Friday, March 14, 2008

Judge Calls Immigration Officials' Decision "Beyond Cruel"

Judge Calls Immigration Officials' Decision "Beyond Cruel"

By Henry Weinstein

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The ruling says a detainee who later died of penile cancer was denied a biopsy of a lesion though several doctors said the procedure was urgently needed. His family will be allowed to seek damages.

In a stinging ruling, a Los Angeles federal judge said immigration officials' alleged decision to withhold a critical medical test and other treatment from a detainee who later died of cancer was "beyond cruel and unusual" punishment.

The decision from U.S. District Judge Dean Pregerson allows the family of Francisco Castaneda to seek financial damages from the government.

Castaneda, who suffered from penile cancer, died Feb. 16. Before his release from custody last year, the government had refused for 11 months to authorize a biopsy for a growing lesion, even though voluminous government records showed that several doctors said the test was urgently needed, given Castaneda's condition and a family history of cancer, Pregerson said.

But rather than test and treat Castaneda, government officials told him to be patient and prescribed antihistamines, ibuprofen and extra boxer shorts, the judge wrote in a decision released late Tuesday. In summary, the judge wrote, the care provided to Castaneda "can be characterized by one word: nothing."

Pregerson blasted public health officials' "attempt to sidestep responsibility for what appears to be . . . one of the most, if not the most, egregious" violations of the constitutional prohibition against cruel and unusual punishment that "the court has ever encountered."

At this stage of the proceedings, "the only question is whether" the plaintiffs' allegations, if true, show that government officials "were deliberately indifferent to his condition. The court finds that they do," Pregerson said.

"Everyone knows that cancer is often deadly. Everyone knows that early diagnosis and treatment often saves lives," the judge wrote. The government's own records, he emphasized, "bespeak of conduct that transcends negligence by miles. It bespeaks of conduct that, if true, should be taught to every law student as conduct for which the moniker 'cruel' is inadequate," Pregerson concluded in permitting the case to move forward.

Conal Doyle, an Oakland attorney who is co-counsel for Castaneda's family members, said the Salvadoran immigrant spent eight months in custody on a charge of possession of methamphetamine with intent to sell, then was transferred to immigration custody because he did not have legal residency.

He first informed the Immigration and Customs Enforcement medical staff at the San Diego Correctional Facility on March 27, 2006, that "a lesion on his penis was becoming painful and growing," the judge wrote. The next day, a physician assistant at the facility examined Castaneda and issued a treatment plan calling for a consultation with a urologist "ASAP" and a request for a biopsy, according to government records cited by the judge.

Over the next 11 months, several doctors, with increasing urgency, made the same recommendations. For example, after conducting an examination June 7, 2006, Dr. John Wilkinson, an oncologist, wrote a report saying he strongly agreed that Castaneda had an urgent need for a biopsy and an assessment by a urologist because he might have "penile cancer. . . . In this extremely delicate area . . . there can be considerable morbidity from even benign lesions which are not promptly treated."

That same day, Pregerson said, Dr. Esther Hui of the Division of Immigration Health Services acknowledged Castaneda's condition but said the government would not admit him to a hospital because her agency considered a biopsy "an elective outpatient procedure."

Pregerson, who became a federal judge in 1996, said evidence presented by the plaintiffs suggested that Hui, one of the defendants, characterized the surgery as elective so the federal government would not to have to provide or pay for it.

In February 2007, after the American Civil Liberties Union intervened, a biopsy was finally scheduled. A few days before the procedure, however, Castaneda was abruptly released, the judge wrote. He went to the emergency room of Harbor-UCLA Medical Center and was diagnosed with metastatic squamous cell carcinoma. His penis was eventually amputated, and chemotherapy ultimately proved unsuccessful.

Four months before he died, Castaneda testified at a hearing held by the House Judiciary Subcommittee on Immigration, Citizenship, Refugees, Border Security and International Law, as his teenage daughter listened.

"Mr. Castaneda's case was just outrageous," Rep. Zoe Lofgren (D-San Jose), chairwoman of the subcommittee, said in an interview Tuesday.

Lofgren said one of the things she found most troubling was that "bureaucrats" at Immigration and Customs Enforcement in Washington have the power to overrule recommendations of doctors who have actually seen the medical problems of detainees. "That is a recipe for disaster," she said.

Lori Haley, an ICE spokeswoman from Laguna Niguel, said in an e-mail that she could not comment on the Castaneda case but that the agency spent nearly $100 million on medical, dental and psychiatric care for detainees in fiscal 2007.

The government had argued that its employees were immune from this lawsuit. A spokesman for the U.S. attorney's office said the Justice Department might appeal Pregerson's ruling.

Last year, the U.S. Government Accountability Office issued a report on medical care at immigration detention facilities that said officials at some of the sites "cited difficulties in obtaining approval for outside medical and mental health care as . . . presenting problems in caring for detainees."

Doyle said Castaneda's death "would have been prevented by the exercise of basic human decency."

Loyola Law School professor Laurie Levenson said the decision was legally significant and factually compelling. "This was not a detainee with a hangnail," she said. "You should not have to have your penis fall off to get medical treatment from the government."

Native Americans On "Longest Walk 2" to Grand Canyon, Colorado

Native Americans On "Longest Walk 2" to Grand Canyon, Colorado

By Darrin Mortenson

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Beale Springs, Arizona - When northwestern Arizona's Hualapai Indians got in the way of the Anglos' westward expansion in the 1860's, US soldiers rounded them up, penned them in and forced survivors to march some 100 miles across the desert to a reservation far from white commerce.

"We became strangers to our own land," said Loretta Jackson, the tribe's current director of cultural resources, who says the tribe now suffers a scourge of alcoholism and health issues, encroachment from rampant development and invasions of their sacred sites.

It's a story familiar to Native American tribes across the continent, and one of many such stories now getting a fresh hearing as activists of the American Indian Movement once again take the "Longest Walk" across the nation from Alcatraz, California, to Washington, DC, visiting the Hualapai and other tribes and spotlighting Indian and environmental issues as they go.

Traveling in two groups - a northern band of some 40 hardy souls now entering snowy Colorado, and a southern group of about 100 trekking across the Arizona desert near the Grand Canyon - the activists struck out from San Francisco on foot on February 11 and say they hope to reach the nation's capital on July 11. Once in Washington, they plan to deliver Congress a "manifesto" relating what they learn from tribes and other Americans they meet along the way.

"We're messengers," said Larry Bringing Good, a 53-year-old former US Marine and long-time Indian activist. "Our message is that all life is sacred."

Bringing Good, a tall, dark Cheyenne-Arapaho native of Oklahoma, was among members of the southern group this week who met with delegates of the Peach Springs Hualapai reservation near the town of Kingman, Arizona. Their roadside camp in a dirt lot behind the local American Legion post was rustled awake at 4 a.m. by drumming and chanting of Japanese Buddhist monks who march with the group. After breaking camp, they gathered to hear Hualapai elder Emmett Bender bless that day's leg of the journey before they moved on foot toward the Grand Canyon.

"You know what I want to see? I want to see everyone dance," said the 85-year-old Bender in a shaky voice, obviously moved by the visit and the chance to share his tribes' concerns with the walkers. "Just like Martin Luther King, we'll walk like brothers and sisters," he said.

Shaking a gourd to an ancient beat, Bender led a short traditional song before the walkers headed east on Highway 40. From there they walked about 15 miles, a distance boosted to about 100 by a select group of "spirit runners" who relay the estimated 100-plus miles a day that both groups try to log so that there is a "footprint on every mile," as one of the walkers put it.

In spirit at least, "Longest Walk 2" is a commemorative reenactment of the first "Longest Walk" in 1978, at the height of the American Indian Movement's strength and notoriety, when the then-militant AIM and its leaders topped the FBI's counterintelligence agenda. As thousands converged on Washington that summer as they completed the 4,000-mile trip, the original group managed to garner enough moral momentum on its journey to help defeat legislation that would have further eroded Indian control of their reservations, and they helped push legislation protecting Indian rights.

Dennis Banks, a founding member of AIM who served time in a federal prison in the 1980's for his part in protests during AIM's violent heyday the previous decade, led the original walk in 1978. At 75, he now leads the southern group quietly and without warrior bluster or revolutionary rhetoric. With him as guide, the journey seems less a protest march and more of an educational tour that takes in all comers of all colors; at each stop they learn a little and teach a little as they meet with locals and then move on. They also pick up hundreds of bags of other people's roadside trash along the way.

Banks and other leaders say the support and newcomers they've received along the way have confirmed that their simple and ancient message resonates across the land. So far, they've been invited to stay at private ranches, local campgrounds, temples, gymnasiums and Indian reservations, and have attracted curious locals at each stop.

Among them are Curt Warren, 71, and his wife Jean, non-Indian residents of Golden Valley, Arizona, who said they saw the walkers along the Colorado River near Bullhead City, Arizona, and stopped to investigate.

"We got to talking about taking care of the earth and all that," said Curt Warren, "and the more we talked, the more I got to thinking. And I said 'yeah, this is what I believe anyway.' They're right and they're gettin' out there and doin' something about it."

Not able to walk with the group, the Warrens helped out by shuttling some of the activists around to meet with local tribal leaders.

"We're a moving community," said Emmett Eastman, 76, a tall, silver-haired Wahpeton native who has traveled with Banks and other AIM leaders for decades and has strode the trail of the "Longest Walk 2" since it left Alcatraz. Translating his native name as "His Many Lightnings," Eastman said he wants America to listen to their message.

"Take care of your health. Take care of your environment. Pick up your trash," he said while slurping down a juicy orange at a brief rest stop this week. "The message we're carrying for the country, for the world, really, is that yellow, red, black and white, we're all involved; so get involved! And we want to plant the seed in the minds of the governments to be peaceful, not warrior-like."

After forming a circle and chanting a prayer led by a Buddhist monk, Eastman and some 45 of his cohorts were blessed by a medicine man burning a sage stalk and then stepped out again along the highway shoulder, some of the group beating drums and others holding feathered staffs in the lead. They and their logistical caravan of cars, vans and a converted school bus that serves as their chuck wagon are heading to the Grand Canyon this week to meet with members of the Havasupai reservation. From there they'll go to Flagstaff for a week-long series events meant to attract Native Americans and environmental activists from the whole region.

Compared with the group traveling the northern route through snow-covered Utah, they've had it relatively good. The 30-40 men and women on that northern route, which more accurately retraces the original 1978 route, have struggled through snow and steep mountain passes but should reach Colorado in a few days.

Still, those walking in short sleeves through the Arizona desert this week say the trek takes dedication and heart, and they hope more people will join them for the journey.

"I knew this was a sacred walk and a spiritual walk," said 59-year-old Margaret Morin, a Chumash native and grandmother who closed up her apartment in Bakersfield and put her things in storage to make the journey.

"I had to come. It was a calling," she said. "Every step we take is a prayer."

More information on the Longest Walk 2 can be found at

New Evidence In Siegelman Case Points To Republican Cabal

New Evidence In Siegelman Case Points To Republican Cabal

By Sam Stein

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A new review of evidence suggests that an aligned group of Republican interests were pressing for - and seeking to profit financially from - the trial of former Alabama Gov. Don Siegelman on charges of bribery.

According to court documents and official testimony, months before Siegelman was charged, Rob Riley, the son of the state's governor, expressed confidence that an indictment would occur and that Siegelman's political financier, Richard Scrushy, would be drawn into case.

Around the same time, moreover, Riley managed to maneuver himself into an extremely profitable position: lead local counsel on a separate, massive civil suit against Scrushy and his company, HealthSouth.

How he received the assignment aroused some suspicion.

Riley had limited experience in securities litigation. And, for critics, his appointment gave of the appearance of legal-political insider trading: the governor's son, cognizant that Scrushy would be dragged into Siegelman's case, saw the benefits to be had from the civil suit against Scrushy's company, and positioned himself to profit.

Riley denied these charges in an interview with the Huffington Post, saying that he had no prior knowledge of Siegelman's forthcoming indictment and arguing that he had been recruited to come on board the HealthSouth case, not the other way around.

What is agreed upon, however, is that Riley earned big money from his work. Ten months after he signed onto the HealthSouth suit, Siegelman was indicted. Less than a year after that, the former governor was convicted of bribery along with Scrushy. And months later, Health South settled for $445 million one of the largest settlements in securities litigation history.

In the early days of 2005, HealthSouth and Scrushy were in the midst of a long-waged battle over whether the company had "perpetrated an elaborate scheme to deceive HealthSouth's investors." The case alleged that the company, and its financial supporters, had "committed deceptive acts whose primary purpose and effect was to create a false appearance" of good financial results and future prospects. There were no connections to Siegelman.

On January 13, Rob Riley, a lawyer for the firm Riley & Jackson P.C. and the son of the state's governor, was abruptly added as local counsel to the New Mexico State Investment Council, a relatively new plaintiff in the case against HealthSouth. It was an interesting move. Riley, who specialized in medical malpractice law, had little history in complex securities litigation. Co-plaintiffs complained, as they often do, that his presence would simply drive up the cost of the case and cut into the pot of any settlement. But their appeal was denied.

Why did Riley come on board? According to him, it was a product of local stature and a bit of luck.

"A guy in New Mexico said, 'Hey, we are trying to get involved in this case,'" Riley recalled. "At that point, it was pretty well out in the papers that there had been fraud at HealthSouth. So I felt like it was probably a good case. I didn't know what chance we had at being lead counsel."

Another official with knowledge of the case said Riley was chosen primarily for his political connections.

But around that time, Jill Simpson, an Alabama Republican official and opposition researcher, told the House Judiciary Committee that Riley called her and said the state's legal apparatus was gearing up to re-investigate Don Siegelman. Moreover, Simpson recalled Riley as saying that Republicans would tie the former governor with Scrushy, "a reviled figure in Alabama."

Less than a year earlier, Siegelman had been indicted for conspiracy and Medicaid fraud but his trial - which seemed politically motivated - fell apart within a day in court.

On this new go-around, the prosecution had a more favorable judge. Mark Fuller, who had been appointed by President Bush to the U.S. District Court in the Middle District of Alabama, was well connected in Republican circles and, according to local Alabama journalist Glynn Wilson, had personal ties to Rob Riley.

Ten months after Riley signed onto the HealthSouth case, Siegelman and Scrushy were indicted on charges of political bribery. At the center of the charge was a $500,000 donation Scrushy made to the former governor's 1999 campaign. The money had gone to the state's education lottery and in exchange Scrushy got a position on a hospital regulatory board.

The connection, critics claim, was weak and prejudiced. Scrushy had been appointed to the board under several governors and his firm had no interests under the board's purview. But the trial, which began ion April 2006, reverberated throughout Alabama's political and legal circles. Siegelman's bid to become governor again was snuffed out. And the civil trial against HealthSouth was altered.

"[Riley] very aggressively he thrust himself into that suit as a late comer," said Scott Horton, a law professor at Columbia University who has written extensively on these issues for Harper's magazine. "He knew that Fuller had made statements suggesting that he felt he had once been a target of a politically motivated attack by Siegelman. He knew that this would make someone predisposed against Siegelman and perfect hanging judge. And he would reap the benefit of the class action suit on the side."

As the criminal case against Siegelman proceeded, so too did the suit against HealthSouth. And in the spring and summer of 2006, the two cases intersected.

According to the Associated Press, in May 2006, William McGahan, an official at UBS, one of HealthSouth's investment bankers, testified in the Siegelman case that he had been pressured to pony up $250,000 for the donations to the state's education lottery. The testimony had limited relevance to the class action suit. But, over objections, it found its way into the court record. McGahan, the document read, was eager to please Scrushy and "arranged for UBS to be the source of the funds for the bribe."

What affect this, and Scrushy's ongoing criminal trial, had on the proceedings is a subject of debate. Riley, pointing to earlier HealthSouth executives who had pleaded guilty to fraud, said he saw no tangible cross-over between the two cases.

"I don't believe that had anything to do with the settlement," he said. "I don't think that it aided it at all."

Two other lawyers who served with other plaintiffs on the class action suit against HealthSouth, however, offered different opinions.

"It is not common that you have criminal trials of corporate executive at the same time that a class action suit is taking place involving the same individual," said Louis Mallone, an attorney for O'Donoghue & O'Donoghue LLP and liaison counsel on the case. "It certainly didn't hurt the prospects of the [class action case]."

A second official, who declined to speak on the record, said that while the HealthSouth case was a "slam dunk" even before the Scrushy-Siegelman trial began, having Scrushy as a convicted felon "obviously helped" the suit against HealthSouth.

In June 2006, both Siegelman and Scrushy were convicted on charges of bribery. Siegelman was sentenced to seven years and four months in federal prison. Scrushy was given six years and ten months.

Months later the HealthSouth case, after years of trial, was finally settled. The company announced that it would pay a whopping $445 million. It was, said Malone, "one of the top fifteen or twenty [settlements] of all time."

Riley declined to reveal what he made from the case, saying that the amount was "evolving." But he did acknowledge that it was substantial. "It was a very good settlement," he said. "But at the same time there was a lot of work that went into it.

For critics, however, the message was clear. Riley knew Scrushy going down in the criminal trial and saw a way to reap the benefits on the separate civil suit. In other words: Good work, if you can get it.

"Rob Riley approved of the strategy of the dragging Scrushy into the [criminal] case because it would have benefits for him in the class action suit," said Horton. "It was clear that he was intently following what was going on in Fuller's court and knew that the conviction of Scrushy in that case would have strong benefits in the class action suit."

EPA Closure of Libraries Faulted for Curbing Access to Key Data

EPA Closure of Libraries Faulted for Curbing Access to Key Data

By Christopher Lee

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A plan by the Environmental Protection Agency to close several of its 26 research libraries did not fully account for the impact on government staffers and the public, who rely on the libraries for hard-to-find environmental data, congressional investigators reported yesterday.

The report by the Government Accountability Office found that the EPA effort, begun in 2006 to comply with a $2 million funding cut sought by the White House, may have hurt access to materials and services in the 37-year-old library network.

Rep. Bart Gordon (D-Tenn.), chairman of the House Science and Technology Committee, said the report reveals a "grim picture" of mismanagement at the EPA. The panel's oversight and investigations subcommittees held a hearing on the reorganization yesterday.

The libraries provide technical information and documentation for enforcement cases and help EPA staff members track new environmental technologies and the health risks associated with dangerous chemicals.

They also are repositories of scientific information that is used to back up the agency's positions on new regulations and environmental reports and data that are tapped by people such as developers and state and local officials. The collections include hard-to-find copies of documents on federal Superfund hazardous waste sites, water-quality data and the health of regional ecosystems.

EPA officials have said that the goal of reorganizing the system was to create a more coordinated and efficient library network, in part by consolidating materials in fewer locations and digitizing many documents to make them available online.

Under the plan, EPA closed physical access to three regional office libraries in Chicago, Kansas City and Dallas, and to the headquarters library and the Chemical Library in Washington. Operating hours were reduced at libraries in Seattle, San Francisco, New York and Boston.

In early 2007, EPA officials enacted an indefinite moratorium on further changes amid congressional concerns about the reorganization. In December, Congress approved an additional $1 million for the libraries as part of a larger spending bill and directed the EPA to reopen the closed facilities. But the agency has not yet done so.

"Our vision is to be the premier model for the next generation of federal libraries by enhancing our electronic tools to complement our traditional library services," Molly A. O'Neill, the EPA assistant administrator who oversees the libraries, wrote in testimony submitted to the subcommittee.

But the GAO found that, because of copyright issues, only 51,000 of the system's more than 500,000 hard copies of books, reports, journals and maps are expected to be transferred to digital format. That means users in areas where libraries have closed must obtain materials through interlibrary loans, delaying access for as long as 20 days.

The GAO report faults the EPA for not consulting agency staff, outside experts or stakeholders before undertaking the reorganization, and failing to do a cost-benefit analysis or name a national manager to oversee the effort. Investigators noted that users of the Chemical Library - which served EPA scientists who review industry requests to sell new chemicals - did not learn of the facility's closure until after it occurred.

"The agency's modernization effort is characterized by poor planning, failure to communicate with its employees, the public or Congress and failure to protect unique government assets," Gordon said in a statement. "As a result, EPA library services are impaired, employees will have a harder time doing their jobs and the public has lost access to government information."

O'Neill said the EPA has taken steps to address some of the problems identified by the GAO, including better coordination with other agencies and more outreach to library users.

Katrina Contractor Has Reaped Millions

Katrina Contractor Has Reaped Millions

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The company charged with distributing aid checks has been blamed for its slow response yet received a pay raise from the state of Louisiana.

New Orleans - Two and a half years after Hurricane Katrina, tens of thousands of homeowners are still waiting for their government rebuilding checks, and many complain they can't even get their calls returned. But the company that holds the contract to distribute the aid is doing quite well.

ICF International of Fairfax, Va., has posted strong profits, gone public, landed additional multimillion-dollar government contracts - and recently secured a potentially big raise from the state of Louisiana.

In the waning days of Democratic Gov. Kathleen Babineaux Blanco's administration, state officials increased the management contract ceiling from $756 million to $912 million - this, after the Legislature wanted to fire ICF over its handling of the homeowner recovery program, called Road Home.

"It is outrageous that ICF couldn't do the job for more than $750 million and that they were given a pay raise after their history of disappointing service," Blanco's successor, Republican Gov. Bobby Jindal, said in an e-mail Thursday.

Displaced residents expressed anger.

"I'm flabbergasted that this company could be so inefficient and could mess up so consistently and for so long," said Bill Yurt, 57, who has been living in a FEMA trailer for 2 1/2 years.

Yurt said ICF hasn't sent an appraiser to determine the grant amount that will resurrect his gutted house in the New Orleans neighborhood of Gentilly. And his calls to an ICF caseworker have gone unreturned for a month.

Road Home was created in June 2006 as a state-run, federally funded plan to compensate homeowners for the breach of New Orleans' government-run levees. Homeowners can apply for grants to repair their homes or to obtain buyouts if they don't want to fix things up.

As of last month, 56,000 applicants - nearly 40% of the qualified total - had yet to receive a cent. Plagued by cost overruns and delays, Road Home is expected to cost federal taxpayers $10 billion and has become a glaring symbol of frustration in post-Katrina New Orleans.

"Supposedly they had the expertise, but what we've learned ever since is it's been on-the-job training," said Frank Silvestri, co-chairman of the Citizens Road Home Action Team, or CHAT, a community group that was formed in anger over ICF.

ICF spokeswoman Gentry Brann blamed the state's ever-changing rules and political meddling by officials and community groups for many of Road Home's difficulties.

She said Road Home had come to be regarded as an entitlement program The company, she said, must carefully evaluate 157,000 applications to guard against fraud.

Ozone Rules Weakened at Bush's Behest

Ozone Rules Weakened at Bush's Behest

By Juliet Eilperin

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EPA scrambles to justify action.

The Environmental Protection Agency weakened one part of its new limits on smog-forming ozone after an unusual last-minute intervention by President Bush, according to documents released by the EPA.

EPA officials initially tried to set a lower seasonal limit on ozone to protect wildlife, parks and farmland, as required under the law. While their proposal was less restrictive than what the EPA's scientific advisers had proposed, Bush overruled EPA officials and on Tuesday ordered the agency to increase the limit, according to the documents.

"It is unprecedented and an unlawful act of political interference for the president personally to override a decision that the Clean Air Act leaves exclusively to EPA's expert scientific judgment," said John Walke, clean-air director for the Natural Resources Defense Council.

The president's order prompted a scramble by administration officials to rewrite the regulations to avoid a conflict with past EPA statements on the harm caused by ozone.

Solicitor General Paul D. Clement warned administration officials late Tuesday night that the rules contradicted the EPA's past submissions to the Supreme Court, according to sources familiar with the conversation. As a consequence, administration lawyers hustled to craft new legal justifications for the weakened standard.

The dispute involved one of two distinct parts of the EPA's ozone restrictions: the "public welfare" standard, which is designed to protect against long-term harm from high ozone levels. The other part is known as the "public health" standard, which sets a legal limit on how high ozone levels can be at any one time. The two standards were set at the same level Wednesday, but until Bush asked for a change, the EPA had planned to set the "public welfare" standard at a lower level.

The documents, which were released by the EPA late Wednesday night, provided insight into how White House officials helped shape the new air-quality rules that, by law, are supposed to be decided by the EPA administrator.

The White House Office of Management and Budget (OMB) questioned in a March 6 memo to the EPA why the second standard was needed. EPA officials answered in a letter that high ozone concentrations can cause "adverse effects on agricultural crops, trees in managed and unmanaged forests, and vegetation species growing in natural settings."

The preamble to the new regulations alluded to this tug of war, stating there was a "robust discussion within the Administration of these same strengths and weaknesses" in setting the secondary standard. The preamble went on to say that the decision to make the two ozone limits identical "reflects the view of the Administration as to the most appropriate secondary standard."

The effort to rewrite the language - on the day the agency faced a statutory deadline - forced EPA Administrator Stephen L. Johnson to postpone at the last moment a scheduled news conference to announce the new rules. It finally took place at 6 p.m., five hours later than planned.

Under the Clean Air Act, the federal government must reexamine every five years whether its ozone standards are adequate, and the rules that the EPA issued Wednesday will help determine the nation's air quality for at least a decade.

Ozone, which is formed when pollutants such as nitrogen oxides and other chemical compounds released by industry and motor vehicles are exposed to sunlight, is linked to an array of heart and respiratory illnesses.

The EPA set the allowable amount of ozone in the air at 75 parts per billion, a level stricter than the current limit but higher than what the scientific advisers had recommended.

Carol M. Browner, who served as EPA administrator under President Bill Clinton, also encountered objections from the OMB when she established new ozone standards in 1997. In that instance, the president backed the EPA over White House budget officials.

"We did not allow OMB to push us into a decision we were quite certain was outside the boundaries of the law," Browner said in an interview. The Clean Air Act, she added, creates "a moral and ethical commitment that we're going to let the science tell us what to do."

Asked for a comment yesterday, EPA spokesman Timothy Lyons said the agency had complied with the Clean Air Act. "The secondary standard we set is fully supported by both the law and the record, and it is the most protective eight-hour standard ever for ozone."

When asked about Clement's role, White House spokesman Tony Fratto said: "The White House sought legal advice from the Justice Department and made its decision based on that advice."

The EPA's documents suggest that senior officials and scientific advisers resisted the White House's position. Last year, the agency's Clean Air Scientific Advisory Committee wrote - using italics for emphasis - that it unanimously supported the EPA staff's conclusion that "protection of managed agricultural crops and natural terrestrial ecosystems requires a secondary [ozone standard] that is substantially different from the primary ozone standard. . . ."

When the OMB's Susan E. Dudley urged the EPA to consider the effects of cutting ozone further on "economic values and on personal comfort and well-being," the EPA's Marcus Peacock responded in a March 7 memo: "EPA is not aware of any information that ozone has beneficial effects on economic values or on personal comfort and well being."

Lisa Heinzerling, a Georgetown University law professor who specializes in the Clean Air Act, said Dudley's letter to the EPA represents "a misunderstanding of the statute, a misunderstanding of Supreme Court precedent and a misunderstanding of the science as the expert agency understands it."

Thoughts of an Ex-Marine Officer Turned Peace Activist

Thoughts of an Ex-Marine Officer Turned Peace Activist

By Camillo "Mac" Bica

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Often as I've marched and demonstrated for peace, I've been verbally assaulted, accused of being un-American, unpatriotic, even treasonous by those who carried American flags, sang inspiring hymns, and boisterously and stridently asserted their patriotism, love of country and support for the troops through bullhorns.

Most of this criticism I dismissed as a failure to understand the nature and the reality of war and the moral and political obligations of citizens in a democracy. I was confident in my patriotism, my love of America and my concern and support for the troops. I had, after all, served honorably as a motivated United States Marine Corps officer in Vietnam. But when this disparagement and denunciation began coming from fellow veterans, I became disquieted and felt the need to seriously ponder the possibility that perhaps I had gone astray, violating some sacred trust or bond. So, what I offer in this essay is a thought experiment in self-examination, an introspective journey into the mind and motivation of a former Marine turned peace activist.

Perhaps my first realization in this exercise was that I allow at least the possibility that war, under very specific circumstances not easily or often met, may be just, moral and necessary. Therefore, I am not an absolute pacifist and, in the strict sense, I am not antiwar.

I realized as well that I believe in the Constitution, the rule of law, and support the fundamental purpose and mission of the United Nations, flawed though it may be, "to maintain international peace and security and to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace." According to the United Nations General Assembly Resolution 3314 (XXIX), (international law), the unjustifiable and unwarranted "use of armed force by a State against the sovereignty, territorial integrity or political independence of another State," is a crime of aggression. Therefore, I am anti aggression and unjust, immoral and unnecessary war.

Further, I believe in the rights and dignity of all human beings. Rational analysis of the facts has convinced me that the invasion of Iraq was a mistake - unjustifiable and unwarranted - based as it was on false or distorted intelligence, deception and lies. Not even President Bush still believes, if he ever did, that Iraq possessed weapons of mass destruction or was linked to the terrorist attacks of 9/11. While the Bush administration has offered, after the fact, various other explanations for the war, e.g., removal of a tyrant, democratization, etc., none seem sincere nor constitute justification under international law. Consequently, the invasion of Iraq is aggression. I am anti the Iraq war.

At this writing, many in our country are celebrating the "success" of the surge and of the "new" military strategy in Iraq. However, military success and improved strategy does not afford a moral and legal basis for continuing, even escalating, the occupation - the aggression against the Iraqi people. How could achieving "victory" in such a scenario, i.e., the triumph of the aggressors over their victims, be legally and morally justified? I am anti the continued occupation of Iraq.

My personal experiences in war led me to conclude that the morally tragic and legally reprehensible incidents such as have occurred at Guantanamo Bay, Cuba, and in Abu Ghraib, Haditha, Fallujah and elsewhere in Iraq and Afghanistan were not the anomalous actions of a few aberrant individuals (I do not blame the troops), but were the direct and inevitable consequence of the Bush administration's incompetence, arrogance and contempt for the Constitution and the dictates of international law and treaties. What threatens the fabric and foundations of our way of life in these dangerous times is not some amorphous, enigmatic horde of bloodthirsty terrorists. Rather, it is the assault upon truth, individual freedom and the values of justice and morality we hold sacred. I am anti the Bush administration.

It is clear from history that such criminal behavior, arrogance and hypocrisy - the characteristics of a rogue nation - brings no credibility, prestige or standing in the world, only disdain, animosity, hatred and righteous indignation. Nor do acts of aggression bring glory or vindication to those already killed or wounded in battle. Justice and morality, the values I associate with being an American, require that an unjust and immoral war be ended immediately; that the aggressors possess the moral courage to acknowledge their crime; that they make retribution to the victims of their aggression and apologize to the citizens of the aggressed nation and the rest of the world community for their transgression. I am anti rogue nation.

My respect for the military convinces me that the lives and well-being of our young men and women are not automatically forfeit upon enlistment, relegating them to the status of cannon fodder. Sending inadequately prepared National Guard troops into combat and then failing to provide them with body and vehicle armor is unconscionable and criminally negligent. Repeated combat tours and insufficient time for rest and rehabilitation between deployments increase the likelihood and inevitability of psychological, emotional and moral injury that is devastating and life-altering. Finally, the "stop-loss" provision that prevents our servicemen and women from leaving the military once their term of service has been completed is disingenuous and a violation of contract. I am pro military. I support the troops.

It is apparent that the burden of this war is not being shared fairly by all Americans. Only a fraction of our citizenry is directly affected, while the vast majority go about their consumption-driven lives as usual, oblivious to the sacrifices of our soldiers, sailors and Marines and to the death and destruction being prosecuted in their names. It is not support, therefore, nor is it patriotic, to remain silent when our troops are placed in harm's way unnecessarily, to kill and be killed subject to the whims and ineptitudes of our political leaders. I am anti apathy and I have learned that if patriotism means unquestioning allegiance and blind obedience, such patriotism is inconsistent with democracy and with basic human decency. Such patriotism is an abeyance of our human reason. Such patriotism is inhumane and immoral. Such patriotism is to surrender our power to think critically. Such patriotism is a profound failure, both intellectually and morally.

As has been clearly demonstrated by the unconscionable treatment of our wounded veterans at Walter Reed Army Medical Center and at Veterans Administration facilities across the country, our returning veterans are not receiving the quality of care they deserve and require to recover from their injuries and experiences in war. I am outraged by this lack of concern and support for those who sacrificed so much for our country. I am pro veterans.

The fundamental moral principle of respect for persons requires that we protect those most vulnerable from being enticed, seduced, brainwashed and deceived into becoming complicit in crimes of aggression and cannon fodder for corporate war profiteers and opportunists. We are morally obligated, therefore, to protect our impressionable young people by striving to ban recruiters from our high schools and colleges and by urging our representatives to rescind the No Child Left Behind Act's military recruitment provision which requires schools, in order to receive financial assistance, to provide military recruiters with students' contact information. Second, we must inform the underprivileged - who see the military as their only alternative to poverty, crime and unemployment - of other educational and employment opportunities available to them other than by joining the military. Finally, we must make clear to all prospective enlistees the realities of military service, the horrors of war and the immorality and futility of the war in Iraq. I doubt this information is contained within a recruiter's motivational packet of hats, tee-shirts, bumper stickers and violent video games. Under this administration, with potential enlistees facing the inevitable prospect of fighting an immoral war of aggression, I am anti recruitment.

The fact that so many of our heroic sons and daughters are languishing abandoned, their emotional and psychological injuries untreated and their needs ignored, is a national tragedy and disgrace. The fact that America has become isolated in the world, respected no longer for our ideals but feared for our brutality, no longer admired for our values of justice and freedom but hated for our hypocrisy and intolerance, should bring a tear to the eye and anger to the heart of every true patriot. I am pro America.

As a result of this exercise in self-examination, I have realized that I am anti aggression. I am anti unjust, immoral, and unnecessary war, but not anti war. I am anti the Iraq war, however; anti the Bush Administration, anti rogue nation and anti recruitment. In addition, I am pro military, pro veteran and pro America. I have realized as well that the outrage I feel regarding the corrupting and disgracing of America by those political leaders and their coconspirators who cherish not our values and way of life but only wealth and power requires - no demands - the true patriot to embrace truth and to cry out in condemnation and protest. Finally, despite the criticisms and disparaging comments and accusations by credulous veterans, I have realized that my activism and dissent are an expression and fulfillment of my moral and patriotic duty. I am confident, therefore, that I am more the patriot today as I demonstrate for peace than when I wore the uniform of a United States Marine.


Camillo "Mac" Bica, Ph.D., is a professor of philosophy at the School of Visual Arts in New York City and a contributing editor for military affairs at Cyrano's His focus is in ethics, particularly as it applies to war and warriors. As a veteran recovering from his experiences as a United States Marine Corps officer during the Vietnam War, he founded, and coordinated for five years, the Veterans Self-Help Initiative, a therapeutic community of veterans suffering from Post-Traumatic Stress Disorder. He is a long-time activist for peace and justice, a member of the Vietnam Veterans Against the War, and a founding member of the Long Island Chapter of Veterans for Peace. Articles by Dr. Bica have appeared in Cyrano's Journal, The Humanist Magazine, Znet,, Common Dreams,, Monthly Review Zine, Foreign Policy in Focus, OpEdNews.Com, and numerous philosophical journals.

FBI Found to Misuse Security Letters

FBI Found to Misuse Security Letters

By Dan Eggen

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2003-06 audit cites probes of citizens.

The FBI has increasingly used administrative orders to obtain the personal records of U.S. citizens rather than foreigners implicated in terrorism or counterintelligence investigations, and at least once it relied on such orders to obtain records that a special intelligence-gathering court had deemed protected by the First Amendment, according to two government audits released yesterday.

The episode was outlined in a Justice Department report that concluded the FBI had abused its intelligence-gathering privileges by issuing inadequately documented "national security letters" from 2003 to 2006, after which changes were put in place that the report called sound.

A report a year ago by the Justice Department's inspector general disclosed that abuses involving national security letters had occurred from 2003 through 2005 and helped provoke the changes. But the report makes it clear that the abuses persisted in 2006 and disclosed that 60 percent of the nearly 50,000 security letters issued that year by the FBI targeted Americans.

Because U.S. citizens enjoy constitutional protections against unreasonable searches and seizures, judicial warrants are ordinarily required for government surveillance. But national security letters are approved only by FBI officials and are not subject to judicial approval; they routinely demand certain types of personal data, such as telephone, e-mail and financial records, while barring the recipient from disclosing that the information was requested or supplied.

According to the findings by Justice Department Inspector General Glenn A. Fine, the FBI tried to work around the Foreign Intelligence Surveillance Court, which oversees clandestine spying in the United States, after it twice rejected an FBI request in 2006 to obtain certain records. The court had concluded "the 'facts' were too thin" and the "request implicated the target's First Amendment rights," the report said.

But the FBI went ahead and got the records anyway by using a national security letter. The FBI's general counsel, Valerie E. Caproni, told investigators it was appropriate to issue the letters in such cases because she disagreed with the court's conclusions.

In total, Fine said, the FBI issued almost 200,000 national security letters from 2003 through 2006, and they were used in a third of all FBI national security and computer probes during that time. Fine said his investigators have identified hundreds of possible violations of laws or internal guidelines in the use of the letters, including cases in which FBI agents made improper requests, collected more data than they were allowed to, or did not have proper authorization to proceed with the case.

Fine also pointed to the FBI's "troubling" use of the letters to obtain vast quantities of telephone numbers or other records with a single request. Investigators identified 11 such cases, involving information related to about 4,000 phone numbers, that did not comply with USA Patriot Act requirements or that violated FBI guidelines.

The latest findings reignited long-standing criticism from Democrats and civil liberties groups, who said the FBI's repeated misuse of its information-gathering powers underscores the need for greater oversight by Congress and the courts.

"The fact that these are being used against U.S. citizens, and being used so aggressively, should call into question the claim that these powers are about terrorists and not just about collecting information on all kinds of people," said Jameel Jaffer, national security director at the American Civil Liberties Union. "They're basically using national security letters to evade legal requirements that would be enforced if there were judicial oversight."

Justice spokesman Dean Boyd said in a statement that Fine's report "should come as no surprise" because the survey ended in 2006, before the FBI introduced procedural changes to better control and keep track of requests for the security letters.

FBI Assistant Director John Miller said a new automated system will keep better tabs on the letters, and they are now reviewed by a lawyer before they are sent to a telephone company, Internet service provider or other target. "We are committed to using them in ways that maximize their national security value while providing the highest level of privacy and protection of the civil liberties of those we are sworn to protect," Miller said.

Fine said that FBI employees "self-reported" 84 possible violations of laws or guidelines in the use of the letters, in 2006, which "was significantly higher than the number of reported violations in prior years." But he noted that his office already had begun its initial investigation into the letters by then, which might have contributed to the increase.

About a quarter of the reported incidents were because of mistakes made by telephone or Internet providers, including some in which they provided either the wrong information or disclosed more than the FBI requested. But many of those cases should have been caught by the FBI earlier, Fine said.

A Vicious Circle Ending In A Systemic Financial Meltdown

A Vicious Circle Ending In A Systemic Financial Meltdown

By Mike Whitney

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"It's another round of the credit crisis. Some markets are getting worse than January this time. There is fear that something dramatic will happen and that fear is feeding itself," Jesper Fischer-Nielsen, interest rate strategist at Danske Bank, Copenhagen; Reuters

Yesterday's action by the Federal Reserve proves that the banking system is insolvent and the US economy is at the brink of collapse. It also shows that the Fed is willing to intervene directly in the stock market if it keeps equities propped up. This is clearly a violation of its mandate and runs contrary to the basic tenets of a free market. Investors who shorted the market yesterday, got clobbered by the not so invisible hand of the Fed chief.

In his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.

“It's like they're putting jumper cables onto a battery to kick-start the credit market,'' said Nick Raich, a manager at National City Private Client Group in Cleveland. ``They're doing their best to try to restore confidence.''

“Confidence”? Is that what it's called when the system is bailed out by Sugar-daddy Bernanke?

To understand the real meaning behind the Fed's action; it's worth considering some of the stories which popped up in the business news just days earlier. For example, last Friday, the International Herald Tribune reported:

“Tight money markets, tumbling stocks and the dollar are expected to heighten worries for investors this week as pressure mounts on central banks facing what looks like the “third wave” of a global credit crisis....Money markets tightened to levels not seen since December, when year-end funding problems pushed lending costs higher across the board.”

The Herald Tribune said that troubles in the credit markets had pushed the stock market down more than 3 percent in a week and that the same conditions which preceded the last two crises (in August and December) were back stronger than ever. In other words, liquidity was vanishing from the system and the market was headed for a crash.

A report in Reuters reiterated the same ominous prediction of a “third wave” saying:

“The two-year U.S. Treasury yields hit a 4-year low below 1.5 percent as investors flocked to safe-haven government bonds....The cost of corporate bond insurance hit record highs on Friday and parts of the debt market which had previously escaped the turmoil are also getting hit.”

Risk premiums were soaring and investors were fleeing stocks and bonds for the safety of government Treasuries; another sure sign that liquidity was disappearing.

Reuters: "The level of financial stress is ... likely to continue to fuel speculation of more immediate central bank action either in the form of increased liquidity injections or an early rate cut," Goldman Sachs said in a note to clients.”

Indeed. When there's a funding-freeze by lenders, investors hit the exits as fast as their feet will carry them. That's why the lights started blinking red at the Federal Reserve and Bernanke concocted a plan to add $200 billion to the listing banking system.

New York Times columnist Paul Krugman also referred to a “third wave” in his article “The Face-Slap Theory”. According to Krugman, “The Fed has been cutting the interest rate it controls - the so-called Fed funds rate – (but) the rates that matter most directly to the economy, including rates on mortgages and corporate bonds, have been rising. And that's sure to worsen the economic downturn.”...(Now) “the banks and other market players who took on too much risk are all trying to get out of unsafe investments at the same time, causing significant collateral damage to market functioning.” What the Times' columnist is describing is a run on the financial system and the onset of “a full-fledged financial panic.”

The point is, Bernanke's latest scheme is not a remedy for the trillion dollar unwinding of bad bets. It is merely a quick-fix to avoid a bloody stock market crash brought on by prevailing conditions in the credit markets.

Bernanke coordinated the action with the other members of the global banking cartel---The Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank---and cobbled together the new Term Securities Lending Facility (TSLF), which “will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally.” (Fed statement)

The plan, of course, is wildly inflationary and will put additional downward pressure on the anemic dollar. No matter. All of the Fed's tools are implicitly inflationary anyway, but they'll all be put to use before the current crisis is over.

The Fed's statement continues: “The Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.”

So, why is the Fed issuing loans to foreign banks? Isn't that a tacit admission of its guilt in the trillion dollar subprime swindle? Or is it simply a way of warding off litigation from angry foreign investors who know they were cheated with worthless toxic bonds? In any event, the Fed's largess proves that the G-10 operates as de facto cartel determining monetary policy for much of the world. (The G-10 represents roughly 85% of global GDP)

As for Bernanke's Term Securities Lending Facility (TSLF) it is intentionally designed to circumvent the Fed's mandate to only take top-grade collateral in exchange for loans. No one believes that these triple A mortgage-backed securities are worth more than $.70 on the dollar. In fact, according to a report in Bloomberg News yesterday: “AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group.

``The fact that they've kept those ratings where they are is laughable,'' said Kyle Bass, chief executive officer of Hayman Capital Partners, a Dallas-based hedge fund that made $500 million last year betting lower-rated subprime-mortgage bonds would decline in value. ``Downgrades of AAA and AA bonds are imminent, and they're going to be significant.'' Bass estimates most of AAA subprime bonds in the ABX indexes will be cut by an average of six or seven levels within six weeks.” (Bloomberg News) The Fed is accepting these garbage bonds at nearly full-value. Another gift from Santa Bernanke.

Additionally, the Fed is offering 28 day repos which --if this auction works like the Fed's other facility, the TAF---the loans can be rolled over free of charge for another 28 days. Yippee. The Fed found a way to recapitalize the banks with permanent rotating loans and the public is none the wiser. The capital-starved banksters at Citi and Merrill must feel like they just won the lottery. Unfortunately, Bernanke's move effectively nationalizes the banks and makes them entirely dependent on the Fed's fickle generosity.

The New York Times Floyd Norris sums up Bernanke's efforts like this:

“The Fed’s moves today and last Friday are a direct effort to counter a loss of liquidity in mortgage-backed securities, including those backed by Fannie Mae and Freddie Mac. Given the implied government guarantee of Freddie and Fannie, rising yields in their paper served as a warning sign that the crunch was worsening and investor confidence was waning. On Oct. 30, the day before the Fed cut the Fed funds rate from 4.75 percent to 4.5 percent, the yield on Fannie Mae securities was 5.75 percent. Today the Fed Funds rate is 3 percent, and the Fannie Mae rate is 5.71 percent, virtually the same as in October.....A sign of the Fed’s success, or lack of same, will be visible in that rate. It needs to come down sharply, in line with Treasury bond rates. Today, the rate was up for most of the day, but it did fall back at the end of the day. Watch that rate for the rest of the week to see indications of whether the Fed’s move is really working to restore confidence.”

Norris is right; it all depends on whether rates go down and whether that will rev-up the moribund housing market again. Of course, that is predicated on the false assumption that consumers are too stupid to know that housing is in its biggest decline since the Great Depression. This is just another slight miscalculation by the blinkered Fed. Housing will not be resuscitated anytime in the near future, no matter what the conditions; and you can bet on that. The last time Bernanke cut interest rates by 75 basis points mortgage rates on the 30-year fixed actually went up a full percentage point. This had a negative affect on refinancing as well as new home purchases. The cuts were a total bust in terms of home sales.

Still, equities traders love Bernanke's antics and, for the next 24 hours or so, he'll be praised for acting decisively. But as more people reflect on this latest manuver, they'll see it for what it really is; a sign of panic. Even more worrisome is the fact that Bernanke is quickly using every arrow in his quiver. Despite the mistaken belief that the Fed can print money whenever it chooses; there are balance sheets constraints; the Fed's largess is finite. According to MarketWatch:

"Counting the currency swaps with the foreign central banks, the Fed has now committed more than half of its combined securities and loan portfolio of $832 billion, Lou Crandall, chief economist for Wrightson ICAP noted. 'The Fed won't have run completely out of ammunition after these operations, but it is reaching deeper into its balance sheet than before."

Steve Waldman at interfluidity draws the same conclusion in his latest post:

“After the FAF expansion, repo program, and TSLF, the Fed will have between $300B and $400B in remaining sterilization capacity, unless it issues bonds directly.” (Calculated Risk)
So, Bernanke is running short of ammo and the housing bust has just begun. That's bad. As the wave of foreclosures, credit card defaults and commercial real estate bankruptcies continue to mount; Bernanke's bag o' tricks will be near empty having frittered most of his capital away on his Beluga-munching buddies at the investment banks.
But that's only half the story. Bernanke and Co. are already working on a new list of hyper-inflationary remedies once the credit troubles pop up again. According to the Wall Street Journal, the Fed has other economy-busting scams up its sleeve:

“With worsening strains in credit market threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses -– perhaps buying mortgage-backed securities directly.

“As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest, said Michael Feroli of J.P. Morgan Chase. He said two options are garnering particular attention on Wall Street: Direct Fed lending to financial institutions other than banks and direct Fed purchases of debt of Fannie Mae and Freddie Mac or mortgage-backed securities guaranteed by the two shareholder-owned, government-sponsored mortgage companies. ( “Rate Cuts may not be Enough”, David Wessel, Wall Street Journal)

Wonderful. So now the Fed is planning to expand its mandate and bail out investment banks, hedge funds, brokerage houses and probably every other brandy-swilling Harvard grad who got caught-short in the subprime mousetrap. Ain't the “free market” great?

But none of Bernanke's bailout schemes will succeed. In fact, all he's doing is destroying the currency by trying to reflate the equity bubble. And how much damage is he inflicting on the dollar? According to Bloomberg, “the risk of losses on US Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves....Support for troubled financial institutions in the U.S. will be perceived as a weakening of U.S. sovereign credit.''

America is going broke and the rest of the world knows it. Bernanke is just speeding the country along the ever-steepening downward trajectory.

Timothy Geithner, President of the New York Fed put it like this:

The self-reinforcing dynamic within financial markets has intensified the downside risks to growth for an economy that is already confronting a very substantial adjustment in housing and the possibility of a significant rise in household savings. The intensity of the crisis is in part a function of the size of the preceding financial boom, but also of the speed of the deterioration in confidence about the prospects for growth and in some of the basic features of our financial markets. The damage to confidence—confidence in ratings, in valuation tools, in the capacity of investors to evaluate risk—will prolong the process of adjustment in markets. This process carries with it risks to the broader economy.”

Without a hint of irony, Geithner talks about the importance of building confidence on a day when the Fed has deliberately distorted the market by injecting $200 billion in the banking system and sending the flagging stock market into a steroid-induced rapture. Astonishing.

The stock market was headed for a crash this week, but Bernanke managed to swerve off the road and avoid a head-on collision. But nothing has changed. Foreclosures are still soaring, the credit markets are still frozen, and capital is being destroyed at a faster pace than any time in history. The economic situation continues to deteriorate and even unrelated parts of the markets have now been infected with subprime contagion. The massive deleveraging of the banks and hedge funds is beginning to intensify and will continue to accelerate until a bottom is found. That's a long way off and the road ahead is full of potholes.

"In the United States, a new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively.” (Statement from The Global Europe Anticipation Bulletin (GEAB)

Is that too gloomy? Then take a look at these eye-popping charts which show the extent of the Fed's lending operations via the Temporary Auction Facility. The loans have helped to make the insolvent banks look healthy, but at great cost to the country's economic welfare.

The Fed established the TAF in the first place; to put a floor under mortgage-backed securities and other subprime junk so the banks wouldn't have to try to sell them into an illiquid market at fire-sale prices. But the plan has backfired and now the Fed feels compelled to contribute $200 billion to a losing cause. It's a waste of time.

UBS puts the banks total losses from the subprime fiasco at $600 billion. If that's true, (and we expect it is) then the Fed is out of luck because, at some point, Bernanke will have to throw in the towel and let some of the bigger banks fail. And when that happens, the stock market will start lurching downward in 400 and 500 point increments. But what else can be done? Solvency can only be feigned for so long. Eventually, losses have to be accounted for and businesses have to fail. It's that simple.

So far, the Fed's actions have had only a marginal affect. The system is grinding to a standstill. The country's two largest GSEs, Fannie Mae and Freddie Mac, which are presently carrying $4.5 trillion of loans on their books, are teetering towards bankruptcy. Both are gravely under-capitalized and (as a recent article in Barron's shows) Fannies equity is mostly smoke and mirrors. No wonder investors are shunning their bonds. Additionally, the cost of corporate bond insurance is now higher than anytime in history, which makes funding for business expansion or new projects nearly impossible. The wheels have come of the cart. The debt markets are upside-down, consumer confidence is drooping and, as the Financial Times states, “A palpable sense of crisis pervades global trading floors.” It's all pretty grim.

The banks are facing a “systemic margin call” which is leaving them capital-depleted and unwilling to lend. Thus, the credit markets are shutting down and there's a stampede for the exits by the big players. Bernanke's chances of reversing the trend are nil. The cash-strapped banks are calling in loans from the hedge funds which is causing massive deleveraging. That, in turn, is triggering a disorderly unwind of trillions of dollars of credit default swaps and other leveraged bets. Its a disaster. Economist Nouriel Roubini predicted the whole sequence of events six months before the credit markets seized and the Great Unwind began”. Here's a sampling of his recent testimony before Congress:

Roubini's Testimony before Congress:

“There is now a rising probability of a "catastrophic" financial and economic outcome; a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown....Capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit.

To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario – however extreme – has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.”

Roubini has been right from the very beginning, and he is right again now. Bernanke can place himself at the water's edge and lift his hands in defiance, but the tide will come in and wash him out to sea anyway. The market is correcting and nothing is going to stop it.

Dollar Panic Approaching: Take Action Immediately

Dollar Panic Approaching: Take Action Immediately

James DiGeorgia

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Gold just broke through my target of $1,000 an ounce and Oil is now trading at $110 a barrel and looking as if it may move much higher, despite the fact inventories worldwide have been rising.

Financial analysts around the world are focusing on the fact that these big moves in energy, precious metals and commodities are many times greater than the 20% downward thrust in the value of the dollar these past months and insist these moves in commodities, energy and precious metals is a short term spike.

They’re 100% wrong!

The falling dollar is only one symptom of a much greater problem and the explosive price moves in these ’hard assets" will be only one of the consequences we will face thanks to these four problems that are not going away any time soon ...

  • Spending $25 billion a month in Iraq and Afghanistan.
  • Allowing mortgage lenders to leverage hundreds of billions in high risk loans.
  • Not policing the derivatives markets
  • Allowing earmark spending to balloon into over a Trillion dollars in pork barrel spending.

While the both parties in Washington seem to be heading towards a one year suspension of ear mark spending — it amounts to an election year stunt. Cutting interest rates hasn’t made one iota of difference to borrows as rates on long term mortgages have not declined and getting a mortgage these days thanks to the liquidity crisis is extremely difficult as banks are discounting home valuations by as much as 70%. The derivatives market is a mess. No one is quite sure how many banks and financial institutions are in trouble but it’s thought to be as much as $600 billion in front end loses and as much as $1 trillion thanks to the derivatives market.

Citibank could go bust. The wealthy sovereign investment funds have already come out and said they can’t save Citibank. Despite Bear Stearns denials of liquidity problems all you have to do to understand how deeply in peril that company finds itself in — is just look at its business model. A mortgage meltdown and credit crises is a doomsday scenario for Bear Stearns.

Dollar Panic — Gold $2500 an ounce —

Don’t Get Caught Without Gold!

I believe we may be on the verge of seeing a series of bank and financial institution failures which will in turn trigger the next leg of this financial crisis -- a full dollar panic. In my SuperStock Investor I recommend shorting Bear Sterns yesterday. They’ll likely be merged into another company but make no mistake about it — they’re in deep trouble.

The fact is: we have not seen this kind of danger here in the U.S financial markets since the late 1920’s. We’ve not seen the threat of massive stagflation like this since the 1970’s. Should Wall Street’s big banking and financial institutions start failing or forced in to mergers via crises — the dollar is toast. Forget about $7 gasoline, $3 McDonalds Regular Hamburgers and instead start thinking about adding one zero to everything you buy....Gasoline now $3.85 will be US$38.50, McDonalds Regular Hamburgers now .79 each soon US$7.90...this dollar panic will produce a devaluation that will resemble the worst South American devaluations of the 1970’s. It’s going to be a mess.

Anyone not holding gold or physical precious metals is going to be seriously impoverished.

The danger is so great, the time is short. Don’t get caught in this coming Dollar Panic.