estate values accounted for a third of the total decline.

This week, the Fed chairman, Ben S. Bernanke, called on lenders to move more aggressively to reduce the principal on delinquent loans to adjust them for the drop in home prices. He also said the Federal Housing Administration, a government mortgage insurance program, should guarantee more loans. The F.H.A. said Thursday that more than 20 counties across the country would see limits on mortgages backed by Fannie Mae and Freddie Mac rise to $729,750, the maximum set by the economic stimulus bill.

Representative Barney Frank, Democrat of Massachusetts and the chairman of the House Financial Services Committee, plans to unveil the details of a proposal to refinance hundreds of thousands of mortgages and provide the new loan insurance from the F.H.A. He has also said that some of the loans or homes could be bought by the federal government, a step that the Bush administration opposes.

In a speech Thursday, the president of the Federal Reserve of Boston, Eric S. Rosengren, said a more aggressive plan that involves the F.H.A could benefit mortgage investors and borrowers by reducing the costs and delays associated with foreclosure. In exchange for writing down the amount owed on the loans, investors could receive a share of any profits from a sale of the home in the future, he added.

Noting that others had proposed similar ideas, Mr. Rosengren said "there may be a significant cost to delaying needed actions."

Still, even if politicians move quickly to agree on a plan, it will take time to implement any recovery effort and many delinquent borrowers will not qualify for help.

Mr. Rosengren noted that a regional effort being coordinated by the Boston Fed with six banks had received over 1,000 inquiries and taken in 50 loan applications in two months. But only a dozen loans have been closed.

He also said that an analysis of subprime loans in Rhode Island, Connecticut and Massachusetts showed that only 16 percent of those borrowers could refinance their loans with a mortgage backed by the F.H.A. under the program's current guidelines. A proposal to liberalize the program that Congress is considering could expand the program to 250,000 more borrowers, according to the administration.

Further, the owners of 18 percent of the homes in foreclosure do not live in their properties, according to the Mortgage Bankers Association, indicating that they were owned by speculators who are walking away from soured investments.

In 1985, the last time delinquency and foreclosure rates were near today's rates, the problems were concentrated in a handful of states like Texas and Oklahoma that were suffering because of a big drop in oil prices. That forced many people to leave their homes to look for work in other states, said Jay Brinkman, a vice president for research and an economist at the Mortgage Bankers Association.

"Those homes then went to foreclosure but you didn't have the same sort of national issue," Mr. Brinkman said. "What we have now is a more broad-based oversupply of homes."

Loan Limits Raised

Washington - The government on Thursday raised the limits for loans that can be purchased by the mortgage companies Fannie Mae and Freddie Mac in more than 220 cities and counties.

As result of the economic stimulus package signed by President Bush last month, the limits have been temporarily raised to a new maximum of $729,750 for the continental United States.

Areas affected range from Flagstaff, Ariz., to Boston to Virginia Beach, and include more than 20 rural areas, according to the Office of Federal Housing Enterprise Oversight, which regulates Fannie Mae and Freddie Mac.

The Department of Housing and Urban Development made a similar change for loans backed by the Federal Housing Administration, where limits were raised to as high as $729,750 in expensive areas.

Swim Against the Current: Ordinary Americans Can Make Change Happen

Swim Against the Current: Ordinary Americans Can Make Change Happen

By Jim Hightower

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This is an excerpt of Jim Hightower's new book, Swim Against the Current, followed by an interview with the author.


Who would've thought that in the moral morass of what is now called the health "industry," the flower of social responsibility could still bloom?

The industry is controlled by insurance middlemen, HMO chains, and rip-off drug makers -- all putting profits over patients. The industry's lobbyists impose public policies that leave forty-seven million of our fellow Americans with no health plan whatsoever, while tens of millions more hold miserly plans that provide very little balm in times of need. The industry has created such a screwed-up system that we Americans spend more each year on health care ($6,280 per capita) than people in any other country, yet the treatment we get ranks a pathetic thirty-seventh in the world.

But there's good news: rising from the grassroots in every area of the country, health professionals and businesses are bringing an enterprising spirit to this dysfunctional system, reaching communities of people who've been shut out, and showing the way to put the "care" back into health care.

Charlie Alfero is one of these people. Working with both private and public health institutions in New Mexico for nearly thirty years, he is some combination of agitator and administrator, adept at figuring out how to get quality care delivered to rural outposts that the corporatized medical system has largely abandoned. Moreover, he sees health care as key to reviving the economic health of those areas.

Charlie's outpost is Hidalgo County. Where? Look at the bottom left corner of a map of the "Land of Enchantment" and you'll see a boot heel. That's Hidalgo, a remote but picturesque stretch of the Old West that was once crossed by the Butterfield Stagecoach line, then the Southern Pacific railroad, and now I-10. The boot heel is a long way from any city -- Tucson is 150 miles west, El Paso 150 miles east, and Albuquerque 300 miles north.

It has been a hard-hit area. Copper companies used the place up before pulling out in the 1970s and 1980s, leaving Hidalgo mostly a ranching economy. Some six thousand people live there, with a lot of poverty among them. The local hospital closed in 1979. The last doctor left in 1983, and the county was unable to entice another one to move in. There was an obvious need and demand for health services, but Hidalgo is hardly the sort of lucrative market that such profit-hungry chains as Hospital Corporation of America are willing to consider.

The county's leaders realized they would have to put something together for themselves. So in 1994, they asked the state rural health office to send some experts to Lordsburg, the county seat, to help guide them. One who came was Charlie Alfero. Years previously, he had attended a small college up the road in a neighboring county, and he was glad for the chance to revisit a region he loved.

Alfero had been working with the rural outreach program of the state university's medical school, and he remembered from his earlier time in the boot heel that despite economic difficulties, the people of the area shared strong egalitarian values. He felt that they might do big things. He arrived with a vision: the people there could create a health commons of their own design -- a community complex that would provide one-stop service for medical, dental, and mental health care, with family support services and economic development built in.

Most of Hidalgo's residents have lived in the county all of their lives and have an attachment to the area and to one another. "We stick together; we help each other in times of need," said Irene Galven, now the city clerk. It was this sense of community, the residents' willingness to throw in on projects to benefit everyone, that inspired Alfero to throw in with them.

It was not a simple project. For nearly four years, Charlie made the six-hundred-mile round-trip commute each week from his home in Albuquerque to Lordsburg to work with eager locals to establish Hidalgo Medical Services (HMS), get it on its feet financially, and get it moving -- one small step at a time.

  • On July 1, 1995, HMS opened its doors in one wing of the old hospital, offering health services two days a week. Four doctors from Silver City (fifty-five miles from Lordsburg) rotated to the clinic, each doing one day every two weeks.
  • In the fall of 1996, HMS was able to add a full-time nurse practitioner, meaning that Hidalgo County had daily medical service for the first time in thirteen years.
  • In the spring of 1997, HMS's proposal for rural outreach was funded by two small but crucial federal programs, the Community Health Center and the Office of Rural Health Policy, thus allowing the clinic to expand its services and hire a full-time family physician.
  • In 1998, for the first time in county history, dentistry was made available on a part-time basis. Also, with the clinic becoming a viable enterprise (it now occupied about 60 percent of the old hospital), Charlie Alfero left Albuquerque to become the CEO of HMS.

From the start, Charlie understood that the key to success would be building broad support -- enthusiasm, even -- throughout the county and gaining the trust of all involved. In addition to board members who could bring a bit of clout to the cause (hometown bankers, lawyers, local officials, and certain retired professionals), he enlisted some of the clinic's patients to serve (today, 100 percent of the board members are patients). He preached the democratic ethic that the larger community had to be invested in HMS, literally making it theirs and recognizing that "each person's success helps strengthen the whole."

Alfero took public involvement a step further by bringing ordinary residents inside to serve as a direct, integral, and very effective part of the health delivery system itself. They were enlisted to be promatoras de salud(promoters of health). These community outreach workers, trained in the management of such chronic diseases as diabetes (a huge problem in this region), literally spread the reach of HMS, traveling out to smaller settlements and isolated ranches and bringing medical help, information, news, connection, and ... well, care. "I think I've always been a promatora," declared Elva Quimby, a fiftyish former cosmetologist. "I just thrive on helping people."

Step-by-step, service was expanded, gaining the attention and the support of health professionals and funders outside of the boot heel. A little more capital was raised, another nurse or physician arrived, and before long HMS had become not only a strong medical center, but also the largest economic engine in the county. Alfero contended that if the strongest local asset is a health clinic, go with it! Why try to get some out-of-state conglomerate to reopen the copper smelter when you've got a clean, community-supported enterprise creating jobs, generating small business growth, and making people healthier?

A dozen years after opening its doors, HMS has become the health commons it was envisioned to be. On its tenth anniversary, it opened the doors of its new twenty-two-thousand-square-foot clinic in Lordsburg, a modern, full-service facility with nine exam rooms, lab and X-ray rooms, a dental clinic with six chairs, and offices to deal with mental health problems, substance abuse, and family support needs. It has a staff numbering more than 140, operating on a budget of more than $10 million a year.

In addition to Lordsburg, HMS now has clinics in six other communities in two counties, including one in Silver City, where it originally had to go to find doctors who were willing to come to Hidalgo twice a week.

"I didn't deliver health care," Alfero noted. "I'm not even a doctor. I just gave people an idea, pointed them in a direction, and they built this themselves. People who rely on external forces to determine their future are going to find a bad future. The people in this area are showing what health care can be if we invest in people, not in the layers of intermediaries looking to make money off a top-heavy system. Our country needs more clinics like this."


AlterNet: What made you decide to write this particular book -- one that relates the stories of everyday people around the country, versus all of your other books?

Jim Hightower: The inspiration came from the people themselves, people that I had come across in my travels, and found that unlike what you find in The New York Times or on the nightly news, there is a very progressive spirit in the countryside, enormous progressive activism ... not merely in politics but also in business, the food economy, health care, religion, numerous different ways.

These people's stories were very uplifting, yet not being told. And then at one point I got an email from a lady a couple years ago, and said, "I have a decent job and I do it well, but I'm constantly thinking that I'm wasting my time. I want to begin doing something useful to contribute to changing things, at least become a cog that's on the right vehicle."

I think a lot of people feel like that. A lot of young people are starting off their careers but are thinking, "Is this all there is? To go to Wall Street or to get into a corporate cubicle, is this my future? Or are there other ways to do this?" And there are people like this email writer who are saying, "I've been at this for some time, I'm doing well, but I'd like to be doing better -- in the sense of doing something that's more meaningful to me."

This was your way of providing people the inspiration to do that.

Exactly. If these people in the book can do it, we all can. These are not Rockefellers, and they're not Einsteins. They're not people who just got lucky. They're folks who just said, "I think I can do it a different way, and that's going to be better for me, and I'm going to try and do it." As we are clear about in the book, it's not an easy thing to do. There are all sorts of potholes on this alternative road. But it can be done, and these stories will, I believe, inspire people to give their own lives a bit of a different direction.

By the way, to give people a helping hand with that, not only do we tell the stories but at the end of each of the three sections, we provide an extensive list of contacts of not only the people that we write about, but others that we think could help in that particular area.

Another thing that's different about this book is that you wrote it with your long-time co-agitator, Susan DeMarco. How did you come to the decision to write it together?

Well, Susan has worked on every book that I've put out, going back to Hard Tomatoes, Hard Times in the early 1970s when we were working together for the project. I've always acknowledged her participation, but it was long overdue for her to have her name right up front. The second reason is that she framed this book, came up with the notion of how it could be organized, how it could be presented, which really is her genius. It's written in my voice, but she knows many of these people herself, she came up with the people that we covered, and she has the ability to pull these things together in a way that's more compelling than my usual sort of ranting style. [laughs] So we've been co-conspirators for a long time and we decided to do this one together.

Much to our amazement, we were able to pull it off without doing any serious bodily harm. It's hard to write with someone else. To tell you a quick anecdote about our writing styles, I'm an early morning person and she's a very late-night person. I would go off in the morning to a coffee shop somewhere and write up a section, then bring it home. As I went to bed, I'd leave that on the kitchen table, and she would take it with her nasty red pencil [laughing] and thoroughly x it and put all sorts of lines around it and stuff. Then I'd get up in the morning and there'd be this little ugly nest of editing, which then I'd go to a coffee shop and put all her edits into a good form. That's how we did it, so it really was a collaborative effort.

What kind of affect is the grassroots activism that you talk about in the book having on the campaign season so far?

I think that in this political season in which "change" has become the buzzword, it's interesting to realize that that cry for change and the activism attempt to implement that change has not come just full-blown out of the Obama campaign from nowhere; rather, this has been building for a long time out in the countryside. People voted for change in 2006, and the Democrats in the Congress disappointed everybody ... so this time they're shouting it even louder than before. Finally, I think the message is coming through.

The "change" and the success that Obama is having with his campaign is somewhat attributable to the efforts of those that have gone before. I think of Wellstone Action -- Paul Wellstone and his wife Sheila, for example, their great vision and leadership have inspired a lot of people, and Wellstone Action. the organization that came out of his last campaign, has done phenomenal work in training campaign managers and candidates to be in the position to sustain a movement like Obama is now carrying forward.

We had in the last election I think it's 4 new members of Congress who came out of the Wellstone training sessions. Tim Walz, for example, or Keith Ellison up in Minneapolis, the first Muslim elected to Congress, was actually a Wellstone trainer.

A movement has a history -- it doesn't just erupt all of the sudden out of the blue. Many of the political stories that we write about in the book are people who hae been leading the way, providing context, energy, leadership, the ideas that can lead to the kind of campaign that Obama's running.

Your tour isn't set up in a typical way, either. Can you talk about that a little?

We're making an effort for the tour itself to reflect the spirit of the book. Thus instead of going to bookstores, we're trying to have book events around the country that benefit good progressive organizations, radio stations, independent newspapers and media, good candidates. Already in March and April, we've scheduled about 40 different cities, and you can find a point on the compass, and pretty much I'll be going in that direction.

We kick off at the beginning of March in Philadelphia and New York, and then throughout the Northeast; heading then down south through Florida and coming back across the upper Midwest, through the Rocky Mountain states, not only in Denver and Boulder, but also through Idaho; then up to the Pacific Northwest, down through California and back across the Southwest to Texas. Pretty much everywhere.

What do you want folks to take away from the book?

I hope that people will come out of the book with a sense of possibility, with a sense of excitement -- that there is another way. You can buck the system, you can defy conventional wisdom and you can define your own success -- not just in monetary terms as the corporate structure wants you to -- but you can reach for something bigger and more satisfying in your life, and have a good shot of achieving it, and in the process, make it a better world.

Jim Hightower is a national radio commentator, writer, public speaker, and author of the new book, "Swim Against the Current: Even a Dead Fish Can Go With the Flow." (Wiley, March 2008) He publishes the monthly "Hightower Lowdown," co-edited by Phillip Frazer.