Sunday, March 23, 2008

Japan's Okinawans Rally Against US Military Crimes

Japan's Okinawans Rally Against US Military Crimes

By Linda Sieg

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Tokyo - Thousands of Okinawans rallied on Sunday to protest crimes by U.S. troops and demand a smaller U.S. military presence on the southern Japanese island after last month's arrest of a Marine on suspicion of raping a schoolgirl.

"Crimes and accidents due to the bases have happened over and over and Okinawa has protested with intense anger to both the U.S. and Japanese governments," Kyodo quoted Okinawa City Mayor Mitsuko Tomon as telling a crowd gathered in heavy rain in the town of Chatan, where the February incident occurred.

"But each time, our voices have been trampled and there has been no end to the heinous crimes," the mayor added.

Organizers estimated about 6,000 people took part in the rally, Kyodo news agency said. Police declined to give an estimate.

The arrest of U.S. Marine Tyrone Hadnott, 38, on suspicion of raping a 14-year-old girl sparked outrage on Okinawa, host to a big chunk of the nearly 50,000 U.S. troops in Japan, and stirred memories of the 1995 rape of a 12-year-old girl that prompted huge anti-base protests and jolted the U.S.-Japan alliance.

The girl, who came under heavy criticism on the Internet, later dropped charges, and Hadnott was released to the custody of U.S. military authorities, who have been investigating the case.

Participants in Sunday's rally adopted a resolution demanding consolidation of the U.S. bases and revisions to a pact governing the status of U.S. military personnel in Japan to give Japanese authorities greater legal jurisdiction.

Both Tokyo and Washington have so far rejected demands to revise the Status of Forces Agreement.

Broader Plans

"The rights of the people of Okinawa continue to be violated by the base-related damage, and we call on both the U.S. and Japanese governments to fundamentally revise the Status of Forces Agreement," Kyodo quoted the resolution as saying.

The pact was not an issue in the Hadnott case since the Marine was arrested off-base by Japanese police.

Organizers, including women's groups, had hoped for a turnout of around 10,000 people but squabbling between conservative politicians and leftist opposition groups undercut their efforts.

The rally comes as Tokyo is trying to persuade local residents to accept a plan to shift key functions of the U.S. Marine's Futenma air station from the crowded central city of Ginowan to the lightly populated coastal town of Nago.

Relocating Futenma is key to a broader plan to shift some 8,000 of the 13,000 Marines now on Okinawa to the U.S. territory of Guam to lighten the presence of the U.S. military on the Japanese island. Nago authorities have agreed to the move but sticky details remain to be worked out.

Anti-base critics argue the consolidation plans will only slightly reduce Okinawa's burden for the U.S.-Japan security alliance, a pillar of Japan's post-World War Two diplomacy.

Friction with local communities near U.S. bases often occurs because of concern about crime, accidents and noise, although sensitivities are greater in Okinawa because of the heavy U.S. presence and the island's long tense relations with the mainland.

On Sunday, the U.S. military said it would cooperate with Japanese police in their investigation of the killing of a taxi driver found stabbed in his cab in Yokosuka, south of Tokyo.

A U.S. credit card apparently belonging to a U.S. sailor who has been charged with desertion was found in the cab.

The sailor, who has been taken into U.S. military custody, has not been named as a suspect but may have information regarding the murder case, the U.S. Navy said in a statement on Saturday. Japanese media said the sailor had denied involvement.

Qualified Borrowers Face Credit Squeeze

Qualified Borrowers Face Credit Squeeze

By Kimberly Blanton

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Increased standards lead to more rejections.

Lenders are rejecting more loan applicants with strong credit scores, the latest indication the nation's credit crunch is deepening and further depressing the housing market and the economy.

Mortgage companies are growing more cautious and tightening lending standards for some of their most credit-worthy customers - from increasing down payments for home purchases to requiring higher credit scores for loan approvals.

An applicant has to be a prime borrower to qualify for a mortgage or to refinance a loan, said Thomas Marroni, president of New Boston Mortgage Corp., a loan brokerage firm. Two months ago, one out of every 15 of his top-rated loan applicants was turned down. "Now, it's four out of 15," he said.

Fifty-five percent of senior loan officers at US banks in January tightened lending standards to prime customers, up from 40 percent in October, according to the latest survey by the Federal Reserve Board. In recent weeks, the situation has deteriorated as mortgage companies worried about a recession have pulled back further on making new loans and refinancing existing mortgages, and have terminated home-equity lines of credit, said lenders, brokers, and borrowers.

Last summer, lenders immediately cut off subprime borrowers - people with credit scores below 620 - when delinquencies on those loans increased. Now, prime customers with scores above 620 - and even those in the 700s - are finding it harder to qualify for loans. Every credit company has a slightly different range of scores for ranking borrowers based on their track record of paying back loans on time. But generally prime borrowers have scores from 700 to about 850. The top score available is 900, but very few borrowers have ever attained that number.

Richard Perlmutter, a Suffolk University Law School professor, has a gold-plated credit history, no car loans, and no credit card balances. He and his wife, an executive at Harvard Business School, hold only a $280,000 mortgage on an upscale Charlestown condominium assessed at $600,000. Last month, Countrywide Home Loans terminated their $100,000 home-equity line of credit, which they tapped for emergency cash but paid off quickly.

While it's legal for lenders to withdraw home-equity lines, it is rare. A loyal customer - the primary mortgage is with Countrywide - Richard Perlmutter was incredulous. Lenders, he said, have "lost any ability to discriminate" between good and bad borrowers.

Freddie Mac and Fannie Mae, the government-backed buyers of mortgages, are tightening standards even as they are investing up to $200 billion more into the loan market. Last week, for example, the agencies increased interest rates for borrowers with credit scores below 700 - previously, a 680 score triggered the higher rate. For borrowers seeking jumbo mortgages, the agencies increased the down payment required in some cases to 10 percent, from 5 percent, said Brian Koss, managing director of Mortgage Network Inc., a Danvers lender. "We call it jumbo light," he said.

During the housing boom, lenders relaxed their standards, allowing homebuyers with bad credit to borrow without a down payment and proof of income. Loose standards fueled the housing boom but now record numbers of delinquencies on subprime mortgages are aggravating the decline in sales and prices. Subprime borrowers could not make their monthly payments when their adjustable interest rates rose, causing foreclosures to soar. Now lenders are tightening credit to prevent more delinquencies in their portfolios, and some economists worry lenders are overcompensating for their past mistakes.

A mortgage-market contraction could prolong the housing slump and hurt the US economy, which most economists believe is already in a recession. If fewer people are able to take advantage of falling mortgage interest rates to refinance and lower their monthly payments or extract home equity, there will be less money circulating in the economy.

"When people with what looks like very good qualifications can't get access to credit, that is the classic credit crunch," said Nigel Gault, senior US economist for Global Insight, a Waltham consulting firm. "If people don't get credit they can't spend, and if they can't spend they don't generate the incomes for other people, and the economy looks worse. Then you're in a very nasty spiral," he said.

Those seeking home-purchase loans are facing higher hurdles. Marroni of New Boston Mortgage said he was shocked when a client who works in the financial industry was denied a mortgage last week to buy a South End condo with a large down payment. The executive, whose salary was in the high $300,000s, was moving to Boston from New York. His credit score was 770 and his wife's was 740, and they had found a buyer for their Brooklyn condo.

The lender, Marroni said, would not approve the couple for a loan even though the executive had a letter confirming his new employment; the lender wanted to see his first paycheck. In the past, Marroni said, "it was no big deal" for relocating executives to qualify for mortgages. "Now, it's a big deal," he said.

Home-equity loans and home-equity lines of credit are also scarcer because home prices are falling. Homeowners use these loans to obtain cash for renovations or other expenditures. They are backed by the equity in the borrower's house, which is equal to the property's market value minus the amount owed on the mortgage. With home prices dropping, banks are skittish about lending against properties that may lose more value in the future.

Countrywide, one of the nation's largest mortgage lenders, recently confirmed it is analyzing its loan portfolio and would cut off lines of credit to some customers. Countrywide said in a statement it is analyzing "the impact of lower property values on existing accounts." Another major lender, Wells Fargo amp; Co., said it is also restricting the use of existing lines of credit "in a small number of instances." Borrowers are finding it hard to refinance because lenders are pressuring appraisers to be conservative in estimating the value of each loan applicant's house. When homeowners want to refinance, lenders require a new appraisal to determine whether the property value can back the loan amount. "People want to refinance from an adjustable mortgage to a fixed rate, but when we do an appraisal of the properties the values aren't there," said Sushil Tuli, president of Leader Bank in Arlington. Matt Varghese has paid the mortgage on his Millis home on time since he bought it in 1993. Varghese, the owner of a medical transcription business, has a 720 credit rating - high by any lender's standard. Until last month, he said he had never been turned down for a loan. Leader Bank rejected Varghese's application to refinance his $417,000, fixed-rate mortgage to reduce his monthly payments. The appraiser came back with an estimate of his home's value that was $80,000 less than an appraisal just over a year ago. It was "not good enough to refinance," Varghese said. Biotech researcher Kerry Sullivan said a Citizens Bank loan officer invited her to apply for a loan and then turned her down. A Citizens spokesman said the bank does not comment on individual customers. Sullivan wanted to refinance and pull another $10,000 out of her Concord condo to pay legal bills from a divorce. She said her credit rating is in the "high 700s" and her property, purchased in 2004, has kept its value. When Citizens rejected her, she said, "I was completely shocked."

Security Is Poor for Personal Data Held by Government

Security Is Poor for Personal Data Held by Government

By Chris Adams

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Washington - Government agencies have a long way to go before they can assure taxpayers that the country's secrets - as well as citizens' personal information - are secure, according to recent government reports.

In fact, the Government Accountability Office testified to Congress last week that "poor information security is a widespread problem with potentially devastating consequences."

Among the potential concerns that the GAO identified in testimony to a Senate subcommittee: If systems aren't secure, sensitive information, such as taxpayer data, Social Security records and medical records, could be "inappropriately disclosed, browsed or copied for improper or criminal purposes."

As in the breach of three presidential candidates' passport files, the use of outside contractors has been cited as a possible problem by the GAO and other government investigators.

In a 2005 report, the GAO found that most government agencies have security policies on the books and written in contracts with outside vendors. But those policies often didn't go far enough to properly oversee the work of those contractors, the GAO said.

In the recent GAO testimony, investigators found that the percentage of employees and outside contractors receiving security-awareness training had dropped from 2006 to 2007.

The issue of security for the personal information kept by the federal government has been a major issue since 2006, when a portable hard drive and laptop computer belonging to a Department of Veterans Affairs employee was stolen, putting at risk the personal information of nearly 26 million veterans and military personnel.

The episode resolved itself without any known damage to veterans' personal information, but it did expose holes in VA security.

Although the main episode involved a VA employee, the VA's inspector general subsequently found that the information entrusted to contractors also needed to be protected better. Sensitive information provided to contractors was "not adequately safeguarded," the inspector general wrote, and many contracts didn't consistently include clauses to protect information.

As an example, the inspector general detailed an episode at a medical center in which 29 physicians were access to the VA's medical records system although none had adequate background checks.

Since the 2006 data breach, the VA has significantly strengthened its information policies.

The recent GAO testimony also highlighted a separate stolen laptop issue at the Centers for Medicare and Medicaid Services. There, a contractor reported that a laptop containing personal information on nearly 50,000 Medicare beneficiaries was stolen.

"It is a serious problem," said Marc Rotenberg, executive director of the Washington-based Electronic Privacy Information Center. He said growing use of outside contractors, as well as questions over what legal responsibility they have over private information, makes the issue one that the presidential candidates should address.

"They now know what it means to have their private information improperly accessed," he said.

US Pushed Allies on Iraq, Diplomat Writes

US Pushed Allies on Iraq, Diplomat Writes

By Colum Lynch

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Chilean envoy to UN recounts threats of retaliation in run-up to invasion.

United Nations - In the months leading up to the U.S.-led invasion of Iraq, the Bush administration threatened trade reprisals against friendly countries who withheld their support, spied on its allies, and pressed for the recall of U.N. envoys that resisted U.S. pressure to endorse the war, according to an upcoming book by a top Chilean diplomat.

The rough-and-tumble diplomatic strategy has generated lasting "bitterness" and "deep mistrust" in Washington's relations with allies in Europe, Latin America and elsewhere, Heraldo Munoz, Chile's ambassador to the United Nations, writes in his book "A Solitary War: A Diplomat's Chronicle of the Iraq War and Its Lessons," set for publication next month.

"In the aftermath of the invasion, allies loyal to the United States were rejected, mocked and even punished" for their refusal to back a U.N. resolution authorizing military action against Saddam Hussein's government, Munoz writes.

But the tough talk dissipated as the war situation worsened, and President Bush came to reach out to many of the same allies that he had spurned. Munoz's account suggests that the U.S. strategy backfired in Latin America, damaging the administration's standing in a region that has long been dubious of U.S. military intervention.

Munoz details key roles by Chile and Mexico, the Security Council's two Latin members at the time, in the run-up to the war: Then-U.N. Ambassadors Juan Gabriel Vald¿s of Chile and Adolfo Aguilar Zinser of Mexico helped thwart U.S. and British efforts to rally support among the council's six undecided members for a resolution authorizing the U.S.-led invasion.

The book portrays Bush personally prodding the leaders of those six governments -- Angola, Cameroon, Chile, Guinea, Mexico and Pakistan -- to support the war resolution, a strategy aimed at demonstrating broad support for U.S. military plans, despite the French threat to veto the resolution.

In the weeks preceding the war, Bush made several appeals to Chilean President Ricardo Lagos and Mexican President Vicente Fox to rein in their diplomats and support U.S. war aims. "We have problems with your ambassador at the U.N.," Bush told Fox at a summit of the Asia-Pacific Economic Cooperation in Los Cabos, Mexico, in late 2002.

"It's time to bring up the vote, Ricardo. We've had this debate too long," Bush told the Chilean president on March 11, 2003.

"Bush had referred to Lagos by his first name, but as the conversation drew to a close and Lagos refused to support the resolution as it stood, Bush shifted to a cool and aloof 'Mr. President,' " Munoz writes. "Next Monday, time is up," Bush told Lagos.

Senior U.S. diplomats sought to thwart a last-minute attempt by Chile to broker a compromise that would delay military action for weeks, providing Iraq with a final chance to demonstrate that it had fully complied with disarmament requirements.

On March 14, 2003, less than one week before the invasion, Chile hosted a meeting of diplomats from the six undecided governments to discuss its proposal. But then-U.S. Ambassador John D. Negroponte and then-Secretary of State Colin L. Powell moved quickly to quash the initiative, warning them that the effort was viewed as "an unfriendly act" designed to isolate the United States. The diplomats received calls from their governments ordering them to "leave the meeting immediately," Munoz writes.

Aguilar Zinser, who died in 2005, was forced out of the Mexican government after publicly accusing the United States of treating Mexico like its "back yard" during the war negotiations. Vald¿s was transferred to Argentina, where he served as Chile's top envoy, and Munoz, a Chilean minister and onetime classmate of Condoleezza Rice at the University of Denver, was sent to the United Nations in June 2003 to patch up relations with the United States.

In the days after the invasion, the National Security Council's top Latin American expert, John F. Maisto, invited Munoz to the White House to convey the message to Lagos, that his country's position at the United Nations had jeopardized prospects for the speedy Senate ratification of a free-trade pact. "Chile has lost some influence," he said. "President Bush is truly disappointed with Lagos, but he is furious with Fox. With Mexico, the president feels betrayed; with Chile, frustrated and let down."

Munoz said relations remained tense at the United Nations, where the United States sought support for resolutions authorizing the occupation of Iraq. He said that small countries met privately in a secure room at the German mission that was impervious to suspected U.S. eavesdropping. "It reminded me of a submarine or a giant safe," Munoz said in an interview.

The United States, he added, expressed "its displeasure" to the German government every time they held a meeting in the secure room. "They couldn't listen to what was going on."

Munoz said that threats of reprisals were short-lived as Washington quickly found itself reaching out to Chile, Mexico and other countries to support Iraq's messy postwar rehabilitation. It also sought support from Chile on issues such as peacekeeping in Haiti and support for U.S. efforts to drive Syria out of Lebanon. The U.S.-Chilean free trade agreement, while delayed, was finally signed by then-U.S. Trade Representative Robert B. Zoellick in June 2003.

Munoz said that Rice, as secretary of state, called him to ask for help on a U.N. resolution that would press for Syrian withdrawal from Lebanon. The United States had secured eight of the nine votes required for adoption of a resolution in the Security Council. Munoz had received instructions to abstain. "I talked to [Lagos], and he listened to my argument, and we gave them the ninth vote," he said.

Barrages Hit Green Zone, Gunmen Kill Seven

Barrages Hit Green Zone, Gunmen Kill Seven

By Paul Tait

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Baghdad - Baghdad's heavily fortified "Green Zone" came under heavy rocket or mortar attack on Sunday, and police said at least two people had been killed outside the government and diplomatic compound.

In a separate incident, gunmen in three cars opened fire on pedestrians in a religiously mixed southern Baghdad district, killing at least seven and wounding 16, police said.

The U.S.-protected Green Zone in central Baghdad area was often hit at the height of sectarian violence a year ago, but attacks have become rarer with improved security across Iraq.

In northern Mosul, a suicide truck bomber killed 10 Iraqi soldiers and wounded 30, including civilians, in an attack on an Iraqi army base, the Interior Ministry said. U.S. commanders describe Mosul as al Qaeda's last urban stronghold in Iraq.

The U.S. military said it killed 12 insurgents in a raid on a house east of Baquba after local media reported an operation in the town of Balad Ruz, 70 km (45 miles) northeast of Baghdad.

"Six of the terrorists killed had shaved their bodies, which is consistent with final preparation for suicide operations," spokesman Major Winfield Danielson said.

Mosul and Baquba are the capitals of two of four northern provinces where offensives were launched this year against Sunni Islamist al Qaeda fighters who regrouped there after being driven out of strongholds around Baghdad and western Anbar.

While there was no immediate indication of who was responsible for Sunday's Green Zone attacks, the U.S. military has blamed past missile strikes on rogue elements of anti-U.S. Shi'ite cleric Moqtada al-Sadr's Mehdi Army militia.

Sadr last month renewed a seven-month-old ceasefire for his militia, which the U.S. military has credited for contributing to sharp falls in violence across Iraq.

However, there are fears the ceasefire may be unravelling after Mehdi Army fighters clashed with Iraqi and U.S. forces in the southern city of Kut and southern Baghdad last week.

The Iraq war last week moved into its sixth year, U.S. President George W. Bush marking the anniversary of the U.S.-led invasion to topple Saddam Hussein with an upbeat speech in which he said the United States was on track to victory.

Tens of thousands of Iraqis have died in the insurgency and sectarian violence between majority Shi'ite and minority Sunni Muslims since the invasion, although attacks across Iraq have fallen 60 percent since last
June, U.S. commanders in Iraq say.

With the number of U.S. troops killed in Iraq nearing 4,000, the war remains a major issue in the U.S. presidential campaign.


The first barrage of about a dozen blasts aimed at the Green Zone started just before 6 a.m. (0300 GMT). Unusually, a second barrage of about eight more followed about four hours later.

Police sources said two people were killed and about 10 wounded by apparent misfires or randomly aimed Katyusha rockets, one in northeast Baghdad and one in central Bab-al-Sheikh.

U.S. embassy officials confirmed "indirect fire" attacks on the Green Zone, a term used to describe rocket or mortar fire.

"The assessment at this time is that it caused no deaths or major casualties," U.S. embassy spokeswoman Mirembe Nantongo said.

A large plume of thick black smoke could be seen rising from one part of the Green Zone, which houses many government ministries and diplomatic missions, including the U.S. embassy. Sirens could be heard warning people to take cover.

Two U.S. attack helicopters circled over an area in the Iraqi capital's northeast soon after the first attack on the 10 sq km (4 sq mile) Green Zone, located on the western bank of the Tigris River that cuts through Baghdad.

Barrages Hit Green Zone, Gunmen Kill Seven

Barrages Hit Green Zone, Gunmen Kill Seven

By Paul Tait

Go to Original

Baghdad - Baghdad's heavily fortified "Green Zone" came under heavy rocket or mortar attack on Sunday, and police said at least two people had been killed outside the government and diplomatic compound.

In a separate incident, gunmen in three cars opened fire on pedestrians in a religiously mixed southern Baghdad district, killing at least seven and wounding 16, police said.

The U.S.-protected Green Zone in central Baghdad area was often hit at the height of sectarian violence a year ago, but attacks have become rarer with improved security across Iraq.

In northern Mosul, a suicide truck bomber killed 10 Iraqi soldiers and wounded 30, including civilians, in an attack on an Iraqi army base, the Interior Ministry said. U.S. commanders describe Mosul as al Qaeda's last urban stronghold in Iraq.

The U.S. military said it killed 12 insurgents in a raid on a house east of Baquba after local media reported an operation in the town of Balad Ruz, 70 km (45 miles) northeast of Baghdad.

"Six of the terrorists killed had shaved their bodies, which is consistent with final preparation for suicide operations," spokesman Major Winfield Danielson said.

Mosul and Baquba are the capitals of two of four northern provinces where offensives were launched this year against Sunni Islamist al Qaeda fighters who regrouped there after being driven out of strongholds around Baghdad and western Anbar.

While there was no immediate indication of who was responsible for Sunday's Green Zone attacks, the U.S. military has blamed past missile strikes on rogue elements of anti-U.S. Shi'ite cleric Moqtada al-Sadr's Mehdi Army militia.

Sadr last month renewed a seven-month-old ceasefire for his militia, which the U.S. military has credited for contributing to sharp falls in violence across Iraq.

However, there are fears the ceasefire may be unravelling after Mehdi Army fighters clashed with Iraqi and U.S. forces in the southern city of Kut and southern Baghdad last week.

The Iraq war last week moved into its sixth year, U.S. President George W. Bush marking the anniversary of the U.S.-led invasion to topple Saddam Hussein with an upbeat speech in which he said the United States was on track to victory.

Tens of thousands of Iraqis have died in the insurgency and sectarian violence between majority Shi'ite and minority Sunni Muslims since the invasion, although attacks across Iraq have fallen 60 percent since last
June, U.S. commanders in Iraq say.

With the number of U.S. troops killed in Iraq nearing 4,000, the war remains a major issue in the U.S. presidential campaign.


The first barrage of about a dozen blasts aimed at the Green Zone started just before 6 a.m. (0300 GMT). Unusually, a second barrage of about eight more followed about four hours later.

Police sources said two people were killed and about 10 wounded by apparent misfires or randomly aimed Katyusha rockets, one in northeast Baghdad and one in central Bab-al-Sheikh.

U.S. embassy officials confirmed "indirect fire" attacks on the Green Zone, a term used to describe rocket or mortar fire.

"The assessment at this time is that it caused no deaths or major casualties," U.S. embassy spokeswoman Mirembe Nantongo said.

A large plume of thick black smoke could be seen rising from one part of the Green Zone, which houses many government ministries and diplomatic missions, including the U.S. embassy. Sirens could be heard warning people to take cover.

Two U.S. attack helicopters circled over an area in the Iraqi capital's northeast soon after the first attack on the 10 sq km (4 sq mile) Green Zone, located on the western bank of the Tigris River that cuts through Baghdad.

Consumers' Right to Sue Weakening

Consumers' Right to Sue Weakening

By Arthur Allen

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Upcoming case could bar public from taking drug makers to court.

For more than a century, the regulation of U.S. food and drugs has seen its share of challenges -- from the filthy slaughterhouses of Upton Sinclair's Chicago to the tainted Chinese-made blood thinner that recently killed at least 19 people. The regulatory shortcomings on display in 1937, when ethylene glycol killed 105 antibiotic consumers, were still glaring six decades later, when Vioxx users started having heart attacks.

But throughout the history of the Food and Drug Administration, and its precursor agencies, U.S. consumers could always bring the manufacturer of a faulty product to court. Now, with the FDA woefully underfunded in its key role of assuring the safety and effectiveness of foods and drugs, and with political ideologues in the agency pushing industry prerogatives, the White House and the courts may be on the verge of stripping Americans of the right to sue. This would take away the last option for those seeking protection from --or recourse for -- faulty products.

Last month, in a 8-1 decision, the Supreme Court ruled that most people using medical devices do not have the right to sue manufacturers. In October, the court is expected to take up a more far-reaching case, Levine V. Wyeth, that could stop most lawsuits involving drugs. The court will examine the legality of a lawsuit preemption quietly written into an innocuous FDA labeling law in 2006. The author was Daniel Troy, then the FDA counsel, now an industry lobbyist. With major cuts in food and drug safety inspections, the take-home message, increasingly, is caveat emptor. Watch out for yourself, because the government won't.

"Consumers are getting the worst of both worlds," says David C. Vladeck, a Georgetown Law School professor. "They don't get the protection the FDA promises because the agency is incapable these days of truly providing a safeguard for the drugs we get. And at the same time, the FDA is claiming that if we're injured by a product falling through this quite penetrable safety net, all our rights to compensation are cut off by virtue of the FDA's regulations - inadequate though they may be."

Few of those who care about the FDA question that it is in deep trouble. A 180-member umbrella committee that includes academics, former government officials, business and consumer groups is pushing for more funding. At a Jan. 29 hearing of a House energy and commerce subcommittee, an expert panel reported that the FDA "cannot fulfill its mission" because of weaknesses in its staff, organization and information technology. "Science at the Food and Drug Administration today is in a precarious position," said Peter Barton Hutt, a former FDA counsel who has chronicled the history of the agency. Hutt recommended a 50 percent increase in the FDA's $2-billion budget over the next two years.

"In terms of both personnel and the money to support them, the agency is barely hanging on by its fingertips," he said. "FDA has become the paradigmatic example of the hollow government syndrome; an agency with expanded responsibilities, stagnant resources and the consequent inability to implement or enforce its statutory mandates." At the same hearing, FDA Commissioner Andrew C. von Eschenbach acknowledged, in general terms, that the agency was having problems meeting its responsibilities.

An FDA spokeswoman, asked to comment on this story, did not respond.

The FDA oversees about $1 trillion in products - 25 cents on every dollar we spend. Yet despite an ever expanding mission, its budget has shrunk in real terms over the past three decades. The agency's staff has fallen by 1,300 employees, to about 7,800, since 1994. Its competence, unsurprisngly, is also shrinking. "I've had telephone calls with FDA commissioners over the years in which they said, 'Oh, we're going to be leaner and meaner, we'll do more with less," said House Energy and Commerce chairman Rep. John D. Dingell (D-Mich.) "On the basis of my experience, they're capable only of doing much less with the much less which they've been given."

The Senate passed a budget resolution last week to give the FDA an additional $375 million - a 20 percent increase compared to the 3 percent proposed by the Bush administration.

When Sinclair wrote his novel "The Jungle," about Chicago meatpacking plants, it provoked a wave of national disgust that helped lead to the creation of the first food regulatory agency in 1906. Sinclair was looking for bigger changes, though -- he once said that he "aimed at the public's heart and by accident hit its stomach." The same is true today.

It's often stomach-churning problems, like the slaughter of sick cows, which led to the recall of 143 million pounds of tainted beef from a California stockyard last month, that get public attention. And well they should. Since 2003, the FDA's Center for Food Safety and Applied Nutrition, which oversees food and cosmetic inspections and the skimpy regulation of the ballooning, $20 billion dietary supplements industry, has seen a decline it its workforce from 950 to 771 full-time employees, according to Catherine E. Woteki, director of scientific affairs for Mars Inc., maker of candy and other foods. The center "no longer has the ability to generate the science needed to fulfill its human nutrition regulatory responsibilities," she said.

But these may not even be the riskiest problems with a weakened FDA, especially now that manufacturers are getting new liability protection from the courts. "The food safety issue never really goes away, its roots are so deep," says Donald Kennedy, the former FDA commissioner and editor of the journal "Science." Perhaps more serious is the FDA's inability to monitor the safety and efficacy of drugs it has approved, he said.

In 1992, under fire for failing to quickly license new drugs, the FDA instituted a user fee system, whereby drug manufacturers pay for the inspection of their products. By 2007, user fees made up about a fifth of the FDA's budget. Yet the fees have only one purpose - to facilitate the licensing of new drugs. The safety profile of even the best-tested drug can't be known until the drug has been on the market and is being used by millions, rather than the hundreds or a few thousand upon whom it was tested.

Yet the FDA relies mostly on passive reporting systems for drug adverse events, and it lacks the power to recall a drug unless it can show eminent peril.

"In retrospect, the user fees system was a bad step," says Kennedy. "It didn't do anything except make other people pay, and the funds FDA gets through user fees can't be used for safety and efficacy monitoring or food safety or any of the other responsibilities that FDA has. We think Congress has to own up to its own responsibilities and not depend on user fees."

Because it's doubtful FDA could bolster its staff enough to take on this mission, some have proposed setting up a network of academic testing centers to handle the job - something similar to the way that NASA and the Pentagon use the Jet Propulsion Laboratory in California to test new industry technologies. Others, like Sen. Richard J. Durbin (D-Ill), have proposed breaking off the FDA and USDA food safety divisions and consolidating them in a single, food safety agency.

Meanwhile, in the real world, the drug industry continues to try to chip away at the authority of the FDA. In a move reported last month here, the FDA proposed allowing drug representatives to drop off copies of reprints from any peer-reviewed journals regarding off-label uses of drugs. Under current policy, the FDA has to approve such research before the drug reps distribute it. The obvious conflict is that "peer-review" is a poorly defined term, and small journals have an incentive to publish iffy research when they know that Merck, Wyeth and Co. are going to buy up hundreds of thousands of copies of the journal to pass out to doctors. It's not a move that inspires confidence.

White House: Computer Hard Drives Tossed

White House: Computer Hard Drives Tossed

By Pete Yost

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Older White House computer hard drives have been destroyed, the White House disclosed to a federal court Friday in a controversy over millions of possibly missing e-mails from 2003 to 2005.

The White House revealed new information about how it handles its computers in an effort to persuade a federal magistrate it would be fruitless to undertake an e-mail recovery plan that the court proposed.

"When workstations are at the end of their lifecycle and retired ... the hard drives are generally sent offsite to another government entity for physical destruction," the White House said in a sworn declaration filed with U.S. Magistrate Judge John Facciola.

It has been the goal of a White House Office of Administration "refresh program" to replace one-third of its workstations every year in the Executive Office of the President, according to the declaration.

Some, but not necessarily all, of the data on old hard drives is moved to new computer hard drives, the declaration added.

In proposing an e-mail recovery plan Tuesday, Facciola expressed concern that a large volume of electronic messages may be missing from White House computer servers, as two private groups that are suing the White House allege.

Facciola proposed the drastic approach of going to individual workstations of White House computer users after the White House disclosed in January that it recycled its computer backup tapes before October 2003. Recycling - taping over existing data - raises the possibility that any missing e-mails may not be recoverable.

At a House committee hearing last month, a computer expert who previously worked at the White House called the e-mail system "primitive" and said it was set up in a way that created a high risk that data would be lost from White House servers where it was being archived.

Under pressure to provide details about its computer system, the White House told the congressional committee that it never completed work that began in 2003 on a planned records management and e-mail archiving system. The White House canceled the project in late 2006 and says it is still working on a new version.

In the absence of a permanent archiving system, the White House has been archiving e-mails on White House servers since early in the administration.

The White House says it does not know if any e-mails are missing, but is looking into the matter.

It would be costly and time-consuming for the White House to institute an e-mail retrieval program that entails pulling data off each individual workstation, the court papers filed Friday state.

The Folly of Turning Water into Fuel

The Folly of Turning Water into Fuel

By Stan Cox
Go To Original

With corn selling at record-high prices, Steve Albracht expects to have no trouble paying his electric bills this year. Albracht irrigates 1,000 acres of corn near the town of Hart in the Texas Panhandle and expects to shell out $180 to $240 per acre to run his pumps through the spring and summer. "In this area," says Albracht, "the water table has dropped, but nobody's cutting back on watering yet. There's still plenty down there."

Albracht won the 2005 National Corn Yield Contest in the "irrigated" category, producing a whopping 352 bushels per acre. In a region that gets an average of less than 18 inches of rain annually, Albracht and his neighbors apply anywhere from 28 inches to more than 3 feet of water to their corn each year. With the prospect of a highly profitable harvest, Albracht says he can afford to water generously this year. And he'll need to, he says, "because it's been a dry winter."

For once, times are good in the High Plains. Corn and other grains are selling like precious metals, and there is every reason to believe that prices will stay high. At the heart of the boom is the U.S. government's decision to rely on corn-based ethanol to meet a big part of the nation's demand for "renewable" fuels.

Most recent controversy over ethanol has focused on the its poor energy return; in growing corn and turning it into ethanol, you have to burn three calories to get four. With prices of fuel and other inputs rising fast, corn farmers won't be getting rich (except for those who happen to have oil wells on their property.) But selling their corn for such high prices, they can afford to sow more acres and burn more propane, diesel or electricity to pump more water than ever. A torrent of cash will be flowing through the nation's corn-growing regions, but the biggest price will be paid in water.

Thirst for corn

To hear agribusiness boosters and politicians tell it, corn-based ethanol is a miraculous solution to the nation's hunger for liquid fuels. But as miracles go, it's not all that impressive. When Jesus, according to Biblical reports, converted approximately 150 gallons of water into an equivalent quantity of wine, his conversion rate was about a cup of ethanol per gallon of water invested (given the typical alcohol content of wine). Compare that to current processes that use irrigated corn as their carbon source and get less than a teaspoon of ethanol for each gallon of water consumed.

In dry areas of the High Plains where irrigation is the most crucial to corn production and the ethanol-to-water ratio even lower, agriculture is dependent on a one-time drawing of groundwater that hasn't seen daylight for 11,000 years or more. The vast Ogallala aquifer, stretching from not far south of Steve Albracht's Texas farm all the way up into South Dakota, is being mined at a rate that, in some areas, will drain it sometime in the relatively near future -- at least before the oil wells of the Persian Gulf run dry.

The Ogallala was trapped underneath the High Plains around the time of the last ice age. The formation holds enough ancient water to fill Lake Huron, the second-greatest of the Great Lakes -- or at least it did before being exploited for agriculture. In the High Plains, raising a single bushel of irrigated corn slurps up 2,000 to 3,000 gallons of water, and more corn than ever is being raised there.

With national corn acreage having shot up 15 percent just from 2006 to 2007, pressure on water resources is increasing. The U.S. Department of Agriculture projects that the land area sown to corn will remain at historically high levels of 90 million acres or more through at least 2017. The incentive: the price, which has rocketed up from around $2.00 to more than $5.00 per bushel. And USDA forecasters now see high corn prices as near-permanent.

Most of the region's corn currently goes to cattle feedlots, but from this point onward, prices will be kept high by the ethanol industry. In western Kansas, for example, ethanol production plants have a total capacity of 143 million gallons per day, but new plants already planned or under construction will add more than 700 million gallons per day, most of that from irrigated corn or sorghum. In the eastern half of the state, where the Kansas River is already considered a toxic hazard because of fertilizer contamination, corn ethanol capacity is slated to grow from 101 to 667 gallons per day in the near future.

The Energy Independence and Security Act, passed by Congress just before Christmas, requires that the nation produce 15 billion gallons of corn ethanol per year by 2015. While meeting only 10 percent of Americans' gasoline consumption, that level of production would require massive, permanent increases in the amount of land sown to corn, as well as ramped-up water consumption and pollution.

That new law will also be a big nail in the coffin of the Conservation Reserve Program (CRP), which since the mid-80s has been paying farmers to reseed millions of acres of highly erodable cropland to diverse mixtures of native perennial grasses and other plants. CRP has done more to conserve soil and protect water in agricultural regions than any other federal intiative. But the USDA now estimates that farmers will plow up 5 million acres of CRP land in the next four years alone to plant corn and other biofuel crops.

According to the calculations of the Washington-based group Environmental Defense, increasing irrigated corn acreage by 10 percent to 20 percent in the High Plains will have an effect on water resources similar to that of plopping onto its landscape a city the size of metropolitan Denver (which would be equivalent to doubling the human population of the entire region).

Vanishing rivers

After World War II, irrigation technology reached a level that allowed for faster exploitation of the Ogallala. The U.S. Geological Survey has reported that by 2005, the most heavily exploited areas, accounting for almost a tenth of the entire region, had seen the water table drop between 50 and 270 feet farther beneath the surface. Farmers in some of the prime agricultural areas with the richest, thickest water deposits -- in western Kansas, eastern Colorado, and the Oklahoma and Texas panhandles -- have had to spend more and more money and fuel to bring water from greater and greater depths.

Flowing through the natural shortgrass vegetation of western Kansas, once-great rivers like the Arkansas are fed not just by surface streams but also by water tables that reach up and away from their streambed. Across much of the region, irrigation has drawn aquifers down so far that the flow of water has reversed, now moving down and out of rivers into the surrounding dry ground. Rivers are actually dropping underground, leaving only dusty beds visible for much of the year.

In Kansas, a significant portion of the Ogallala's area has already shrunk below the threshold -- 30 to 50 feet thick -- that can support large-scale irrigation. Kansas lies downstream from Colorado and Nebraska, and has fought bitter water battles with both states in recent years. Those border regions in which struggles over water have been fiercest are precisely the regions being eyed for new ethanol plants and bigger plantings of thirsty corn.

Farther south, the situation is even worse. The USDA has recorded water-table drops of 100 feet in the Texas Panhandle, and by 2025, several counties at the southern fringe of the Ogallala in west Texas will have lost 50 percent to 60 percent of their water that's available for pumping. Agricultural economists at nearby Texas Tech University predict that unless restrictions are put in place, farmers will most likely respond to water shortages (and high corn prices) by drilling more wells and depleting the water even faster than that.

Chemical tide

Unlike the High Plains, the Corn Belt of Iowa, Minnesota, Illinois and surrounding states receives enough rain to naturally replenish most groundwater used to irrigate crops. There, the bigger issue is quality, not quantity of water. Maps of nitrate pollution in streams and groundwater fit closely to maps of nitrogen fertilizer use across the country, especially in the Corn Belt. The National Academy of Sciences found that recent increases in corn production have already led to greater pollution of surface and groundwater. The risk is "considerable," says the academy, that expansion of corn ethanol production will add to the nitrate load of the Mississippi River and expand the oxygen-depleted "Dead Zone" in the Gulf of Mexico a thousand miles downstream.

A study conducted last year at the request of Sen. Saxby Chambliss, R-Ga., painted a scenario in which the conversion to biofuels is even more aggressive than what's currently mandated by the Energy Independence and Security Act: 20 billion gallons of corn ethanol and 1 billion gallons of soy biodiesel annually by 2016. Even that mammoth effort would hardly achieve "energy independence," displacing only 13 percent of our current gasoline consumption and less than 2 percent of diesel. But it would achieve the long-term cultivation of almost 100 million acres of corn, with 47 percent of the nation's crop going straight to ethanol plants.

Under that scenario, fertilizer and pesticide use would increase substantially across the Corn Belt and in the High Plains as well. Toxic nitrates in groundwater would rise accordingly, by 11 percent in the states around the Great Lakes and 8 percent in the southern plains -- areas where a critical need to lower, not raise, nitrate levels already exists.

A recent study found nitrate pollution to be by far the worst in those aquifer-dependent regions of Texas where irrigated corn and sorghum are now grown and will likely increase in acreage as ethanol plants clamor for more and more grain. University of Kansas scientists found that pollutants have been concentrated in that state's portion of the Ogallala by "evapotranspiration, oil brine disposal, agricultural practices, brine intrusion and waste disposal," as well as nitrates, chlorides and sulfates.

'Everybody else has to get his cut'

Riding the roller-coaster of agricultural economics, farmers have learned to get whenever the getting is good. Ethanol mania is the latest in a long line of schemes designed to wring quick wealth out of a rural landscape that's more suited to slow, steady exploitation. Last year, the Lawrence, Kan., Journal-World reported on the short-term pragmatism that underlies the boom in western Kansas:

Wayne Bossert, manager of the Northwest Kansas Groundwater District No. 4, in Colby, has a counter view. "If you are going to make money, you are going to use water," Bossert said. "If you want to make less money, use less water. It's an economic resource out here; it's about choices." Bossert said policymakers wanting to reduce use of the aquifer needed to approach the problem with eyes wide open. "We are going to have economic and social impacts. Are you certain this is the way you want to go?" he said ... Bossert noted that irrigation is the foundation of industries ranging from crops, fertilizer and seeds to equipment, land and taxes.

We are wasting irreplaceable water in the name of "energy independence," but so far the only result has been increased dependence of agribusiness on federal and state governments, via subsidies bestowed on every gallon of ethanol produced.

An exhaustive report on the vast tangle of past and current biofuel subsidies, prepared for the International Institute for Sustainable Development, concluded that "government subsidies to liquid biofuels, particularly ethanol, started out as a way to increase the demand for surplus crops. But lately they have been promoted as a way to reduce oil imports, improve the quality of urban air-sheds, reduce carbon dioxide emissions, raise farmers' incomes and promote rural development. That is a tall order for a pair of commodities [ethanol and biodiesel] to live up to. It is highly unlikely that they can."

Yet another goal not listed in that statement -- to ensure a big return on investment for agribusiness -- may be biofuel's chief accomplishment. As champion corn grower Steve Albracht puts it, the ethanol boom may make it possible for him to produce more, but it won't necessarily boost his own net income. "With $800 anhydrous [ammonia fertilizer per acre] and $3.60 diesel for the tractor, we still won't be getting ahead. Everybody else has to get his cut first."

The fate of the plains

Donald Worster, professor of history at the University of Kansas and author of a shelf-full of books on the environmental history of our drier regions, including Dust Bowl: The Southern Plains in the 1930s (1979, Oxford University Press), sees only a very limited future for agriculture in the High Plains, noting, "It is basically a mining economy wherever groundwater is the resource to be extracted, and the ultimate result of such an economy is always a ghost town." If we had the legal tools, he says, "We should reserve the remaining groundwater supply for human and animal consumption during the dessicated future that seems likely to develop with climate change." But today there's no mechanism to do that.

Worster believes that as the region dries out, it "will require a large government program to deprivatize a lot of farm acreage and put it into the best vegetation cover we can devise. It will be very difficult to farm much of the southern plains within another 50 years, unless global climate change is arrested very soon. The deprivatized, former agricultural land will have little economic value, except for national parks and light grazing."

In 1987, Deborah and Frank Popper of Rutgers University sparked furious debate across the nation's midsection with their paper "The Great Plains: From Dust to Dust" in the journal Planning. Because the irrigation economy simply cannot last, they wrote,

The federal government's commanding task on the plains for the next century will be to recreate the 19th century, to reestablish what we would call the Buffalo Commons. More and more previously private land will be acquired to form the commons. In many areas, the distinctions between the present national parks, grasslands, grazing lands, wildlife refuges, forests, Indian lands, and their state counterparts will largely dissolve. The small cities of the plains will amount to urban islands in a shortgrass sea. The Buffalo Commons will become the world's largest historic preservation project, the ultimate national park. Most of the Great Plains will become what all of the United States once was -- a vast land mass, largely empty and unexploited.

With the Ogallala shrunk to a size that can support only animal grazing, small industry and a limited human population, the land could eventually restore itself, and the people who remain could achieve a pleasant, if not lucrative, existence. But, wrote the Poppers, "It will be up to the federal government to ease the social transition of the economic refugees who are being forced off the land. For they will feel aggrieved and impoverished, penalized for staying too long in a place they loved and pursuing occupations the nation supposedly respected but evidently did not."

Twelve years after publication of that paper, the Poppers noted that the Buffalo Commons was "materializing more quickly than we had anticipated." However, their evidence for that consisted entirely of an observed growth in the numbers of bison grazing in the region. What they had identified as the chief source of the region's problems -- the drive to wring excess private profit out of a parched landscape -- had not been addressed. Now, almost a decade even farther down the road, the ethanol industry threatens to wreck the region's chances for a smooth transition to its inevitably drier, quieter future.

Quieter, that is, except for the High Plains' other great natural resource: a wind that never stops howling and will never be depleted. That has led Donald Worster to conclude that "wind farms, carefully planned to avoid any destruction of native prairie and wildlife habitat, offer probably the most viable economic future for the plains." However, he warns, that can't be the basis for another growth economy: "I doubt such a future would support the level of population or the number of towns that are currently hanging on."

The vast resource of the Ogallala could be used to help the region ease into such a modestly productive, long-term state. But, saddled with the ethanol industry, the High Plains is more likely to arrive at that future only after passing through an economic crash and ecological ruin.

Stan Cox is a plant breeder and writer in Salina, Kansas. His book Sick Planet: Corporate Food and Medicine will be published by Pluto Press this week.

Recessionary trends deepen, sparking gyrations on stock, commodities markets

Recessionary trends deepen, sparking gyrations on stock, commodities markets

By Barry Grey
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In the wake of the bailout of Bear Stearns, brokered and largely financed by the US Federal Reserve Board, fears of a deepening recession and continuing uncertainties over the solvency of major finance houses fueled a week of wild gyrations on American stock exchanges.

On Tuesday, one day after the Fed engineered the takeover of Bear Stearns by JPMorgan Chase and announced that it would extend unlimited credit for six months to investment banks and brokerage houses—a measure without precedent since the Great Depression of the 1930s—the Dow Jones Industrial Average soared by 420 points. The jump was led by financial stocks, which benefited from the Fed’s agreement to swap Treasury bonds for illiquid and dubious mortgage-backed securities.

The next day, the Dow plummeted by 293 points, buffeted by a sudden sell-off of commodities.

On Thursday, the final trading day in a week shortened by the Good Friday holiday, the Dow shot up again, closing with a gain of 261 points, despite a continued fall on commodities indexes.

The extreme market volatility was driven in large measure by growing indications that the US has slid into a recession and that the slumping American economy is leading to a global slowdown.

On Thursday, the US Labor Department reported that jobless claims jumped by 22,000 last week over the previous week, reaching its highest level in nearly two months. The Labor Department said applications for jobless benefits totaled 378,000 for the week, far more than had been expected. The four-week average for new claims rose to 365,250, the highest level since a wave of claims caused by the 2005 Gulf Coast hurricanes. The number of people on benefit rolls reached its highest level since August 2004.

The jobless claims report came on the heels of monthly employment reports for February and January which saw net declines in payroll jobs of 63,000 and 22,000 respectively.

Citigroup, the largest US commercial bank, announced that it was laying off 2,000 employees in its markets and banking unit. The layoffs, to take effect by the end of this month, bring the total job cuts announced by the bank since the mortgage crisis began last summer to more than 6,000—about 10 percent of the firm’s global workforce. Citigroup said the layoffs would be concentrated in New York and London.

The Wall Street giant has written down the value of its assets by over $20 billion in the last year, and is expected to report billions more in losses from subprime and other risky investments in the coming months.

Since the eruption of the subprime crisis and credit crunch in mid-2007, US financial services companies had shed over 60,000 jobs.

The Conference Board, a New York research firm, reported that its index of leading economic indicators declined 0.3 percent in February, its fifth straight monthly drop, and the Philadelphia Federal Reserve said its factory index had declined in March, the fourth consecutive monthly fall in the index. Nationwide, manufacturing declined last month at the fastest pace in almost five years, according to a survey by the Institute for Supply Management.

Auto industry spokesmen projected a sharp decline in vehicle sales for 2008, foreshadowing more layoffs and plant closures. J.D. Powers & Associates issued a forecast putting US industrywide sales of light trucks and cars at 14.95 million, the lowest level since 1994.

In yet another report pointing to a continuing slump in the housing market and rise in home loan defaults and foreclosures, the US Census Bureau said the national homeowner vacancy rate rose to 2.8 percent in the fourth quarter of 2007. That was up from 2.7 percent in the previous quarter and equaled the record set in the first quarter of 2007.

The global impact of the US financial crisis and recession was indicated by a report showing a virtual standstill in world trade over the new year. The Bureau for Economic Policy Analysts, a Dutch research institute, reported that in the three months to January, world trade in goods rose at an annualized rate of 0.2 percent over the previous three months.

“This is a substantial deceleration,” the institute said. “World trade volume growth is on a downward trend.”

The growing signs of economic slump, combined with the impact of the credit crunch and investor fears about new bank failures, sparked the broad sell-off on commodity markets that began on Wednesday and continued Thursday. Crude oil and gold prices nosedived from record highs set at the start of the week.

Oil prices fell by 6.9 percent over the two days, while most other commodities fell by 7 percent. Wheat prices plummeted by 15 percent. Overall, the decline in commodities prices for the week was the biggest in a half-century.

The sell-off was evidently sparked by the decision of the Fed, announced Tuesday, to cut its federal funds target interest rate by 0.75 percent, rather than the 1 percent expected by commodities speculators. That bolstered the US dollar on world currency markets and led to a sharp decline in the euro, the yen and the Swiss franc from record highs recorded earlier in the week. The British pound, Australian dollar and Canadian dollar also fell sharply.

Big investors, including hedge funds, which had bid down the value of the US currency and bid up the price of key commodities, in part to recoup losses on stock, bond and derivative investments, panicked and began unloading their commodity holdings. But the commodity sell-off was also fueled by fears of a global recession, which would deflate commodity prices.

Since the beginning of 2008, demand for oil in the US has fallen 2.4 percent compared with the same period last year.

The commodity plunge is also the result of increasing demands from hard-pressed creditors for commodity speculators to increase their margins in collateral and cash.

The Wall Street Journal on Friday described the mechanism as follows: “Investors with losing trades in credit markets—mortgage bonds or collateralized debt obligations, for example—are being required by banks and others to set aside more cash to cover the money they borrowed to make trades, a process called ‘deleveraging.’ To raise the cash, some investors and hedge funds have sold some of their commodity winners.”

The Journal went on to explain that the process is an expression of the generalized crisis of the financial system, centered in the big banks and investment houses. It quoted Rich Feltes, director of commodity research at MF Global Ltd. in Chicago, as saying, “This is all related to the liquidity crisis. As assets at banks are written down, they need to shore up their portfolios by bringing in more cash from hedge funds that are trading in commodities.”

Heavily leveraged hedge funds and other investors also dumped commodity holdings because they were compelled to sell liquid assets in order to make up for losses from bad bets on other forms of speculation.

As Mark Wilson, vice president and senior credit officer at Moody’s Investors Service, put it: “We are in an environment where there is uncertainty all around.”

In an attempt to fend off a financial meltdown, the Fed has taken unprecedented measures, including pumping hundreds of billions of dollars into credit markets and taking onto its own balance sheet mortgage-backed securities, loans used to finance leveraged corporate takeovers and other failing assets that are weighing on commercial banks and investment houses and threatening them with bankruptcy, a la Bear Stearns.

This can only weaken global confidence in the Fed’s own solvency and further undermine the position of the US dollar. Ultimately, the cost will be born by the US government, either in the form of curtailed remittances from the Fed to the US Treasury, as a result of losses suffered by the US central bank, or a direct government bailout of Wall Street.

The US government took another step in this direction on Wednesday when the regulatory body that oversees Fannie Mae and Freddie Mac, the government-chartered mortgage finance firms, agreed to allow the two companies to reduce their capital requirements from 30 percent to 20 percent. This move, reportedly taken under intense pressure from the Bush administration, will enable the two mortgage finance companies to pump an additional $200 billion of liquidity into the US mortgage market. The aim is to bolster the distressed market for so-called “jumbo” mortgages greater than $417,000 and increase the firms’ capacity to refinance more subprime home loans.

Since the US government ultimately stands behind Fannie Mae and Freddie Mac, both of which recorded record fourth-quarter losses, the expansion of their lending facility represents yet another step toward a direct government rescue of the banking and mortgage industries.

The loosening of capital requirements for the two firms helped spark the stock market rally on Thursday, raising hopes that it will help stanch the fall in home prices and the spread of mortgage defaults and home foreclosures, thereby shoring up the balance sheets of the banks and investment houses.

That the fallout from the US housing collapse and failure of mortgage-linked investments continues was underscored by the announcement Thursday from Credit Suisse, the Swiss Banking giant, that it was likely to record a loss for the first quarter of 2008. The bank also admitted that it had mispriced the value of some of its securities and said it would write down its assets by $2.83 billion and cut its profit results for 2007 by 6 percent, or $7.8 billion.

Another ominous sign was the announcement from CIT, a major lender based in New York, that it had drawn down its entire $7.3 billion line of backup credit because it could not get credit from its usual sources. CIT stock plunged by 17 percent on Thursday. “It’s a ripple effect,” said Michael Taiano, an analyst at Sandler O’Neill & Partners. “CIT gets squeezed, the people they lend to get squeezed and end up maybe defaulting on their loans. It kind of goes down the food chain.”

Comparing the current crisis to the process that produced the Great Depression, economist and New York Times columnist Paul Krugman wrote Friday: “The financial crisis currently underway is basically an updated version of the wave of bank runs that swept the nation three generations ago. People aren’t pulling cash out of banks to put it in their mattresses—but they’re doing the modern equivalent, pulling their money out of the shadow banking system and putting it into Treasury bills. And the result, now as then, is a vicious circle of financial contraction.”

Former Federal Reserve Board Chairman Paul Volcker suggested in a television interview that the Fed was taking inordinate risks and cautioned that its policy of cutting interest rates could lead to an explosion of inflation. He said on PBS’s Charlie Rose program: “We have seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with the financial crisis.”

He went on to say that the Fed was not a place “where you put in bad assets, possibly bad assets,” and warned that the weakening of the dollar “begins to raise questions” as to its role as a world currency.

US financial crisis fuels social unrest: Workers protest rising prices in UAE, Egypt

US financial crisis fuels social unrest: Workers protest rising prices in UAE, Egypt

By Joe Kay
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The global financial crisis that has its origins in US credit markets is heightening social tensions around the world. This week, social unrest exploded to the surface in the United Arab Emirates (UAE), where as many as 1,500 workers staged protests against inflation and unpaid wages.

Inflation is becoming a major source of discontent throughout the Middle East and Asia, particularly in countries whose currency is pegged to the US dollar, including most of the oil-rich states in the Persian Gulf. In non-oil-exporting countries, such as Egypt, where the currency is not linked to the dollar, rising import prices and shortages of key goods such as bread have also provoked protests.

All of these countries are politically unstable and characterized by the most acute social contradictions. Their regimes are authoritarian, either semi-feudal sheikdoms or military-dominated dictatorships controlled by narrow ruling elites. A large majority of their populations consist of brutally exploited workers and peasants. In many cases, the workers are mostly immigrants with no civil rights.

Many of these repressive regimes sit atop economies that are being at once transformed and destabilized by an influx of oil wealth, largely unplanned economic expansion—whose benefits go almost exclusively to the ruling elites—and a rapid growth in the working class. The potential for social and political upheaval is enormous.

According to the UAE’s official news agency, WAM, 1,500 striking workers participated in demonstrations on Tuesday in the emirate of Sharjah, the third largest emirate in the UAE. The workers are employed by Drake & Scull, an engineering contractor owned by the US-based Emcor Group.

WAM reported that the protest turned violent, with workers burning part of an office building and overturning or burning several cars and buses owned by the company. Police said that several officers were attacked, but there is no independent confirmation of this claim.

The news service reported that workers were complaining of unpaid wages. The company stated, however, that the main causes of the protest were declining real wages and the falling value of the UAE’s currency, the dirham.

Like most Gulf States, the UAE relies heavily on immigrant workers who are paid low wages—as little as $50 a week—and are denied basic democratic rights, such as the right to demonstrate and unionize. These workers, many of whom come from South Asia, have provided the labor for a construction boom fueled by an influx of oil money in recent years.

In total, UAE citizens comprise only 15 percent of the population. The 3 million migrant workers in the UAE make up about 90 percent of the workforce in the private sector.

According to a 2007 report by Human Rights Watch, "Abuses against migrant workers include nonpayment of wages, extended working hours without overtime compensation, unsafe working environments resulting in deaths and injuries, squalid living conditions in labor camps, and withholding of passports and travel documents."

Several factors have combined in recent months to severely undercut the already poor living standards of migrant workers. The dirham is pegged to the US dollar, which has lost much of its value. At the same time, except for oil, most of the goods in UAE and the other Gulf States are imported from Europe and other countries whose currencies are appreciating against the dollar.

This means that imports are becoming much more expensive. Global prices for basic commodities have risen sharply, driven in part by speculation.

The rising cost of imports is exacerbating inflationary pressures that have been generated by the construction boom. Under normal conditions, the central banks in these countries would increase interest rates to curb inflation. However, in order to keep their currencies pegged to the US dollar, they have been forced to follow the US Federal Reserve in cutting interest rates, adding to inflation.

The Fed has cut rates repeatedly over the past several months—including by 75 basis points on Tuesday—in an effort to inject more cash into the financial markets and end a sharp contraction in credit markets. This week, central banks in the UAE, Saudi Arabia, and Bahrain all followed suit.

Overall inflation in the UAE last year was about 10 percent. However, food price inflation is estimated to be much higher. According to the Emirates Consumer Protection Society, food inflation in 2007 was 27 percent, and the organization estimates that inflation next year could rise to 40 percent.

Many of the workers have taken jobs in the UAE in order to provide for their families at home. As the value of the dirham has dropped relative to other currencies, including the Indian rupee, the remittances sent back have lost value. To make matters even worse, inflation in India and other South Asian countries has jumped sharply as well, compounding the impact of lower remittances.

The UAE government has responded to the protests with promises of a quick crackdown, including arrests and deportations. At least 30 workers were arrested on Tuesday. UAE officials have demanded that workers present their grievances through bogus labor resolution bodies.

The uprising in Sharjah followed protests by thousands of workers at construction facilities last fall in Dubai, the largest of the emirates in the UAE by population. A court recently sentenced 45 Indian construction workers to six months in jail and deportation for their role in the protests.

The Gulf States have traditionally pegged their currencies to the dollar because oil is priced in dollars on the international market. There have been some calls within ruling circles in these countries for removing the link to the dollar in order to deal with inflation. However, there has been intense pressure from the US not to do this, for fear that it would precipitate a run on the dollar and threaten the status of the US currency as the world reserve currency.

A move by the Gulf States away from the dollar would be particularly significant due to the critical role of oil on world markets. Last year, Kuwait became the first Gulf State to remove the dollar peg, and Qatar may follow soon. Qatar announced on Thursday that it would put off a decision on its interest rates until at least Sunday, signaling that it may decide to remove the dollar peg. Kuwait did not change its rates in response to the Fed move.

The UAE has decided not to follow Kuwait, at least for now. According to a March 17 Bloomberg report, citing an unnamed UAE Central Bank official, "US Embassy officials last week told [UAE] central bank Governor Sultan Bin Nasser al-Suwaidi of their concern about reports that the sheikhdom may drop the [dollar] peg." In response, UAE officials pledged to maintain the peg at least through the end of this year.

The Gulf monarchies, including Saudi Arabia and the UAE, are heavily dependent on American imperialism for military and political backing. US Vice President Dick Cheney met with Saudi King Abdullah on Friday, and the economic and financial crisis was no doubt high on the list of discussion topics, next to US plans for possible military action against Iran. The Saudi sheikhdom, which has the closest ties to the US, has so far sought to pressure the other Gulf States to refrain from moving against the dollar.

In other countries in the Middle East, Asia, and Africa, inflation is becoming a major problem as well. In Egypt, attempts by the government to ration subsidized bread have produced long lines and protests. World wheat prices have more than tripled since last summer, and Egypt’s working poor depend upon subsidized bread to survive. Egypt is one of the world’s largest wheat importers, and the rise in prices is placing strains on government coffers.

The protests have rattled the government of President Hosni Mubarak, who called on the Egyptian army to begin producing bread for commercial use. Social explosions from rising bread prices are not unknown in Egypt. In 1977, hundreds of thousands of protesters demanded that then-President Anwar Sadat reverse plans to lift bread subsidies.

Similar conditions prevail throughout the region. A recent survey of Jordanians found that 85 percent of the population chose high prices and living costs as the most important problem. Inflation has shot up in China, Hong Kong, Vietnam, India, South Africa, Iran, and a host of other countries.

These conditions are adding up to an explosive situation, of which the protests in the UAE and Egypt are only the first signs. Social tensions are rising in every country. As only the latest example, millions of workers in Greece have begun a strike action to protest cuts in pensions and an increase in the retirement age.

The financial crisis, the worst since the 1930s, is confronting the population of the entire world with recession or worse. In response to an economic disaster of its own making, the ruling elite of the US and every other country will seek to place the burden of the crisis on the backs of the international working class.

Top Court Tackles Gitmo

Top Court Tackles Gitmo

By Michelle Shephard

Go to Original

Judges in Khadr case to consider arguments on international law and Guantanamo.

The Supreme Court of Canada has agreed to hear arguments about the legality of the U.S. military prison at Guantanamo, where Canadian Omar Khadr is being held.

The high court ruled yesterday that it could consider submissions on whether Guantanamo violates international law, dismissing the federal government's objections that the Canadian courts were not the place to examine the actions of the United States.

"In essence, the respondent (Khadr) wants the court to preside over a trial of the Guantanamo trials," the government argued in its submission. "The court should refuse this invitation."

Khadr is now the sole Western detainee remaining at Guantanamo, and Canada has come under international pressure to demand his repatriation.

Now 21, Khadr was 15 when he was shot and captured in Afghanistan in July 2002 and accused of throwing a grenade that killed Delta Force soldier Christopher Speer. The Pentagon has charged him with five war crimes, including "murder in violation of the laws of war."

The Supreme Court has already scheduled a hearing for Wednesday, in which the central questions are whether Khadr's lawyers are entitled to evidence from Canada that could help in his defence at Guantanamo and if the Canadian officials who travelled to the base to interrogate him in 2003 and 2004 breached his constitutional rights.

But in hearing arguments about whether Khadr's rights were violated in Guantanamo, the court agreed in its unanimous ruling yesterday that it could consider the actions of American officials and the conditions at the U.S. Navy base in Cuba, which in essence also puts Guantanamo Bay on trial.

"Canadians should be pleased about that because regardless of what the court decides, I don't think anyone can question that the Supreme Court has a role in overseeing government action, in particular something as important as the rights and freedoms of a Canadian who has been imprisoned abroad," said Michael Byers, who holds a Canada Research Chair in global politics and international law.

"The larger issue at stake is whether or not the Canadian government can continue to get away with an apparent Ð not only disregard for the rights of a Canadian citizen Ð but also alleged complicity in his plight. This is why we have the checks and balances of a democratic system with an independent judiciary."

The court also rejected the government's bid to block human rights groups from raising points of international law in their intervention in the case.

University of Toronto law professor Audrey Macklin, who will represent the university's law clinic and Human Rights Watch at the hearing, said the court's rulings on these points may force the government to defend its actions.

"Certainly, what the Supreme Court of Canada says about the legality of Guantanamo Bay and the actions of Canadian officials with respect to a citizen there, will reverberate in the political sphere in terms of bringing greater attention to, and a requirement of justification by the government of Canada about why it refuses to intervene," Macklin said.

Canada sent agents from the Canadian Security Intelligence Service and an official with the intelligence division in the foreign affairs department to interrogate Khadr in the two years after his capture. The purpose of the visits was to collect intelligence, since the U.S. would not permit consular visits for detainees.

Khadr's Canadian lawyers, Dennis Edney and Nathan Whitling, have argued that these interrogations Ð and turning over the information gleaned by the Canadians to U.S. officials Ð violated Khadr's constitutional rights.

They also argue that the government's refusal now to hand over the complete notes from the interrogations further breaches his right to fair trial.