Friday, April 25, 2008

The Plunge Protection Team

The Plunge Protection Team

By Kevin Phillips

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Some people foolishly think that Washington's recent high-profile effort to steer, subsidize and protect the American financial sector is the beginning of something new - a revolutionary development.

It isn't. Consider that the President's Working Group on Financial Markets - nicknamed "the Plunge Protection Team" by The Washington Post in 1997 quietly observed its 20th birthday on Mar. 18.

"Quietly," in fact, is an understatement. "Semi-secretly" would be more like it. The Working Group, or PPT, is much-pondered but reclusive group that has declined to submit to the federal Freedom of Information Act or to testify in detail before Congress about its activities. This is true even though its current chief, Treasury Secretary Henry M. Paulson Jr. - Federal Reserve Board Chairman Ben Bernanke is another prominent member - made no secret of revving up its operations after he took took over at Treasury in 2006.

The curious reader will wonder: Just what does the PPT do?

Right now, Congress ought to able to pursue this basic question: Is the PPT a kind of committee for the extra-legal coordination, manipulation and subsidization of financial institutions and markets? Has it been stepping in when free-market forces have become too perilous to profits and asset values - in financial crisis years like 1998, 2001 and 2007. Has Washington decided to protect the financial sector more than any other element of the U.S. economy?

Over the last decade or so, the Treasury Dept. and the Fed have both developed something of a scofflaw attitude toward strict interpretation of federal statutes and regulations. For example, both winked in the late 1990s, as federal regulators allowed Citibank to merge with Travelers Insurance, despite contrary law still on the books. Both winked in more recent years, as major banks set up huge multi-billion-dollar structured investment vehicles, or SIVs, to do on an off-the-books basis what they were not allowed under banking law. Now we have the federally funded J.P Morgan Chase takeover of Bear Stearns. The PPT may well have had a quiet role in some of these actions.

For the bigger picture, look back to the stock market crash of 1987 - the sickening Oct. 19 fall when the Dow-Jones Industrial Average lost 508 points or 23.6 percent of its value in a single trading day. Alan Greenspan had just taken over as the Federal Reserve Bank chairman, and some believe that the Fed intervened to support the market the next day - by either buying Standard & Poors futures or telling several collaborative broker-dealers to do so.

Tim Metz, in "Black Monday," contends that "some leaders and market makers at the New York Stock Exchange and Chicago Mercantile Exchange collaborated to save the stock market by rigging stock information and prices." Tony Dye, a British fund manager, made a similar charge of intervention by U.S. authorities. London Sunday Telegraph, Mar. 22, 1998).]] Edward Chancellor, in his 1999 book, "Devil Take the Hindmost," noted that if these interventions occurred, they raised a major issue of "moral hazard."

The likelihood they did occur is increased by the fact that a year after the PPT group's launch, a retiring Fed board member, Robert Heller, wrote a much-discussed article in The Wall Street Journal that in the case of an another emergency like 1987, there might be a better alternative than the Fed's usual remedy - interest rate reduction. "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, " Heller wrote, "the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole." No public mention was ever made of the Fed or the Working Group embracing the Heller scheme, but that may have happened privately.

Such accusations are a long way from being conclusive. But they do help explain the milieu in which the Working Group, or PPT, was set up by presidential proclamation - Congress had no role - in March 1988. The proclamation authorized the Working Group to "enhance the integrity, efficiency, orderliness and competitiveness of financial markets" - language that may have been intended to provide a broad and loose authorization for intervention in the 1987 mode, should it be required again.

Media discussion of the Working Group, negligible in 1988, rekindled after the tribulations over the Asian and Russian debt and currency crises of 1997 and 1998. Washington's ambitions to manipulate seem to have been on the upswing. In a January 1997 speech in Belgium, Greenspan indicated that the Fed could pursue "direct intervention in market events" - a bold new legal interpretation.

A month later, The Washington Post ran a big article, revealing details never repeated by any other major publication. The article describes how the Working Group had set up a financial "war room;" assembled a global as well as national list of key emergency contacts, and carried out simulated emergency drills.

In the wake of the Sept. 11 terrorist attacks, media attention to possible government market intervention and manipulation refocused again - though less in the United States than in foreign English-speaking media. The London Observer reported, later that September, the Working Group-cum-PTT was "ready to coordinate intervention by the Federal Reserve on an unprecedented scale. The Fed, supported by the banks, will buy equities from mutual funds and other institutional sellers if there is evidence of panic selling in the wake of last week's carnage."

The group was cited again a half-year later. The authoritative Financial Times quoted a Fed official, who declined to be identified, but acknowledged that policy-makers had considered "buying U.S. equities" - not just futures. The Fed, said the official, could "theoretically buy anything to pump money into the system," including "state and local debt, real estate and gold mines, any asset." That sounds much like the same broad conception of empowerment Greenspan had injudiciously taken note of in 1997.

Two months later, the Australian Financial Review weighed in, wondering whether a 234-point intra-day surge on the New York Stock Exchange could be attributed to the PPT: "There is a belief that this team represents a powerful and secretive hand that is ready to act any time the Dow looks ready to tank big time."

After 2001-02, there was little mention of the PPT group for several years. But come 2006, when Paulson decided to renew the Working Group as a major player, the British financial pages, if not the American, renewed their interest. The London Telegraph described the PPT as a "shadowy body with powers to support stock index, currency and credit futures in a crash." It added that the former Clinton aide, George Stephanopoulos, had earlier described the group as having "an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem."

Not all U.S. financial journalists have been baaing sheep, ready to ignore the issue. John Crudele of The New York Post has pursued it in several columns, and others have acknowledged hearing about the buy orders from friends in the S&P trading pits. Another columnist, James Pethokoukis of U.S. News & World Report, described at length how in the final two trading hours on Aug, 16, 2007, the Plunge Protection Team might have encouraged one or two major institutions to buy stock index futures, because a 300-point Dow decline was briskly wiped away. But then he felt obliged to close with a semi-disavowal: "there's never been any official confirmation of this," and that insiders both in Washington and Wall Street "totally dismiss" these reports.

With the recent market panics and surges, the Working Group - if not its deepest secrets - might have again appeared on the front pages. But this did not happen.

However, in March 2008, the Senate Finance Committee's top Democrat, Max Baucus (D-Mont.), and top Republican, Charles Grassley (R-Iowa), were consumed by interest in whether Paulson pressured Bernanke into having the Federal Reserve broker the controversial deal in which J. P. Morgan Chase got $30 billion to help take over Bear Stearns.

Baucus and Grassley asked for all kinds of details. However, they seem not to have asked for information on how closely Paulson and Bernanke had been collaborating since 2006 in their mutual roles on the Plunge Protection Team. and how they interpreted their powers under the 1988 presidential proclamation. This is unfortunate.

Former Fed Chairman Paul Volcker, a well-respected senior statesman, stated his concern bluntly. "To meet the challenge," Volcker said, "the Federal Reserve judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending certain long-embedded central banking principles and practices."

Volcker is regarded as one of the last honest men in U.S. finance. But since 1987, the lawful and implied powers of the Federal Reserve have probably been extended further than the former Fed chairman would like - and, conceivably, further than he knows.

US new home sales at 16-year low

US new home sales at 16-year low

Sales of new homes in the US fell more than expected in March to their lowest level since late 1991.

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Sales fell 8.5% from February to a seasonally adjusted 526,000 homes, according to the Commerce Department.

The median price of a home was down 13.3% from March 2007, which is the biggest fall since July 1970.

Sales were down in all regions of the country, with the biggest falls coming in the north-east of the country, where sales declined by 19.4%.

In other economic news, the Commerce Department said that orders for manufactured items such as fridges and washing machines from US factories fell 0.3% in March.

It means that so-called durable goods orders have fallen for three months in a row, which has not happened since 2001.

But there was some better news, with the Labor Department announcing that the number of newly laid-off workers claiming unemployment benefit fell 33,000 last week to 342,000.

The figure had been expected to rise.

Steel Says Premature to Call U.S. Credit Crisis Over

Steel Says Premature to Call U.S. Credit Crisis Over

By Matthew Benjamin

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Treasury Undersecretary Robert Steel said it's premature to say that financial market turmoil stemming from tightening credit conditions is near an end.

``This is going to take a while to work through, and the improvement from here won't be in a continual line,'' Steel said in an interview on Bloomberg Television's ``Political Capital with Al Hunt,'' to be aired today. While progress is being made, he added, ``there will be some bumps and fallbacks.''

Steel said that the government should consider easing limits on how much private-equity firms can invest in banks and that he's open to discussions with Congress on the creation of a federal agency to monitor financial market risk.

Steel called Citigroup Inc. Chief Executive Officer Vikram Pandit's statement that the global credit-market contraction is closer to the end than the beginning ``a bit simplistic.''

Falling house prices and rising mortgage delinquencies have slowed U.S. growth, disrupted credit markets and led to $309 billion in credit losses and asset writedowns by the world's biggest banks and securities firms since the start of last year.

As head of Treasury's domestic finance division, Steel has worked to contain damage from the collapse in the market for subprime mortgages. Former Federal Reserve Chairman Alan Greenspan said on April 8 that the decline in credit is worse than at any time in 50 years.

Since the Federal Reserve arranged an emergency loan on March 14 for Bear Stearns Cos., the Standard & Poor's 500 Index is up 4.6 percent and the dollar is up 0.8 percent against a basket of currencies of U.S. trading partners.

`Pleased' With Progress

``The essence of it is we're making good progress and we're pleased with how things are going,'' Steel said.

Steel, 56, said a restriction on private-equity firms' investment in banks should be reconsidered if it can help banks raise needed capital. Under current law, prior approval from the Federal Reserve is required for any acquisition of 10 percent or more in a bank.

Treasury Secretary Henry Paulson has repeatedly urged financial institutions to raise as much capital as possible to cope with the credit and housing crises.

``In the last few recapitalizations where balance sheets have been strengthened for financial institutions, private equity has played an important role,'' Steel said. Changes to the current asset limit is ``certainly something worth considering and looking at.''

Frank's Proposal

Steel said it's ``worth talking about'' a proposal by Massachusetts Rep. Barney Frank, the Democratic chairman of the House Financial Services Committee, to create a federal agency to regulate risk in financial markets.

Treasury's plan to overhaul regulation of Wall Street includes a financial stability regulator, ``which has really the same idea'' suggested by Frank, Steel said. Treasury is still considering how best to alter the regulatory regime, he said, stopping short of a full endorsement of Frank's plan.

``We need to have a financial regulation system in our country that is effective, efficient and competitive,'' Steel said.

Steel said he supported the Fed's March rescue of Bear Stearns from possible bankruptcy. The Fed's decisions to lend to Bear Stearns and other Wall Street firms at the same discount rate offered to commercial banks ``were right for this time,'' he said.

``These were unusual times'' involving ``tricky issues,'' Steel said. Support for Bear Stearns was necessary because turmoil on Wall Street impairs consumers' ability to borrow and spend. ``This was not about Wall Street, this was about Main Street,'' he said.

CEO Compensation

Treasury opposes legislation that would give company shareholders the ability to cast nonbinding votes on executive pay, Steel said.

``Each company should decide that as opposed to legislation,'' Steel said. ``In the end compensation is going to have to be managed from the board room.''

Steel said Democrats' plans to aid homeowners who can't pay their mortgages ``go a little bit too far.''

Frank on April 17 introduced legislation to have the Federal Housing Administration guarantee up to $300 billion in refinanced mortgages for owner-occupied homes.

``There's a fine balancing act between what FHA should do and how much they should be helpful and also protecting the taxpayers,'' Steel said.

He reiterated Treasury's commitment to a voluntary program to get lenders and borrowers to renegotiate loans. The priority for Congress should be to pass separate bills streamlining FHA and creating a tougher regulator for Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans.

Oil Rises More Than $2 on U.K. Pipeline, Nigeria's Output Drop

Oil Rises More Than $2 on U.K. Pipeline, Nigeria's Output Drop

By Mark Shenk

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Crude oil rose more than $2 a barrel and gasoline climbed to a record on BP Plc's plans to shut down a North Sea pipeline, plunging Nigerian output and reports that a ship carrying U.S. cargo fired warning shots at Iranian boats.

BP said it would shut the Forties Pipeline System tomorrow because of a two-day strike at a refinery in Scotland. Nigeria has lost about half of its oil production because of a strike and rebel attacks, Petroleum Minister of State H. Odein Ajumogobia said today in an interview with Bloomberg News.

``We are getting hit all over the place with supply issues today,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``The loss of Nigerian barrels will be exacerbated by the refinery strike in Scotland. On top of these disruptions there were shots at Iranian boats in the Persian Gulf.''

Crude oil for June delivery rose $2.46, or 2.1 percent, to $119.10 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $119.55 today. Prices are 80 percent higher than a year ago.

Prices surged to the day's high after Fox News reported that a U.S.-contracted cargo ship fired warning shots at Iranian boats in the Persian Gulf. Iran, OPEC's second-biggest oil producer, has been in conflict with the U.S. over its nuclear program and Iraq policy.

``The market has probably overreacted to news of the shots on the Iranian boats but nobody wants to take a chance with all of the other things that are going on,'' Flynn said.

Brent crude for June settlement rose $2.05, or 1.8 percent, to $116.39 a barrel on London's ICE Futures Europe exchange. The contract touched a record $117.56 today.

Pipeline Shutdown

BP will start shutting down the Forties pipeline, which carries about 700,000 barrels a day from more than 50 North Sea oil fields, because of the strike that will start April 27 at Ineos Group Holdings Plc's Grangemouth refinery. The pipeline relies on steam and power provided by the refinery complex.

About 90 percent of Exxon Mobil Corp.'s Nigerian output of about 850,000 barrels a day is halted, said Olusola George- Olumoroti, chairman of the branch of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan, that's taking action against the company.

Ajumogobia said that he held a meeting with union leaders today in an effort to end the strike against Exxon Mobil. He said he expects to hear back from the union later today.

Nigerian Attacks

Recent attacks on Royal Dutch Shell Plc-run pipelines are cutting crude-oil flows by about 140,000 barrels a day, Ajumogobia said.

The Movement for the Emancipation of the Niger Delta's fighters claimed they detonated the oil pipeline at Kula in Rivers state at about 10:18 p.m. local time, according to an e- mailed statement from the group today. The attack occurred on a line that feeds oil to the Bonny Light export terminal, said Rainer Winzenried, a Shell spokesman in The Hague.

``These disruptions are impacting Forties and Bonny crude, which are both good for making gasoline,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.

The North Sea and Nigeria produce low-sulfur, or sweet, oils prized by refiners. U.S. refineries usually bolster fuel output in May as they prepare for the peak-demand summer driving season.

Oil in New York reached a record $119.90 a barrel on April 22 after the dollar touched an all-time low against the euro. The euro fell 0.5 percent to $1.5605 per dollar at 2:31 p.m. in New York. Commodity contracts have become attractive to investors seeking to offset a 15 percent decline in the dollar against the euro in the past year.

`Three-Legged Stool'

``The market has been supported by a three-legged stool: The weak dollar, low refinery utilization and petro-political uncertainties,'' Beutel said. ``The upcoming strike and ongoing problems in Nigeria are the main drivers today.''

U.S. refineries operated at 85.6 percent of their capacity last week, up 4.2 percentage points from the week before, an Energy Department report on April 23 showed. The previous week refineries operated at 81.4 percent of capacity, the lowest rate since October 2005.

Oil supply from the 13-member Organization of Petroleum Exporting Countries probably fell 0.3 percent to 32.5 million barrels a day this month, according to preliminary estimates from PetroLogistics Ltd.

OPEC cut crude-oil output because of supply disruptions in Iraq and Nigeria, data from the Geneva-based tanker-tracking service showed.

Consumer confidence fell more than forecast

Sentiment Weakens More Than Anticipated

By Bob Willis

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U.S. consumer confidence fell more than forecast in April to a 26-year low as record fuel prices and rising unemployment threatened to reduce spending.

The Reuters/University of Michigan sentiment index decreased to 62.6, from 69.5 the previous month. The measure was down from a preliminary estimate of 63.2 issued on April 11.

Consumers are growing increasingly anxious because the economy has lost almost a quarter million jobs so far this year, gasoline is up 17 percent and property values have fallen. Sales of houses and cars have declined as a result, contributing to a slowdown that may bring an end to the six-year expansion.

``Consumers are feeling the pinch, not only from the labor market, but also from prices,'' Aaron Smith, an economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview. ``There's a squeeze on incomes from two sides.''

Economists had forecast the consumer sentiment gauge would fall to 63.2 from 69.5 in March, according to the median of 60 projections in a Bloomberg News survey.

The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 53.3 from 60.1 last month.

Stocks fell, pushing the Dow Jones Industrial Average down 56.2 points, or 0.4 percent, to 12,792.8 at 12:28 p.m. in New York.

Current Conditions

A measure of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to make big-ticket purchases like cars, decreased to 77 from 84.2 last month.

Consumers were also more concerned about inflation. Americans thought prices would increase 4.8 percent over the next 12 months, up from a 4.3 percent estimate in March. Longer term, inflation was pegged at 3.2 percent, the highest level since August 2006 and compared with 2.9 percent last month.

The economy lost 80,000 jobs in March, the most in five years, following a 76,000 drop in payrolls in each of the prior two months, according to figures from the Labor Department. The jobless rate rose to 5.1 percent, the highest level in more than two years.

Rising fuel costs have contributed to a drop in auto sales and prompted some shoppers to limit trips to malls. The average price of regular unleaded gasoline rose to a record $3.58 a gallon yesterday, according to data from AAA.

Auto Sales

Cars and light trucks sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998. Some 14.9 million autos will be sold this year, the fewest since 1995, Standard & Poor's forecast this month.

AutoNation Inc., the largest publicly traded U.S. car dealer, yesterday said first-quarter profit fell 35 percent as weak housing markets in states including California hurt demand for new vehicles.

``We expect to continue to see a challenging automotive retail market as long as the current economic difficulties persist,'' Chief Executive Officer Michael Jackson said in a statement.

Only one-third of consumers polled by the University of Michigan said they planned to spend the tax-rebate checks that the Treasury Department is poised to send as part of the Bush administration's economic stimulus plan. The majority of Americans plan to use the money to pay down debt or boost savings, the report said.

Bush Comments

President George W. Bush today said Americans will start getting that tax rebates next week and predicted the money will give the economy a boost.

Economists surveyed by Bloomberg earlier this month forecast consumer spending will rise at a 0.5 percent pace in the first half of the year, the smallest gain since 1991. The economy is unlikely to grow at all through June, the survey also showed.

Those polled put the odds of the economy entering a recession this year at 70 percent, up from 50 percent in the prior month's poll.

The biggest housing slump in a generation is leading the downturn. Home prices nationwide have fallen 10 percent from their peak, according to the S&P Case-Shiller home-price index, and many economists are forecasting values will keep dropping. Falling property prices make Americans feel less wealthy and reduce the amount of equity owners can tap for spending.

Rising foreclosures are also lifting stress levels. Foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as rates on adjustable mortgages increased, Irvine, California-based RealtyTrac Inc., a seller of default data, said last week.

Carlyle May Pay $525 Million for Stake in NYC Tower

Carlyle May Pay $525 Million for Stake in NYC Tower

By Jason Kelly, Jonathan Keehner and David M. Levitt

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Carlyle Group, the world's second- largest private-equity firm, is poised to buy a stake in the retail portion of 666 Fifth Ave. in New York for $525 million in a transaction that would help the building's owner Jared Kushner repay debt, according to people familiar with the matter.

Carlyle, based in Washington, plans to make the purchase with Crown Acquisitions as a leasing partner, said the people, who declined to be named because the deal isn't complete. Carlyle may not buy all of the space available, according one person familiar with the transaction.

The purchase would be the second high-profile commercial real estate acquisition by Carlyle this month. The firm acquired 650 Madison Ave. for $680 million with Ashkenazy Acquisition Corp. A sale of the 666 Fifth retail space would enable Kushner Cos. to pay some of the short-term debt incurred after purchasing the building last year for $1.8 billion.

``As far as Manhattan retail goes, it doesn't get much better than that space,'' said Dan Fasulo, managing director and head of research for Real Capital Analytics Inc. in New York. ``It makes sense for a cash-heavy buyer to come in and wait out the leases. Kushner is seeking to raise cash.''

Carlyle's Investments

Carlyle has sought investments in real estate as the market for large leveraged buyouts wanes. Announced private-equity deals plunged 70 percent to $60.7 billion in the first quarter from $200 billion a year earlier, according to data compiled by Bloomberg.

Kushner spokesman Steve Solomon and Carlyle spokeswoman Ellen Gonda declined to comment.

Carlyle co-founder Daniel D'Aniello, who started the firm in 1987 with David Rubenstein and William Conway, oversees its real-estate investments. The firm last year raised a $3 billion fund for U.S. real estate deals, its fifth such pool. Past investments include One Wilshire Blvd. in Los Angeles and 14 Wall St. in Manhattan. Carlyle also has raised real estate funds in Europe and Asia.

Florham Park, New Jersey-based Kushner Cos. bought the 41- story office tower in part with high-interest short-term debt. Securitized lenders have withdrawn from the market due to subprime losses, making it harder to refinance commercial properties.

Kushner's Deal

The Kushner family is one of a handful of investors who bought trophy Manhattan skyscrapers close to the top of the real estate market, before rising financing costs caused property values to fall.

Another was Harry Macklowe, who has been unable to refinance short-term debt he used early last year to pay $7 billion for seven New York towers from Equity Office Properties Trust. He is selling the General Motors building on Fifth Avenue to repay debt to Deutsche Bank and Fortress Investment Group LLC.

Founder and former chairman Charles Kushner built the firm into one of New Jersey's largest owners of apartment complexes until it sold most of them last year for $1.9 billion, including assumed debt. Kushner's son, Jared, said last year that the proceeds of that sale gave it a cushion in case it ran into problems refinancing debt.

Higher Rents

Jared Kushner is publisher of the New York Observer, a weekly newspaper that focuses on politics, media and real estate.

The 1.5 million square-foot 666 Fifth has about 90,000 square feet of ground-floor retail space, with three main stores. Retail tenants include the National Basketball Association store and Hickey-Freeman men's clothier.

One of the other tenants, a Brooks Brothers Inc. clothing store, has agreed to move out next year, which will enable the owners to reconfigure the space, and possibly bring in a new tenant at a higher rent, the New York Post reported on March 11.

The space at Fifth and 53rd Street, part of the most expensive retail corridor in the world, could be re-rented at double the current $600 a square-foot rent, said Faith Hope Consolo, chairwoman of retail services at New York brokerage Prudential Douglas Elliman.

``If they could put all that space together, they could have a department store there,'' she said. ``It's no secret that people like Nordstrom have been trying to find a home in New York, and that other `lux' retailers want to be in the area. The street is full of lux, lux and deluxe.''

Israelis Block UN Food Relief For Gaza

Israelis Block UN Food Relief For Gaza

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The UN is to halt food handouts for up to 800,000 Palestinians from tomorrow because of a severe fuel shortage in Gaza brought on by an Israeli economic blockade.

John Ging, the director of operations in Gaza for the UN Relief and Works Agency, which supports Palestinian refugees, said there had been a "totally inadequate" supply of fuel from Israel to Gaza for 10 months until it was finally halted two weeks ago. "The devastating humanitarian impact is entirely predictable," he said.

A shortage of diesel and petrol means UN food assistance to 650,000 Palestinian refugees will stop tomorrow, and aid from the World Food Programme for another 127,000 Palestinians due in the coming days will also be halted.

"The collective punishment of the population of Gaza, which has been instituted for months now, has failed," said Robert Serry, the UN special coordinator for the Middle East.

Gaza's streets have largely been emptied of cars, except for those running on the last reserves of fuel, or on cooking gas or used vegetable oil.

Gaza will be high on the agenda at a meeting of donors to the Palestinians in London next Friday. Last year, after Hamas seized full control of Gaza, Israel imposed an economic blockade, preventing exports and allowing in only limited supplies of food, fuel and aid.

Recent militant attacks on Gaza's crossings, strongly condemned by the UN, have meant a tightening of the closures.

Hours before Gaza's sole power plant was to shut down, Israel pumped in 1m litres of industrial diesel, enough to last the plant around three days.

The effects are mounting. On Tuesday, Gaza's central pharmacy ran out of fuel to refrigerate vaccines during the now regular power cuts. The main laundry at Shifa hospital, which washes sheets and uniforms for six hospitals and all government clinics, has less than a day's fuel left. "This is the first time in 40 years of operating that we've faced such a problem," said Samir el-Ankar, the laundry manager.

Around three-quarters of the 4,000 agricultural wells in Gaza depend on fuel-powered pumps. Fuel shortages have already drastically increased food prices. A kilogram of tomatoes has risen from one shekel to six shekels in Gaza City.

Israel halted supplies of fuel for transport two weeks ago after Gazan militants attacked the Nahal Oz fuel crossing and killed two Israeli civilian workers. Thirteen Israeli soldiers were injured in an attack on Saturday at the Kerem Shalom crossing, used to deliver food and aid.

"We remain committed to not allowing a humanitarian crisis in Gaza," said Mark Regev, a spokesman for the Israeli prime minister, Ehud Olmert. "But you cannot talk about the difficulties in delivering fuel to the Gaza Strip without stating and re-stating the fact that terrorists under the auspices of Hamas have deliberately -targeted the fuel supply depot. It's almost as if their agenda is nihilistic."

Regev said there were problems with fuel distribution inside Gaza, which meant Hamas maintained a supply of fuel for its military vehicles. All the fuel is paid for by the Palestinian Authority or the EU.

For nearly three weeks, the fuel distributors have effectively been on strike in protest at the shortages. "We ask Israel to declare they will send the right amount of fuel into Gaza that is necessary for our needs," said Mahmoud Khazendar, vice-president of the distributors' association. "If they want to punish Hamas then OK, but not 1.5 million people."

He admitted Hamas had taken some fuel as soon as it arrived in Gaza, but said the amounts were equivalent to two or three days' delivery over three months

One in 58 British children is autistic, some experts suspect it is Vaccine related

One in 58 British children is autistic, some experts suspect it is Vaccine related

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Almost twice as many children in Britain could have autism than previously thought, researchers say.

A study has found that as many as one in 58 may have some form of the condition - well above the widely-accepted existing estimate of one in 100.

If so, it would mean that around 210,000 children under 16 in the UK have autism or a related disorder.

The leader of the Cambridge University study, autism expert Professor Simon Baron-Cohen, said the higher figure was not linked to use of the controversial MMR jab.

However, two members of his team are understood to privately believe that the triple vaccination may be to blame for the rise.

Their fears follow claims from experts that injecting children with the combined measles, mumps and rubella vaccine - rather than three separate jabs - can cause autism.

Autism is an umbrella term for a range of developmental disorders that have a lifelong effect on the ability to interact socially and communicate.

There are related problems, known as autism spectrum disorders, which include Asperger's syndrome, which also require special teaching needs.

Estimates of the number of children with autism have been edging up for more than a decade. In the 1990s, it was believed there were around four or five cases of autism in every 10,000 people - rising to 20 cases if other ASD problems were included.

Later this was revised upwards to one in 100, the widely-accepted estimate among British scientists.

Last year a study suggested the figure may be as high as one in 86, and now the Cambridge team say it could be as high as one in 58.

It is not known whether the rise is down to better diagnosis of the condition, or because the numbers with autism are actually rising.

Professor Baron-Cohen and his team arrived at their estimate by studying the incidence of autism and ASD among 12,000 children at Cambridgeshire primary schools between 2001 and 2004.

He said possible factors behind the rise were genetics, environmental factors such as greater use of pesticides and children's exposure to hormones such as testosterone in the womb.

He said: "As for MMR, at this point one can conclude that evidence does not support the idea that the MMR causes autism."

However, two of the seven-strong team - Dr Fiona Scott and Dr Carol Stott - said the jab, which is given at 12 or 15 months, could be a factor in small numbers of children.

The MMR scare began in 1998 when Dr Andrew Wakefield, a gastroenterologist at the Royal Free Hospital in North London, wrote an article in The Lancet which linked the jab to autism and inflammatory bowel disease.

Despite further research debunking the claims, some mothers opted to go private and pay for three separate jabs or missed the jab altogether.

This month Dr Wakefield could be struck off the medical register following a General Medical Council hearing-over claims of dishonesty and irresponsibility over the research.

Ivan Corea, head of the Autism Awareness Campaign UK, said he hoped the increased estimate would prompt the Government to improve services because autistic people were at the mercy of a 'postcode lottery'.

He said: "We are urging Gordon Brown to provide a world-class education for all children with autism, to provide new specialist autism schools, even special needs academies and autism units equipped with sensory rooms in mainstream primary and secondary schools."

Humanitarian situation in the occupied Palestinian territory

Humanitarian situation in the occupied Palestinian territory

Report to UN Security Council

by John Holmes

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Briefing to the Security Council on the situation in the Middle East including the Palestinian question

Statement by John Holmes, Under-Secretary General for Humanitarian Affairs and Emergency Relief Coordinator

22 April 2008

Thank you, Mr President, for this opportunity to brief the Council on the humanitarian situation in the occupied Palestinian territory. Ms. Kane’s brief on the continued violence speaks for itself. I will not repeat what she has said on the increased number of civilians killed, the unacceptability of the continued firing of Rockets at Israel and of the attacks on the Gaza crossings. Allow me though to put things in a humanitarian perspective. What does this violence mean in humanitarian terms?

The situation in Gaza

Mr. President,

Attacks on civilians are from any perspective unacceptable. Under international humanitarian law, both Israel forces and Palestinian militants have an obligation to distinguish between combatants and non-combatants and to preserve civilians from undue violence and suffering. The continuous disregard in the occupied Palestinian territory and Israel of these basic rules remains alarming and is to be condemned, including by this Council.

I would like to say that I welcome Israel’s statement that the death of a Reuters cameraman on 16 April would be investigated. I look forward to the conclusion of this investigation. But I also hope that investigations will be launched on a systematic basis when civilians are killed as a result of military operations in the occupied Palestinian territory.

I would like also to highlight the humanitarian impact of the attacks by Palestinian militants on the Gaza crossings. I condemn these attacks as cynical and irresponsible. They contribute to a further escalation of violence, with all the risks of further human suffering that this entails. By putting in danger those trying to operate the crossing and by inevitably increasing the risk of further closures of the crossings, i.e. Gaza’s lifeline, they are only likely to lead to increased suffering for the population in Gaza They cannot possibly help to end or ease the blockade of Gaza, but risk deepening and prolonging it. I hope and trust that the unacceptable threats we have heard from Hamas that the recent attacks are only a beginning or “practice” are not serious.

Let me illustrate this point. Prior to the 9 April attack on the Nahal Oz fuel crossinga , approximately 65% ofa the fuel needs of the Gaza power plant was being met by imports through the Nahal Oz fuel terminal. Because of the attack, the Nahal Oz was closed from 9a to 21 April, except for two days. Had Nahal Oz not been able to reopen today, the power plant would have shut down and most areas of Gaza would have experienced increased electricity cuts.

Equally critical are the low levels of fuel to meet transportation needs due to the continued closure of Nahal Oz. Even before the 9 April attack, import levels of diesel and petrol had been significantly reduced, with no petrol imported since 18 March and no diesel since 2 Aprila. Vehicular traffic has effectively been brought to a standstill. The impact of the low import levels of petrol and diesel has been exacerbated by the refusal of the Palestinian Petrol Stations Association to distribute the supply that does exist, in protest against the low levels of imports. I fail to see how this can help in any way and hope again this is not dictated by politics.

15-20% of the population now receives water for only 3-5 hours every four days, with serious consequences on daily hygiene. Sixty thousand cubic meters of raw and partially treated sewage continue to be dumped daily into the Mediterranean Sea. Student and teacher absences at schools and universities have reached a level as high as 20% due to the lack of fuel for transport. All classes at Gaza’s four main universities were suspended last week. Most fishing vessels are grounded, which will lead to the loss of the sardine season.

Humanitarian agencies are also severely affected. UNRWA’s fuel supplies will be exhausted on 24 April. In an effort to save fuel, UNRWA has prioritized food distribution, solid waste removal and sewage projects. It has stopped all monitoring activities and as of 14 April, roughly half of the 1,240 vocational students usually transported by contractors have not been able to attend their classes. As of tomorrow, UNRWA will discontinue its food assistance to 650,000 refugees as well as its garbage collection services benefiting 500,000 Gazans. Another 500,000 Gazans are already living in twelve municipalities without any solid waste management capacity.

The humanitarian situation in Gaza remains grave in other ways. The level of truck imports increased significantly in March, with 3,399 truckloads of commercial and humanitarian goods being allowed in. This compares positively to the 1,827 and 1,782 truckloads allowed into the Strip in January and February respectively. However, it still represents only 31% of what was allowed in the Strip in March 2007. Moreover, the variety of goods entering Gaza remains minimal. Only food, cattle, medical and cleaning supplies are entering on an ongoing basis. Shortages of daily necessities fluctuate, bringing corresponding price increases in accordance with supply and demand. Clearly the improvement in March was threatened by the attack on Kerem Shalom crossing on 17 April, which led to the closure of the crossing. I am glad to see that trucks were allowed through the Sufa crossing on 22 April, but this is fragile and unsatisfactory at best. Again, the population of Gaza is paying the price for Hamas’ attacks.

Currently, no materials are entering for UN humanitarian infrastructure projects. Despite assurances, UNRWA has also not received approval for the import of materials needed for the annual summer games the agency facilitates for 250,000 children. UNRWA also has had to negotiate the entry of its payroll for the five months since November 2007.

During my last brief to the Council, on 26 February, I stressed the urgency of reopening the Gaza crossings in order to avert a further deterioration of the humanitarian situation. My message remains the same, except that the re-opening of the crossings has become even more urgent today than it was two months ago. Until humanitarian and commercial goods and staff are allowed into the Strip in sufficient quantity and in a sustained manner, the humanitarian situation in Gaza will continue to deteriorate. It is therefore critical that workable arrangements acceptable for all those concerned be reached with the shortest delay. That is what we have been trying to achieve in our contacts with the Israeli authorities. Whatever the actions of Hamas, the Israelis still have the responsibility to allow the supply of the population with their basic needs and to avoid the kind of collective punishment we have been seeing. We will go on working with Israel in order to improve the situation as far as we can.

The situation in the West Bank.

Mr. President, Ms. Kane briefed you on the removal of checkpoints in the West Bank and the analysis of this by the OCHA office in Jerusalem. Like her I welcome the removal so far, but underline the urgency to do much more in order to improve access and ease the lives of ordinary Palestinians. As I said in my briefing on 26 February, it is the cumulative effect of these closures with the continuing expansion of the settlements, the extension of the Barrier and a cumbersome permit regime which does so much to aggravate the humanitarian conditions in the West Bank and undermine belief in the possibility of an early political settlement.

Restrictions on UN operations have meanwhile continued to increase in the West Bank, with the installation of Israeli civilian police at checkpoints causing significant delays and security concerns to UN staff crossing from the West Bank into Jerusalem. UN agencies experienced 139 access incidents just during the month of March, compared to the 63 incidents reported in February. As a result of these incidents, UNRWA alone lost more man-hours in one month than they had during the whole of 2007.

In this context, I am alarmed by the decision of Israeli authorities to reduce the number of checkpoints allowed for the passage of humanitarian goods into the West Bank and to request further security clearance for UN vehicles, staff and contractors. In a context of already limited access, the accumulation of such measures will have a serious impact on humanitarian operations. Hence, humanitarian agencies already foresee a significant increase in the cost of humanitarian operations and important delays in the delivery of humanitarian assistance to those in need in 2008 if these measures are implemented.

I therefore call on the Israeli authorities to reconsider these measures and to engage in further discussions with the humanitarian community. We are certainly ready on our side. I believe that if we can engage in a constructive dialogue, we can agree on adequate mechanisms that would address both Israel’s legitimate security concerns and relief organisations’ urgent need for improved access.

Mr. President, as I have said before, it is my views that the facts and realities on the ground in both Gaza and the West Bank have to change to transform the prospects for the peace agreement, which alone can resolve the underlying issues. I hope we will see progress in this direction soon.

The Single-Payer Solution

The Single-Payer Solution

By Amy Goodman

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A
s the media coverage of the Democratic presidential race continues to focus on lapel pins and pastors, America is ailing. As I travel around the country, I find people are angry and motivated. Like Dr. Rocky White, a physician from a conservative, evangelical background who practices in rural Alamosa, Colo. A tall, gray-haired Westerner in black jeans, a crisp white shirt and a bolo tie, Dr. White is a leading advocate for single-payer health care. He wasn’t always.

He told me in a recent interview: “Here I am, a Republican, thinking about nationalizing health care. It just went against the grain of everything that I stood for. But you have to remember: I didn’t come to those conclusions with lofty ideals of social justice.”

In the early 1990s, his medical group started falling apart. White, a keen student of economics and the business of medicine, determined that it wasn’t just his practice but the system that was broken.

“You’re seeing an ever-increasing number of people starting to support a national health program. In fact, 59 percent of practicing physicians today believe that we need to have a national health program. I mean, that’s unheard of, even 10 years ago. It’s amazing to see a new generation of physicians coming up who are disgusted with our current health-care system. You know, we’re trained to be advocates of patients, we’re trained to save lives, we’re trained to practice medicine. And instead, what we’re doing is we’re practicing Wall Street economics.”

Single-payer is not to be confused with universal coverage, which Hillary Clinton and Barack Obama both support. In fact, in a recent debate, when Clinton raised the issue of single-payer, the audience interrupted with applause. She immediately countered, “I know a lot of people favor [it], but for many reasons [it] is difficult to achieve.”

Why? One of the most powerful industries in the country opposes it-the insurance industry. Under universal coverage, insurance profits are preserved. Under single-payer, they are not. Dr. Rocky White, who now sits on the board of the nonprofit Health Care for All Colorado, has switched his political affiliation. He also has updated and reissued Dr. Robert LeBow’s book on single-payer called “Health Care Meltdown: Confronting the Myths and Fixing Our Failing System.”

He described possible solutions: “There are a lot of different types of single-payer systems-you could have purely socialized medicine. That’s kind of like what England has. The government owns the hospitals, the government owns the clinics, the government finances all the health care, and all the doctors work for the government. That is truly socialized medicine, as opposed to the Canadian system, where the financing comes through their Medicare program, but all the doctors are in private practice.”

The economics are complex, but this plain-spoken country doctor explains it clearly:

“You know, this industry is a $2-trillion industry, and the profits in the for-profit insurance industry are so huge and it’s so deeply entrenched into Wall Street … but until we move to a single-payer system and get rid of the profit motive in financing of health care, we will not be able to fix the problems that we have.”

What would it take? Dr. White has spent his life dealing with the high winds on the high plains, from Nebraska to Colorado, and describes the challenge the country faces in familiar terms:

“I think that our current presidential candidates understand that ideally single-payer would be the best, but they don’t have the political will to move that forward. Their job is to feel which way the wind is blowing. Our job is to turn that wind.”

Latin American food fund started

Latin American food fund started

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Leaders from four Latin American countries have set up a $100m food security fund for staples such as rice, beans and corn in a bid to offset rising food prices that have sparked global protests.

The presidents of Bolivia, Nicaragua and Venezuela as well as Cuba's vice-president also promised joint agricultural programmes.

"This issue is really crucial for the future of our people, most of all to the people of the poorest countries," Daniel Ortega, Nicaragua's president, said at the meeting in Venezuela on Thursday.

Hugo Chavez, the Venezuelan president, said the fund was an "urgent geopolitical issue".

"This food crisis is the biggest demonstration of the historic failure of
the capitalist model," he said at the Alternative for the People of Our America (ALBA) summit in Caracas.

Also at the summit, leaders pledged their support to Bolivia ahead of a referendum vote in May in which the nation's more prosperous eastern provinces are seeking greater autonomy from the capital, La Paz, and its socialist policies.

'Silent tsunami'

Chavez said a regional food distribution system was needed to cut out the so-called "middle-men" who were increasing prices.

"We have to create a regional trade network to stop us falling into the hands of speculators," he said.

Cuba, Venezuela and Bolivia all import much of their foodstuff, with Bolivia forced to grant small farmers who grow corn, rice, wheat and soya beans interest-free loans as incentives for production.

The group's food security plan includes projects to help boost
output of grains, especially corn and rice and vegetables, as well as milk
and water, and improve irrigation, the Venezuelan leader said.

Global food prices, affected by rising fuel prices, environmental changes and increased demand from India and China, have sparked often violent protests this year in more than 35 countries in the Caribbean, Africa and Asia.

The leaders' announcement comes after the head of the United Nations World Food Programme (WFP) warned that a "silent tsunami" of hunger is sweeping across the globe, with an additional 100 million people facing poverty.

"This is the new face of hunger - the millions of people who were not in the urgent hunger category six months ago, but now are," Josette Sheeran said in a speech during a UK summit on the global food crisis.

CIA admits they will continue rendition program, which allows torture overseas

CIA admits they will continue rendition program, which allows torture overseas

Documents show they expected legal challenges from the start

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The Central Intelligence Agency knew from the beginning that its secret detention and torturous interrogation tactics probably bordered on illegal from the start, according to new documents identified through a Freedom of Information Act lawsuit.

In a filing yesterday, the CIA said it had identified 7,000 pages of classified memos, emails and other records relating to President Bush's secret detention and interrogation program. Human rights groups quickly jumped on the filing -- which came after their own Freedom of Information Act lawsuit seeking information about those detained.

The CIA also acknowledged in their filings that the program “will continue.” Terror suspects detained or "renditioned" by the United States are transferred to third party countries that allow torture which gives the US a legal loophole to allow harsh interrogation without being legally liable. Such suspects, who effectively disappear, are held without access to courts.

The US has refused to produce a list of the suspects it is holding in sites overseas, and only recently provided a list of those held captive at Guantбnamo Bay.

Amnesty International says at least 30 people are believed to still be held in secret prisons.

In 2006, President Bush muted dissent surrounding the program by announcing that he would transfer 14 "high-value" detainees to Guantбnamo Bay.

The filing also shows that the agency sought legal advice from the White House Office of Legal Counsel numerous times over several years.

"The CIA's purpose in requesting advice from OLC was the very likely prospect of criminal, civil, or administrative litigation against the CIA and CIA personnel who participate in the Program," Ralph S. DiMaio, information review officer for the CIA's clandestine service, said in the documents.

Such proceedings, he added, would "be virtually inevitable."

Nineteen documents were withheld; the Bush Administration cited "presidential communications privilege." The withholding of documents under presidential privlige has been a common practice of the Bush Administration -- but its decision to do so in this case appears a tacit acknowledgment of the high-level interaction between Bush advisors and CIA officials.

The filing says that some of the withheld documents were "authored or solicited and received by the President's senior advisors in connection with a decision, or potential decision, to be made by the president."

Rights groups say CIA is hiding criminal activity

Amnesty International USA, the Center for Constitutional Rights and the International Human Rights Clinic at NYU School of Law were the key litigants seeking the documents made the claim following a summary judgment motion by the agency.

“For the first time, the CIA has acknowledged that extensive records exist relating to its use of enforced disappearances and secret prisons,” Curt Goering, AIUSA senior deputy executive director, said in a statement yesterday. “Given what we already know about documents written by Bush administration officials trying to justify torture and other human rights crimes, one does not need a fertile imagination to conclude that the real reason for refusing to disclose these documents has more to do with avoiding disclosure of criminal activity than national security.”

RAW STORY was the first news outlet to identify the exact location of one of the sites in the CIA's secret prison network, which was revealed first by the Washington Post. Raw Story identified a prison in northeastern Poland, Stare Kiejkuty, that was used as a transit point for terror suspects.

Once a Soviet-era compound once used by German intelligence in World War II, Stare Kiejkuty is best known as having been the only Russian intelligence training school to operate outside the Soviet Union. Its prominence in the Soviet era suggests that it may have been the facility first identified – but never named – when the Washington Post’s Dana Priest revealed the existence of the CIA’s secret prison network in November 2005.

The groups say that they're not the only ones being stonewalled. Congress, they say, is getting the short end of the stick as well.

"Documents released to plaintiffs by the CIA demonstrate that many within the government itself have been unable to obtain accurate information from the CIA," the groups said. "These documents, which include letters from Members of Congress to the CIA, demonstrate a pattern of withholding information from Congress. In a pointed bipartisan letter on Oct. 16, 2003, then-Chair and Ranking Member of the House Select Committee on Intelligence requested that CIA Director George Tenet provide senior level briefings on the treatment of, and information obtained by, three men known to be held in secret CIA detention, admonishing the CIA by stating that the committee was 'frustrated with the quality of the information' provided in past briefings."

“The CIA has employed illegal techniques such as torture, enforced disappearances, and extraordinary rendition,” said Meg Satterthwaite, Director of the NYU IHRC. “It cannot use FOIA exemptions as a shield to hide its violations of U.S. and international law.”

CIA has begun to lose, destroy documents

Two recent reports signal that the agency has begun to destroy evidence of harsh interrogations conducted at US prisons. Last year, the CIA acknowledged it had destroyed videotapes of two interrogations they were asked to provide to the Sept. 11 commission.

Earlier this week, the erstwhile director of interrogations at Guantбnamo Bay said records of a prisoner who accused his captors of torturing him had been destroyed.

"Retired general Michael Dunlavey, who supervised Guantбnamo for eight months in 2002, tried to locate records on Mohammed al-Qahtani, accused by the US of plotting the 9/11 attacks, but found they had disappeared," the Guardian writes. "The records on al-Qahtani, who was interrogated for 48 days - "were backed up ... after I left, there was a snafu and all was lost."


Subsidizing Corporate Crime and Rewarding Constitutional Abuses

Subsidizing Corporate Crime and Rewarding Constitutional Abuses

By Shahid Buttar

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Government handouts to corporations might seem untenable at a time when more and more Americans suffer every day from the impacts of a mounting economic crisis. Yet efforts to bolster the economy have largely taken the form of corporate welfare — much like an appalling effort, in the closing days of the Bush administration, to subsidize corporate violations of the rule of law and individual liberties.

After the Federal Reserve’s $30 billion bailout for investment bank Bear Stearns last month came the Senate’s recent decision to set aside $25 billion in tax breaks for corporate homebuilders, and then last week’s revelation of “a historic collapse in audits” of major corporations by the IRS. All three stories prompted outrage from observers noting the implications for American workers.

But even these insults pale next to another round of corporate welfare currently considered by Congress for the telecom industry — a handout that, despite a smaller price tag, even more thoroughly degrades the public interest by both undermining national security and offending our nation’s fundamental interests in transparency and the rule of law.

Subsidy Via Amnesty

Both houses of Congress recently authorized a constitutionally suspect domestic spying program that violates the Foreign Intelligence Surveillance Act of 1978. The Senate also approved, although the House patriotically rejected, a further give-away to telecom companies.

Unlike loan guarantees for Bear Stearns or tax subsidies for condo developers, the Senate’s handout to telecom companies including AT&T, BellSouth and Verizon takes the form of an amnesty: retroactive immunity from nearly 40 pending lawsuits alleging that their participation in the Administration’s surveillance activities illegally (and possibly unconstitutionally) invaded the privacy of millions of law-abiding Americans.

Given the pervasive secrecy surrounding government surveillance, concerned citizens across the country initiated the litigation largely to learn more about the government’s activities. But even the limited information known to the public suggests that the Senate bill effectively subsidizes corporate crime, encourages secrecy, denigrates transparency, offends the rule of law, rewards constitutional subversion — and also undermines national security.

Secret Government and Censorship

First and foremost, the so-called “Terrorist Surveillance Program” (TSP) is the mere tip of an iceberg that remains mostly secret.

Enacted over the dramatic objections of former Attorney General John Ashcroft, the TSP is the only domestic surveillance program confirmed by government sources. Other programs — for which potential challenges could loom in the future — continue to operate in secret, including a data-mining scheme run by the National Security Agency (NSA) that reportedly duplicates the “Total Information Awareness” program affirmatively rejected by Congress.

In late 2005, The New York Times exposed the TSP in an investigative report that the White House stonewalled for over a year and attempted to censor. Like the revelation of the Nixon administration’s (far less ambitious) surveillance operations, the story deeply shook the Washington establishment. However, in sharp contrast to the Watergate era, the contemporary abuses have only grown worse since their revelation.

The Watergate scandal led to the formation of the Church Committee, the FISA statute (for whose violations telecom companies now seek a public subsidy), and the threatened impeachment and resignation of the President. In contrast, the revelation of today’s domestic spying scandal culminated in congressional permission for previously illegal acts committed by executive officials.

Even before evading accountability for secret programs violating the rights of millions of Americans, Administration officials threatened to prosecute the journalists who exposed their abuses to the public. The reporters pursued both ends and means at the core of the First Amendment, and even delayed publication of their story for over a year based on objections fabricated by the administration. Yet they were framed as criminals, rather than guardians of the public interest.

Transparency and Checks & Balances

Among the principles protected by the Constitution, few compare with the transparency sought by the First Amendment. The reason is simple: government secrecy impedes democracy.

Controversial government programs are theoretically restrained by checks and balances, like legislative oversight and judicial review. But neither Congress nor the courts have a way to check a secret program.

Senator Jay Rockefeller (D-WV) faced this problem when reviewing the TSP in a closed 2003 briefing. After the meeting, he wrote to Vice President Dick Cheney to “reiterate [his] concerns,” noting that “the activities we discussed raise profound oversight issues,” but that, because he is “neither a technician nor an attorney,” his “inability to consult staff or counsel on [his] own” rendered him “unable to fully evaluate, much less endorse these activities.”

Nor is Congress the only branch stymied by secrecy. Domestic spying faced no legal challenges in court until 2006 only because, until then, the TSP had been secret. And the Senate’s bill effectively forces courts to dismiss the numerous suits filed after the program was revealed.

As Sixth Circuit Judge Damon Keith wrote in another context, it is because “[d]emocracies die behind closed doors….[that] the Framers of the First Amendment….protected the people against secret government.” But secrecy pervades the TSP’s history, animates the Administration’s threat to prosecute the journalists who courageously exposed it, and continues to hide from scrutiny the government’s other unconfirmed — but ongoing — surveillance programs.

Each obstruction violates bedrock democratic principles by denying the opportunity for either a legislative or judicial check. Put another way, executive secrecy leaves the President unrestrained by precluding other branches of government, as well as civil society, from pursuing checks and balances.

Secret programs recall those of former Soviet bloc countries during the era of totalitarian rule. The Constitution — and our Republic — has been turned on its head.

Executive Aggrandizement vs. The Rule of Law

Setting aside how secrecy offends democracy, domestic spying also assaults the rule of law on multiple fronts and aggrandizes executive power.

At the outset, the Senate’s immunity provision effectively declares the FISA law void — but only after the fact of violation, and only as it pertains to specific violators. Such procedural arbitrariness makes a mockery of the Rule of Law, even setting aside the substantive illegitimacy of rewarding criminal behavior.

In addition, the TSP shares the same legal pedigree as the infamous “torture memo” recently repudiated by Attorney General Mukasey. Its concoction roiled the executive branch, inspired resistance culminating in threats by senior officials to resign, and bears the fingerprints of the same arch-conservatives whose view of executive power bears no limit. The program embodies a deeply controversial theory attacked from across the ideological spectrum.

The only court to publicly examine the program on its merits declared the TSP unconstitutional, and a separate ruling by a secret court struck down portions of the program, although its precise contours remain unknown. A conservative appellate court dismissed the first ruling on a legal technicality, and since the Supreme Court rejected a petition to appeal the case, the TSP has been effectively insulated from judicial review despite grave concerns about its legal basis.

The TSP stood on thin legal ice — until Congress lay itself (and the American people) at the President’s feet.

Thus, a scheme invading the privacy of millions of law-abiding Americans continues unchecked, despite the constitutional abuses implicit in warrantless surveillance. Private suits pending against the program’s telecom enablers present the only remaining opportunity through which to check the administration’s surveillance activities, especially now that Congress has authorized them to continue.

Moreover, unless suits against the telecom companies are allowed to proceed, the full scope of warrantless surveillance — and the extent to which it may have been abused by an administration already known for politicizing various institutions, including the Justice Department and even the Centers for Disease Control — may never be known.

Finally, the Bush administration’s other surveillance programs stand effectively immune from judicial review or congressional oversight as long as they, too, remain secret. Regarding unconfirmed secret data-mining by the NSA, Senate Intelligence Committee member Ron Wyden (D-OR) recently argued, “There’s not been as much discussion in the Congress as there ought to be.”

Especially given this lack of oversight, private interests should be discouraged from compromising individual liberty interests. The Senate bill instead invites them to disregard their customers’ privacy with impunity.

Immunizing telecom companies for enabling the TSP thus sends the wrong message to other companies that, through other secret programs, continue to help authorities spy on Americans — as well as those, like Qwest, that tried to protect their customers from prying government eyes.

Dragnets vs. Real Security

Transparency, democratic checks & balances, and the rule of law are not the only values undermined by domestic spying. The TSP also hinders counterterrorism efforts. Put simply, sweeping domestic surveillance undermines security by inundating analysts with false leads.

Throughout the debate about re-authorizing FISA, Administration apologists have falsely claimed that domestic spying is necessary to protect the country from a future terrorist attack. Intelligence analysts have repeatedly rejected such red herrings.

Earlier this month, senior counter-terrorism officials and intelligence analysts from agencies including the Department of Homeland Security, the FBI, and the National Counterterrorism Center hosted a briefing on their assessments of domestic terrorism. One analyst captured a point of consensus by explaining that “having too much data is as much a problem as having too little.”

According to The Washington Post, “Even with 38,000 employees, the NSA is incapable of translating, transcribing and analyzing more than a fraction of the conversations it intercepts.” The New York Timesunfiltered information was swamping investigators.” confirms that, in the wake of the 9-11 attacks, “F.B.I. officials repeatedly complained to the [NSA], which was collecting much of the data by eavesdropping on some Americans’ international communications and conducting computer searches…that the

Domestic surveillance not only violates several constitutional principles and tears at the very fabric of our constitutional Republic, but also fails to achieve its purported ends.

Government Handouts to Repeat Recipients

By granting immunity for participating in this ineffective and potentially illegal scheme, the Senate offered the telecom industry — which is no stranger to government largess — yet another corporate handout.

In 2004, Philadelphia announced a municipal wireless plan enabling wi-fi service for its residents at a fraction of the retail cost. The plan enhances efficiency by leveraging economies of scale and encouraging economic development, while also seeking equality by diminishing the digital divide.

But, lobbied by telecom companies, the Pennsylvania state legislature banned other cities from following Philadelphia’s lead. The ensuing state-by-state march against municipal wireless began shortly after Congress passed the 2003 Medicare legislation, which similarly maximized health care costs by prohibiting collective bargaining by government purchasers. Each measure represented an enormous — though politically covert — give-away to corporate interests.

The TSP itself entails corporate handouts to telecom companies. As security analysts monitor, review and track the telephone calls of millions of Americans, they incur millions of dollars in fees. Beyond those charges known to the rogue authorities who oversee the program, companies also have at least sometimes overcharged the government, and some law enforcement authorities have embezzled funds.

Congressional Co-optation

After enabling the most secret and intrusive government program since COINTELPRO, running roughshod over the Fourth Amendment, expanding Presidential power without congressional or judicial authorization, and reaping immense profits while doing so, telecom companies now demand immunity from law-abiding Americans seeking to vindicate their rights.

And instead of responding assertively to defend the Constitution — or even simply maintaining the statutory protections erected by the Watergate-era Church Committee — Congress instead perversely debates whether retroactive immunity is necessary to encourage such corporate crime and constitutional subversion in the future.

Corporate welfare may be offensive in the abstract, but it is even more galling when supporting chronic recipients, and downright odious when used to reward constitutional subversion.

The House bill is the lesser of two evils. Like its Senate counterpart, it abdicates Congress’ responsibility to check the executive and sacrifices constitutional liberties violated by warrantless surveillance. But by allowing in camera (i.e., sealed) judicial review of classified evidence, it at least leaves the courthouse doors open, while allowing corporate defendants to challenge their accusers without violating the Administration’s secrecy.

Policymakers have already abandoned the freedom sought by the framers of the First Amendment, and their successors who passed FISA, by authorizing domestic surveillance in the first instance. But the suits against telecom companies enabling surveillance should proceed. With corporate welfare having already richly padded the telecom industry’s pockets, it should not receive from Congress yet another subsidy for abusing Americans and the Constitution.