Tuesday, June 24, 2008

Home Prices in U.S. Metropolitan Areas Fell 15.3% in April, Most on Record

S&P/Case-Shiller Home Prices Fell 15.3% in April

By Shobhana Chandra

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Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today.

The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier, less than forecast, after a 14.3 percent decline in March. The gauge has fallen every month since January 2007. The group began keeping year-over-year records in 2001.

Mortgage defaults and foreclosures are adding to the glut of properties on the market, while stricter loan rules are making it more difficult for prospective buyers to get financing. The prolonged real-estate slump, along with higher fuel prices and a shrinking job market, is taking a toll on consumers and the economy.

‘‘There's such an excess of inventories that we certainly expect to see more price declines,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ‘‘The economy is still weakening and housing still looks pretty weak.''

Home prices decreased 1.4 percent in April from a month earlier after a 2.2 percent decline in March, the report showed. The figures aren't adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month to month.

The index was forecast to fall 16 percent from a year earlier, after a previously reported 14.4 percent drop in the 12 months ended in March, according to the median forecast of 23 economists surveyed by Bloomberg News. Estimates ranged from declines of 15.4 percent to 17 percent.

Declines Widespread

All of the 20 cities in the index showed a year-over-year decrease in prices for April, led by a 27 percent drop in both Las Vegas and Miami. Charlotte, North Carolina, showed a decline for the first time.

One bright spot in the report was that more cities showed a gain in prices in April compared with the previous month. Houses in eight areas rose in value, compared with just two in March. Month-over-month gains were led by Cleveland and Dallas.

‘‘There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline,'' David Blitzer, chairman of the index committee at S&P, said in a statement.

Reports this week may reinforce the dim outlook for housing. Combined sales of new and existing homes in May probably were the third-lowest on record, according to the Bloomberg survey median.

Sales May Fall

New-home sales probably fell, approaching March's 17-year low, a report from the Commerce Department tomorrow may show. The National Association of Realtors may report the following day that purchases of existing houses, which account for 85 percent of the market, rose last month from a record low.

Rising borrowing costs aren't helping. Fannie Mae, the largest mortgage buyer, last week cut its forecast for new and existing home sales this year as 30-year fixed mortgage rates jumped to an eight-month high.

Banks repossessed twice as many homes in May as they did a year ago and foreclosure filings rose 48 percent, according to RealtyTrac Inc., a real estate database in Irvine, California.

Homebuilders are reeling. Standard Pacific Corp., an Irvine, California-based homebuilder, last week said new home orders for April and May fell 12 percent from a year earlier, citing ‘‘difficult housing conditions'' in most of its markets.

Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

The S&P/Case-Shiller index and another by the Office of Federal Housing Enterprise Oversight track the same home over time and more accurately reflect price trends, economists said.

OFHEO's measure for April is due at 10 a.m. today.

The gauges from the Commerce Department and the Realtors group can be influenced by changes in the types of homes sold. Higher sales of cheaper homes relative to more-expensive properties will bias the figures down.

U.S. Consumer Confidence Falls to 16-Year Low on Fuel Prices, Housing Woes

Consumer Confidence Weakens, House Prices Slide

By Shobhana Chandra and Timothy R. Homan

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Confidence among Americans dropped to the lowest level in 16 years and house prices fell the most on record, raising the risk that consumers will cut back on purchases after spending their tax rebates.

The Conference Board's confidence index fell to 50.4 in June, lower than forecast, from 57.2 in May. Home prices in 20 cities dropped 15.3 percent in April from a year earlier, according to S&P/Case-Shiller, the most since the group began collecting data.

Consumers, whose spending accounts for more than two thirds of gross domestic product, are being hurt by the housing slump, rising unemployment and higher food and fuel bills.

‘‘We've seen this dive in confidence in the last two months at the same time these stimulus checks'' have been mailed, Chris Low, chief economist at FTN Financial in New York, said in a Bloomberg Television interview. ‘‘It tells me if we see this pop in spending, it's not going to last.''

The confidence measure reached the lowest level since February 1992, when the economy was in the midst of the so- called ‘‘jobless recovery'' following the 1990-1991 contraction.

Concern over jobs contributed to the erosion in confidence. The share of consumers who said jobs are plentiful fell to 14.1 percent from 16.1 percent last month. Those saying jobs are hard to get increased to 30.5 percent from 28.3 percent. Buying plans over the next six months for automobiles, houses, appliances and vacations all declined.

Greenspan Pessimism

Recent economic data ‘‘suggests we are on the brink'' of a recession in the U.S., former Federal Reserve Chairman Alan Greenspan said today via satellite to a conference in Johannesburg. The next year will be ‘‘a very sluggish period,'' with a ‘‘highly volatile oil market,'' he said.

Mortgage defaults and foreclosures are adding to the glut of properties on the market, while stricter loan rules are making it more difficult for prospective buyers to get financing. A separate report from the Office of Federal Housing Enterprise Oversight today showed prices fell 4.6 percent in April from a year earlier.

While the Fed has pledged to combat any increase in inflation expectations, economists predict the central bank will keep its benchmark interest rate at 2 percent tomorrow. They will also be reluctant to signal an imminent increase in borrowing costs.

Ford Motor Co., the second-biggest U.S. automaker, last week said domestic sales of large pickup trucks will decline because of $4-a-gallon gasoline. Best Buy Co., the largest U.S. electronics retailer, last week said first-quarter profit fell 6.8 percent as consumers bought less profitable items such as video games and laptop computers.

UPS Warning

United Parcel Service Inc., the world's largest package- delivery company, yesterday lowered its second-quarter profit forecast because of rising fuel costs and a slowing U.S. economy.

The economy is ‘‘very sluggish'' and manufacturing ‘‘continues to deteriorate,'' Chief Financial Officer Kurt Kuehn said in a telephone interview. The biggest impact was from jet- fuel costs, he said. ‘‘It's hard to compensate for that until things even out and calibrate a little bit.''

Home prices in the S&P/Case-Shiller index decreased 1.4 percent in April from a month earlier after a 2.2 percent decline in March, the report showed. The figures aren't adjusted for seasonal effects, so economists prefer to focus on year- over-year changes.

The index was forecast to fall 16 percent from a year earlier, after a previously reported 14.4 percent drop in the 12 months ended in March, according to the median forecast of 23 economists surveyed by Bloomberg News. The confidence index was projected to retreat to 56.

Las Vegas, Miami

All of the 20 cities in the index showed a year-over-year decrease in prices for April, led by a 27 percent drop in both Las Vegas and Miami. Charlotte, North Carolina, showed a decline for the first time.

One bright spot in the report was that more cities showed a gain in prices in April compared with the previous month. Houses in eight areas rose in value, compared with just two in March. Month-over-month gains were led by Cleveland and Dallas.

‘‘It's not as bad as people think today,'' Karl Case, an economics professor at Wellesley College, said in an interview on Bloomberg Radio. ‘‘Cities are beginning to sort themselves into the bad and not-so-bad. It's not like the whole market is collapsing.''

Case, Shiller

Case created the home-price index with Yale University's Robert Shiller based on research from the 1980s.

Reports this week may reinforce the dim outlook for housing. Combined sales of new and existing homes in May probably were the third-lowest on record, according to the Bloomberg survey median.

New-home sales probably fell, approaching March's 17-year low, a report from the Commerce Department tomorrow may show. The National Association of Realtors may report the following day that purchases of existing houses, which account for 85 percent of the market, rose last month from a record low.

Rising borrowing costs aren't helping. Fannie Mae, the largest mortgage buyer, last week cut its forecast for new and existing home sales this year as 30-year fixed mortgage rates jumped to an eight-month high.

Banks repossessed twice as many homes in May as they did a year ago and foreclosure filings rose 48 percent, according to RealtyTrac Inc., a real estate database in Irvine, California.

Homebuilders are reeling. Standard Pacific Corp., an Irvine, California-based homebuilder, last week said new home orders for April and May fell 12 percent from a year earlier, citing ‘‘difficult housing conditions'' in most of its markets.

Ofheo's price measure has a broader geographical database than the S&P/Case-Shiller index, though it doesn't include so- called jumbo mortgages. Those loans are above the federal limits, which were raised on a temporary basis in February to as much as $729,750 in some areas.

Virtually all US state jobless rates higher in May

Virtually all US state jobless rates higher in May

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All but one US state reported a higher jobless rate in May, led by Michigan and Rhode Island.

Michigan, hit hard by a slumping automotive industry and high home foreclosure rates, saw its unemployment rate rise 1.6 percentage points to 8.5 percent in May from 6.9 percent in April.

Only Louisiana showed a month-on-month decrease in its seasonally adjusted unemployment rate, edging down to 4.0 percent in May from 4.1 percent in April. But the Gulf Coast state's labor force declined about 11,300 during the month, indicating fewer people actively were seeking jobs.

All other states and the District of Columbia, showed increases in their unemployment rates in May versus April.

The national unemployment rate rose to 5.5 percent in May compared to 5.0 percent in April, the Labor Department reported on June 6. A number states exceeded the national half-percentage point rise for the month.

The unemployment rate in Rhode Island rose by 1.1 percentage points to 7.2 percent in May, while in Illinois the rate rose 1.0 percentage point to 6.4 percent. California's rate rose 0.6 percentage point to 6.8 percent.

Among regions, the East North Central and Pacific registered the highest jobless rates in May at 6.4 percent each, while the Mountain and West South Central regions reported the lowest rates at 4.4 percent each.

New crisis threatens healthy banks

New crisis threatens healthy banks

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Increasing struggles by consumers and businesses to make payments on a variety of loans, not just mortgages, are setting off a new wave of trouble in the financial sector that is battering even institutions that had steered clear of the subprime-home-loan debacle.

Late payments on home-equity loans are at a record high, according to fresh data from the Federal Deposit Insurance Corp. The delinquency rates on loans for cars, small businesses and construction are spiking to levels not seen in a decade or more.

Unlike last year, when soaring mortgage defaults sparked a crisis of confidence in the financial system, the root of these problems is the downturn in the broader economy. Simply put, consumers and businesses are strapped for cash with job losses growing and retail sales falling, economists said.

'Another wave coming'
"We are not finished with the mortgage problem, but you are starting to see increased delinquencies in other forms of consumer debt," said Paul Kasriel, an economist at Northern Trust Securities. "We are in the eye of the hurricane. We had the first wave of the credit crisis, and it was quite damaging. But there's another wave coming, and it's likely to be as destructive."

The institutions most at risk in this new phase of the credit crisis are regional and local banks, many of which stayed away from subprime mortgages. These firms are key drivers of economic activity in communities across the country. Without them, consumers would lose a source of personal loans. Small businesses would struggle to stay afloat. Construction companies often can't finance local projects without these banks.

Because they have fewer options than big Wall Street firms for raising emergency funds, these regional and local banks tend to be more vulnerable in a crisis.

In the Washington area, the stock prices of several local banks have already plummeted, with shares of Virginia Commerce Bank falling nearly 50 percent and Alliance Bank dropping about 45 percent since the beginning of the year.

Others swung to a loss in the first quarter after remaining profitable through last year's financial turmoil. The Federal Reserve put at least one, Millennium Bankshares of Reston, under close scrutiny this month out of concern for its financial condition.

The market values of some of these banks have fallen below their book value, or what accountants say the firms' assets are worth minus their debts. This is a sign that investors expect more losses this year. The market value of Virginia Commerce is about $142 million, below its book value of about $175 million, while Alliance's market value has dwindled to $18.4 million, compared with its book value of $44 million.

The situation is worse in the Southwest and Midwest, where several community banks are teetering and a few have already collapsed.

Toll on ordinary borrowers
Even as this second wave erodes the stability of the country's banks, it is already taking a heavy toll on ordinary borrowers. Vanessa Chavez and her family took out a home-equity loan in 2003 to pay for some remodeling of their District home and for the medical bills for her pregnancy. Their monthly payments, once the new loan was added to their mortgage, jumped from about $2,000 to $3,700.

Chavez had hoped to help pay the bill by getting a high-paying job. But the economic downturn sabotaged her plan, and she finally took a job as an assistant manager at a Domino's Pizza. Late last year, her mother declared personal bankruptcy, hoping to get the house payments lowered.

"We're doing everything we can to stay in the house," said Chavez, 21. "We've been going through tough times, so we're trying to do as much as we can, even if it is killing us."

For lenders, there is little recourse when a home-equity loan defaults or a homeowner declares bankruptcy. They can seize the collateral for the loan, in this case the house, only after the primary mortgage is paid off.

From October to March, $6.7 billion in home-equity loans became delinquent, increasing the total by 45 percent, according to SNL Financial. The delinquency rate is now 2.24 percent, according to the FDIC, which began tracking the data in 1991.

Losses at banks are going up as a result. J.P. Morgan Chase absorbed $450 million of home-equity-loan losses in the first quarter, up from $248 million in the previous quarter. It said its total home-equity losses could double by the end of the year.

Smaller banks have even more exposure to such loans. Overwhelmingly, the institutions that hold the most home-equity loans are regional banks, such as SunTrust Banks and National City, according to Fitch Ratings.

Late payments and defaults in every other major category of consumer debt also rose in the first quarter, the American Bankers Association reported. Auto loans issued through car dealers have a delinquency rate of 3.13 percent, the highest since at least 1990, according the ABA.

'An overall weak economy'
"The rise in consumer credit delinquencies is consistent with a rapidly slowing economy," said James Chessen, the ABA's chief economist. "Stress in the housing market still dominates the story, but it's a broader tale of an overall weak economy."

Businesses are also feeling the pain of relying too much on credit. Construction and development loans, a specialty of regional and local banks, hit a delinquency rate of 7.18 percent at the end of March, the highest in 14 years, according to the FDIC. In October, the rate was 3.22 percent.

The trend worries regulators. "Right now, too many community bankers are having too hard a time coming to grips with the problems that have emerged in their commercial real estate portfolios," Comptroller of the Currency John C. Dugan said in a speech last month.

In the Washington area, home-equity and commercial real estate loans represent a significant share of the banking business, and the trouble in these two areas is a source of deep concern, said Peter Fitzgerald, a former U.S. senator from Illinois who founded Chain Bridge Bank in McLean.

"The banks around here all have an extraordinary concentration in real estate," said Fitzgerald, adding that his bank has followed conservative lending practices since opening in August. "And what will happen is you will have some economic Darwinism. The banks with the strongest balance sheet will not only survive but will go on to prosper."

Even the region's healthiest banks are anxious about the prospect of a prolonged recession.

"We are pretty upbeat right now; our guys are feeling really good," said Bernard H. Clineburg, chairman and chief executive of Cardinal Bank. The firm recorded a profit of $2 million in the first quarter, attributing the result to conservative lending policies. "But if people keep losing their jobs, at some point everyone is going to feel the pain," Clineburg said. "If it keeps going, I don't think anyone escapes."

Iraq social and refugee crisis is worsening

Iraq social and refugee crisis is worsening

By Sandy English

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According to a report issued last week by the human rights organization Amnesty International, the plight of nearly 5 million Iraqis displaced from their homes since the American invasion of 2003 is worsening in nearly every respect.

The report observes the “crisis has steadily increased in size and complexity.” One in eight Iraqis is now internally displaced or a refugee.

Amnesty International notes that the trend of reduction in Iraqi deaths in the second half of 2007 has reversed, with nearly 2,000 Iraqis killed in March and April because of the US-backed Iraqi government’s campaign against the Madhi Army in Basra and Sadr City in Baghdad.

“The wider human rights situation in Iraq remains dire,” the report continues. “People are being killed every month by armed groups, the Multinational Forces, Iraqi security forces, and private military and security guards. Kidnappings, torture, ill-treatment and arbitrary detentions pervade the daily lives of Iraqis. Violence against women and girls, including rapes and killings in ‘honour crimes,’ is reportedly on the rise.”

The report cites the atrocious living conditions in most of Iraq as an additional factor driving people to flee the country. According to Oxfam, in 2007 70 percent of Iraqis had no access to clean drinking water and 43 percent were living on less than a dollar a day. Child malnutrition has increased from 19 percent in 2003 to 28 percent last year.

About half of Iraqis who have fled their homes remain in other parts of Iraq because of the increasing restrictions on leaving the country. Denial of access to refuge abroad is at least in part due to the actions of the Iraqi government, which—along with its American masters—has a vested interest in reducing the number of people fleeing the country.

The report, for example, notes that one factor in the Syrian government’s decision to introduce stricter visa requirements for Iraqis crossing the boarder was “the request of the Iraqi Prime Minister Nouri al-Maliki.”

Earlier this month the senior US coordinator for Iraqi refugee issues, Ambassador James Foley, encouraged the Iraqi government to step up its efforts to repatriate Iraqis, although he admitted that the Office of the United Nations High Commissioner for Refugees (UNHCR) estimates that 70 percent of those returning to Iraq were unable to resettle in their own homes. Foley said, “It’s fairly clear the government was not prepared to provide returnees with housing, with essential services.”

Amnesty’s report makes the case that no place in Iraq can be considered safe, including the northern region controlled by the Kurdish Regional Government (KRG). Political tensions between Kurds and Arabs exist, and there are repeated Turkish incursions in the Kurdish-controlled areas. Many internal refugees from central and southern Iraq are putting a strain on the resources of the KRG.

The bulk of Iraqi refugees have fled to Syria. Although no official census has been taken, some estimates place the figure at 1.5 million.

Protection for Iraqi refugees in Syria is precarious. Some manage to obtain temporary visas and others register with UNHCR.

The majority, however, has no official status and is subject to deportation back to Iraq at any time. In particular, Iraqis who have been arrested, or even simply accused of minor crimes, are subject to expulsion. These include misdemeanors necessary for survival, such as possession of forged documents or illegal entry to Syria.

Most Iraqis in Syria have been there since 2006, and what funds they brought with them are now vanishing. Increasing numbers are dependent on food aid. A 20-percent increase in the price of food since late 2007 in Syria, as well as a decrease in government food subsidies, has increased need.

As Iraqi families in Syria fall further and further into poverty, child labor has been on the rise. The report estimates that only 43,794 of 200,000 school-age refugee children were enrolled in school in 2007. While many of them are denied places by the school authorities because of overcrowding, or cannot attend because of long commutes or difficulties with the curriculum, more and more children are working to help support their families.

Iraqi refugees in Syria have access to the public health system, but the system itself cannot meet their needs. Iraq families are often required to make a financial contribution for treatment that they cannot afford. In addition, Iraqis in Syria suffer from a much higher incidence of trauma because of their experiences in Iraq and have complex psychological needs that go untreated.

Five hundred thousand Iraqi refugees reside in Jordan (8 percent of the population). Here, if anything, the situation is even worse than in Syria. Access to Jordan is also highly restricted. The report observes that young men in particular are turned back at the border. In May the Jordanian government instituted new visa requirements, forcing Iraqis to apply for visas before they travel to Jordan.

Most Iraqis in Jordan have no legal status. Iraqis with no residence permit must pay US$761 for every year that they are without official status. Further, Iraqis are not permitted to work. As in Syria, Iraqis in Jordan are becoming poorer every week. Some work illegally, the report says, “where they are reported to be vulnerable to low pay, exploitation, and arbitrary dismissals.” Rents are also on the rise, and Iraqi families are now sharing apartments and, in many cases, rooms with others.

As in Syria, education of children is a problem because of child labor and because Iraqi children are required to have their school documents from Iraq with them.

Emergency medical care for refugees has been restricted recently, and Iraqis with serious medical conditions in Jordan have no or limited access to treatment. Iraqis have access to private clinics, but for the vast majority the cost of these clinics makes treatment there impossible.

The report says that 77 percent of the 50,000 Iraqis in Lebanon are there illegally, although the government has recently announced a plan to regularize their status. To achieve legal status, a refugee is now required to pay a fee of the equivalent of about US$630 and a sponsor willing to put up an equivalent of US$1,000 guarantee. Most Iraqis in Lebanon are living in poverty. About 40 percent of Iraqi children “aged between six and 17 did not enroll in school because of the high tuition fees and the need to work.”

The report makes a special note about the myth of voluntary returns to Iraq from all countries. The widespread American and Iraqi government propaganda that the situation in Iraq is “normalizing” has led to a spate of reports after late 2007 of refugees returning to Iraq. State television has broadcast calls for refugees in the region to come back. For those who do return, the reality has been devastating

For example, the report notes, “Two highly publicized officially organized return convoys from Syria took place in November 2007, one from Aleppo and the other from Damascus. Despite an attempt to make the convoys a flagship initiative, symbolizing a recovered Iraq to which Iraqis could make voluntary, safe and sustainable returns, the reality was very much the opposite. Many of the individuals who returned found dreadful conditions. Of the 30 families who returned and were interviewed by one of UNHCR’s partners in Iraq, only a third could go back to their original homes, while two thirds became internally displaced. Some of the returnees found their property looted, occupied or destroyed. In addition, the return incentive of around US$1,000 promised by the Iraqi government has yet to be received by the returnees, according to reports.”

It does seem clear that some refugees are retuning to Iraq, but to call this repatriation voluntary is deceptive. The report observes that the main reason for return appears to be poverty or other hardship. For example, “Information gathered about people the respondents knew who had returned showed that most had cited their inability to afford to live in Syria as the reason they had gone back to Iraq (56 per cent). Only 16 per cent had returned because they had heard that the security situation had improved. Of those, however, 59 percent wanted to leave Iraq again and return to Syria. Some 47 per cent of these could not return because they lacked the money (31 per cent) or did not have a visa (64 per cent).”

If the bourgeois governments of Syria, Jordan, and Lebanon have treated Iraqi refugees with disdain, they have, at least, admitted them in larger numbers and allowed them to stay for at least some length of time.

The same cannot be said of the wealthiest countries near Iraq. Saudi Arabia, for example, is building a wall, “complete with sensors and night vision,” along its border with Iraq to prevent refugees form entering the country. According to a recent report by UNHCR, neighboring Kuwait has accepted about 45,000 Iraqi refugees, “most of whom entered on three-month visit visas and then overstayed.” Kuwait does not recognize the right to asylum.

The conduct of Europe and the United States is even more hostile to the basic human rights of Iraqi refugees.

The report observes, “Some countries outside the region that do have the means to support the relatively few Iraqi refugees who have crossed into their territory have adopted policies that appear intended to make rejected asylum-seekers destitute and so encourage their ‘voluntary’ return.”

Amnesty International singles out the United Kingdom, the junior partner in the invasion and devastation of Iraq, as particularly egregious in this regard. When an asylum seeker’s appeal has been rejected, no second application is allowed and the seeker must leave the country within 21 days. Some Iraqis who have gone though this process have simply returned to Iraq.

Other European nations have curtailed the numbers of Iraqi refugees that they will admit. Since 2003 Germany has withdrawn refugee status from Iraqis protected from the regime of Saddam Hussein. “In 2007,” the report states, “5,780 new revocation procedures for Iraqi refugees were introduced. Many resulted in revocation of protection status.”

Deportations or Iraqis from Europe are now at a record high. In the UK, at the end of 2007, there had been an increase of 105 percent over the previous year.

The report points out that the United States has resettled only 753 Iraqis between 2003 and 2006. The government pledged to take in 25,000 more refugees after 2007, but this has not been honored, and the total number of Iraqis resettled in the US is 1,608. Amnesty International believes that a newly announced target of resettling 12,000 Iraqi refugees by September 2008 is also unlikely to be met.

The primary reason for this has been US anti-terrorism laws. As the report states: “Resettlement cases headed for the USA and Australia are suffering serious delays due to the rigorous security checks to which Iraqis are being subjected in several countries. This is hindering the ability of resettlement to provide a fast and effective response to the dire situation of the most vulnerable refugees.”

The report makes a special plea for the Palestinians who have left Iraq because of violence and attacks on them due to their presumed favored status under the Baathist regime. Thousands live in dangerous and squalid camps along the Iraq-Syrian boarder.

Referring to one such camp, the Amnesty International report states, “Al-Waleed camp is in the Iraqi desert approximately 200m inside the Iraqi passport control. The unbearable conditions include extreme temperatures, the presence of snakes and scorpions, and serious protection issues such as the reported presence of armed non-residents entering the camp. One aid worker who has visited the camp described it as ‘hell.’”

In a related report issued last week, the United Nations Committee on Human Rights documented an increase in the number of global refugees and internally displaced persons to 67 million in 2007, up 2.5 million from a year before. About half of these have fled their homes because of natural disasters (or the inability of states to deal with disasters), and the remainder because of armed conflict. Iraq and Somalia saw some of the largest changes between 2006 and 2007 in the numbers of internally displaced persons.

Both of these countries are of considerable geo-strategic importance to American imperialism and have been the focus of recent American military action. It is noteworthy also that Colombia, which has between 2 million and 4 million internally displaced persons—by far the highest number of people in the Western Hemisphere—is a major recipient of US aid in dollars and military equipment.

The full Amnesty International report is available here.

War threats against Iran overshadow US elections

War threats against Iran overshadow US elections

By Bill Van Auken

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The US election campaign, rather than offering the American people any real opportunity to vote for an end to the war and occupation in Iraq, is increasingly overshadowed by threats of new acts of military aggression against Iran.

This is the significance of a series of provocative actions and statements coming out of both Washington and Tel Aviv in recent days.

Speculation about the likelihood of imminent air strikes against Iranian nuclear facilities were heightened by a report published last Friday in the New York Times detailing a long-range exercise staged over the Mediterranean earlier this month involving over 100 Israeli F-15 and F-16 fighter jets, refueling planes and rescue helicopters. Citing unnamed Pentagon sources, the Times reported that the operation was a dry run for an attack on Iran.

“Israel carried out a major military exercise earlier this month that American officials say appeared to be a rehearsal for a potential bombing attack on Iran’s nuclear facilities,” the Times reported.

Responding to this military threat, Mohamed ElBaradei, the head of the International Atomic Energy Agency, the United Nations organization charged with oversight of the Iranian nuclear program, said it was not justified by any “current, grave or urgent danger” and threatened to quit his post in response to any such an attack.

Air strikes against Iran, he warned, would “turn the region into a fireball” and cause Iran to “launch a crash course to build nuclear weapons with the blessing of all Iranians.”

The report was widely seen as a deliberate leak by Washington and Israel aimed at ratcheting up pressure on Teheran to abandon its uranium enrichment program. The Iranian government has rejected Western demands that it halt these efforts, insisting that they are dedicated exclusively to the development of domestic nuclear energy and are not in violation of the Nuclear Non-Proliferation Treaty.

The Times report came less than a week after a trip to Iran by EU foreign policy chief Javier Solana, who offered the Iranian government a package of economic and political incentives in exchange for Teheran bowing to demands that it halt its enrichment program. As of early this week, the Iranian government had yet to respond officially to the offer.

Meanwhile, the European Union Monday adopted a resolution imposing new sanctions against Iran, banning the country’s largest bank, Bank Melli, from operating in Europe.

The Israeli press presented the published report of a supposed dress rehearsal of air strikes on Iran as part of an orchestrated pressure campaign.

“When the diplomacy of economic and political pressure fails to produce results, a shift is made to gunboat diplomacy,” wrote Alex Fishman, the military affairs columnist for Israel’s largest newspaper, Yedioth Ahronoth.

“As the Iranian regime discusses the European Union representative’s most recent offer to halt its nuclear programme in exchange for extensive benefits, the Americans opted to add a bit more pressure in the shape of Israel’s air force,” he wrote.

An unnamed Israeli official quoted in the Times of London Sunday put the matter somewhat more bluntly. Iran, he said, should “read the writing on the wall.” He continued: “This was a dress rehearsal, and the Iranians should read the script before they continue with their program for nuclear weapons. If diplomacy does not yield results, Israel will take military steps to halt Tehran’s production of bomb-grade uranium.”

Citing an unnamed US military official, the Wall Street Journal reported that “US policy makers were divided over reasons for the exercise. Some viewed the maneuver as an actual practice run for a future strike on Iran, while others see it mainly as a show of force designed to remind both Tehran and Washington of Israel’s concern.”

Such an exercise—and the publicity about it in the US media—has another and crucial objective. It is aimed at preparing the American public for being dragged into another war of aggression.

Military analysts agree that the Israeli air force by itself lacks the strategic capacity to carry out any attack on Iran that would even have the possibility of destroying its nuclear program, much of which is housed in fortified underground bunkers. The only viable purpose for such threats is either as part of a joint campaign with the US or to draw Washington into such an attack.

There is an important constituency for such a course of action among influential elements of the Republican right, who are openly expressing support for a US-Israeli attack on Iran—as well as their frustration with Washington for not moving more rapidly to carry one out.

This was clearly the message of an editorial published Monday in the Wall Street Journal, among the most consistent mouthpieces for the right-wing layers that have dominated the current administration. Entitled “Israel on the Iran Brink” the editorial states:

“Israelis surely don’t welcome a war in which they will suffer. Yet they have no choice but to defend themselves against an enemy that vows to obliterate them if Iran acquires the weapon to do so. The tragic paradox of the past six years is that the diplomatic and intelligence evasions offered in the name of avoiding war with Iran have done the most to bring us close to this brink. Appeasement that ends in war is a familiar theme of history.”

Meanwhile, two prominent supporters of the administration—who played significant roles in promoting the war against Iraq six years ago based on the same pretexts of weapons of mass destruction and terrorist ties—spoke over the weekend in chilling terms about the timing and political calculations concerning an attack on Iran.

Speaking on the television interview show “Fox News Sunday,” Bill Kristol, the publisher of the right-wing Weekly Standard, warned that President Bush could be driven to launch a war against Iran by the prospect of a victory for Democratic presidential candidate Barack Obama in the November election.

“If the president thought John McCain was going to be the next president, he would think it more appropriate to let the next president make that decision than do it on his way out,” said Kristol.

However, he warned, “if President Bush thinks Senator Obama’s going to win, does he somehow think—does he worry that Obama won’t follow through on that policy.”

Asked by Fox’s Chris Wallace whether he was saying that Bush could “launch a military strike” either in the run-up to or aftermath of the election, Kristol replied: “I don’t know. I mean, I think he would worry about it. On the other hand, you can’t—it’s hard to make foreign policy based on guesses of election results. I think Israel is worried though. I mean, what is, what signal goes to Ahmadinejad if Obama wins on a platform of unconditional negotiations and with an obvious reluctance to even talk about using military force.”

Meanwhile, also appearing Sunday on Fox, the right-wing network owned by Rupert Murdoch, former US ambassador to the United Nations, John Bolton, gave a more precise prediction about an Israeli attack.

“I think if they are to do anything, the most likely period is after our elections and before the inauguration of the next president. I don’t think they will do anything before our election because they don’t want to affect it. And they’d have to make a judgement whether to go during the remainder of President Bush’s term in office or wait for his successor.”

Following up these remarks in an interview with the British Daily Telegraph, Bolton, a long-standing advocate of military action against Iran, repeated that the “optimal window” for an Israeli attack would be after the November 4 election and before the inauguration on January 20, 2009.

“The Israelis have one eye on the calendar because of the pace at which the Iranians are proceeding both to develop their nuclear weapons capability and to do things like increase their defences by buying new Russian anti-aircraft systems and further harden the nuclear installations,” he told the Telegraph.

“They’re also obviously looking at the American election calendar. My judgement is they would not want to do anything before our election because there’s no telling what impact it could have on the election.”

There has been ample speculation about an “October surprise,” i.e., a military action or terrorist attack on the eve of the election aimed at shocking the American public into rallying around the Republican administration. But as Bolton suggests, some of Bush’s closest supporters are less than confident that such an event would have the desired effect.

They have the example of the Spanish election of March 2004, when their right-wing ally Prime Minister Jose Maria Aznar attempted to exploit and distort a terrorist attack for political advantage and instead provoked a popular backlash that swept him from office.

Despite the Republican drumbeat about Obama and the Democrats being unreliable in terms of their attitude towards Iran, the policies of militarism and the provocation clearly enjoy bipartisan support.

Democrats in Congress are pushing through a resolution that calls for Washington to mount a blockade against Iran—an act of war—as a means of tightening pressure over the nuclear issue. Sponsored by Representative Gary Ackerman (Democrat, New York) in the House and Senator Evan Bayh (Democrat, Indiana) in the Senate, “demands that the President initiate an international effort to immediately and dramatically increase the economic, political, and diplomatic pressure on Iran,” including by “imposing stringent inspection requirements on all persons, vehicles, ships, planes, trains, and cargo entering or departing Iran.”

Such a unilateral action is an act of war under international law and could well provoke a military confrontation between the US and Iran.

For his part, Obama was asked at a press conference in Florida last Friday whether he believed Israel was right to carry out such a threatening military exercise. He responded:

“There is no doubt that Iran poses an extraordinary threat to Israel and Israel is always justified in making decisions that will provide for its security.”

One can only assume from such a remark that an Israeli air strike on Iran, dragging the US into a conflagration that would eclipse the war in Iraq would, in the view of the Democratic presidential candidate, be justified as well.

Michael Parenti - The Struggle for History

Michael Parenti - The Struggle for History

An excellent lecture by the well-known American political scientist, historian, and media critic, Michael Parenti.

The Hedonists of Power

The Hedonists of Power

By Chris Hedges

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Washington has become Versailles. We are ruled, entertained and informed by courtiers. The popular media are courtiers. The Democrats, like the Republicans, are courtiers. Our pundits and experts are courtiers. We are captivated by the hollow stagecraft of political theater as we are ruthlessly stripped of power. It is smoke and mirrors, tricks and con games. We are being had.

The past week was a good one if you were a courtier. We were instructed by the high priests on television over the past few days to mourn a Sunday morning talk show host, who made $5 million a year and who gave a platform to the powerful and the famous so they could spin, equivocate and lie to the nation. We were repeatedly told by these television courtiers, people like Tom Brokaw and Wolf Blitzer, that this talk show host was one of our nation’s greatest journalists, as if sitting in a studio, putting on makeup and chatting with Dick Cheney or George W. Bush have much to do with journalism.

No journalist makes $5 million a year. No journalist has a comfortable, cozy relationship with the powerful. No journalist believes that acting as a conduit, or a stenographer, for the powerful is a primary part of his or her calling. Those in power fear and dislike real journalists. Ask Seymour Hersh and Amy Goodman how often Bush or Cheney has invited them to dinner at the White House or offered them an interview.

All governments lie, as I.F. Stone pointed out, and it is the job of the journalist to do the hard, tedious reporting to shine a light on these lies. It is the job of courtiers, those on television playing the role of journalists, to feed off the scraps tossed to them by the powerful and never question the system. In the slang of the profession, these television courtiers are “throats.” These courtiers, including the late Tim Russert, never gave a voice to credible critics in the buildup to the war against Iraq. They were too busy playing their roles as red-blooded American patriots. They never fought back in their public forums against the steady erosion of our civil liberties and the trashing of our Constitution. These courtiers blindly accept the administration’s current propaganda to justify an attack on Iran. They parrot this propaganda. They dare not defy the corporate state. The corporations that employ them make them famous and rich. It is their Faustian pact. No class of courtiers, from the eunuchs behind Manchus in the 19th century to the Baghdad caliphs of the Abbasid caliphate, has ever transformed itself into a responsible elite. Courtiers are hedonists of power.

Our Versailles was busy this past week. The Democrats passed the FISA bill, which provides immunity for the telecoms that cooperated with the National Security Agency’s illegal surveillance over the past six years. This bill, which when signed means we will never know the extent of the Bush White House’s violation of our civil liberties, is expected to be adopted by the Senate. Barack Obama has promised to sign it in the name of national security. The bill gives the U.S. government a license to eavesdrop on our phone calls and e-mails. It demolishes our right to privacy. It endangers the work of journalists, human rights workers, crusading lawyers and whistle-blowers who attempt to expose abuses the government seeks to hide. These private communications can be stored indefinitely and disseminated, not just to the U.S. government but to other governments as well. The bill, once signed into law, will make it possible for those in power to identify and silence anyone who dares to make public information that defies the official narrative.

Being a courtier, and Obama is one of the best, requires agility and eloquence. The most talented of them can be lauded as persuasive actors. They entertain us. They make us feel good. They convince us they are our friends. We would like to have dinner with them. They are the smiley faces of a corporate state that has hijacked the government and is raping the nation. When the corporations make their iron demands, these courtiers drop to their knees, whether to placate the telecommunications companies that fund their campaigns and want to be protected from lawsuits, or to permit oil and gas companies to rake in obscene profits and keep in place the vast subsidies of corporate welfare doled out by the state.

We cannot differentiate between illusion and reality. We trust courtiers wearing face powder who deceive us in the name of journalism. We trust courtiers in our political parties who promise to fight for our interests and then pass bill after bill to further corporate fraud and abuse. We confuse how we feel about courtiers like Obama and Russert with real information, facts and knowledge. We chant in unison with Obama that we want change, we yell “yes we can,” and then stand dumbly by as he coldly votes away our civil liberties. The Democratic Party, including Obama, continues to fund the war. It refuses to impeach Bush and Cheney. It allows the government to spy on us without warrants or cause. And then it tells us it is our salvation. This is a form of collective domestic abuse. And, as so often happens in the weird pathology of victim and victimizer, we keep coming back for more.

The Real State of Iraq

The Real State of Iraq

By Juan Cole

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American television loves natural disasters. The Burmese cyclones that may have carried off as many as 200,000 people offered the cameras high drama.

The floods in Wisconsin, Iowa and Missouri along the Mississippi River, which have wiped out thousands of homes, have been carefully detailed hour by hour.

But American television is little interested in the massive disaster blithely visited upon Iraq by Washington. Oh, there is the occasional human interest story. Angelina Jolie's visit sparked a headline or two. Briefly.

By now, summer of 2008, excess deaths from violence in Iraq since March of 2003 must be at least a million. This conclusion can be reached more than one way. There is not much controversy about it in the scientific community. Some 310,000 of those were probably killed by US troops or by the US Air Force, with the bulk dying in bombing raids by US fighter jets and helicopter gunships on densely populated city and town quarters.

In absolute numbers, that would be like bombing to death everyone in Pittsburgh, Pa. Or Cincinnati, Oh.

Only, the US is 11 times more populous than Iraq, so 310,000 Iraqi corpses would equal 3.4 million dead Americans. So proportionally it would be like firebombing to death everyone in Chicago.

The one million number includes not just war-related deaths but all killings beyond what you would have expected from the 2000-2002 baseline. That is, if tribal feuds got out of hand and killed a lot of people because the Baath police were demobilized or disarmed and so no longer intervened, those deaths go into the mix. All the Sunnis killed in the north of Hilla Province (the 'triangle of death') when Shiite clans displaced from the area by Saddam came back up to reclaim their farms would be included. The kidnap victims killed when the ransom did not arrive in time would be included. And, of course, the sectarian, ethnic and militia violence, even if Iraqi on Iraqi, would count. And it hasn't been just hot spots like Baghdad, Basra, Mosul and Kirkuk. The rate of excess violent death has been pretty standard across Arab Iraq.

As for the Iraqis killed by Americans, like the 24 civilians in Haditha, the survivors are not going to be pro-American any time soon. The US can always find politicians to come out and say nice things on a visit to the Rose Garden. But the people. I don't think the people are saying nice things in Arabic behind our backs.

The wars of Iraq-- the Iran-Iraq War, the repressions of the Kurds and the Shiites, the Gulf War, and the American Calamity, may have left behind as many as 3 million widows. Having lost their family's breadwinner, many are destitute.

Although it is very good news that the number of Iraqis killed in political violence fell in May to 532 according to official sources, the number was twice that in March and April. And,it should be remembered that independent observers have busted the Pentagon for grossly under-reporting attacks and casualties. If someone shows up dead and they aren't sure exactly why, it isn't counted as political violence, just as an ordinary murder. Attacks per day are measured by whether the mortar shell scratches any US equipment when it explodes. If not, it didn't happen. McClatchy estimated a year and a half ago that attacks were being underestimated by a factor of 10.

By the way, isn't is a little odd that the death rate fell in the month of the Great Mosul Campaign? I conclude that either it can't have been much of a campaign or someone is cooking the death statistics.

But over 500 a month dead in political violence is appalling enough. The Srebenica massacre in 1995 killed 8,000. At the average rate of death in Iraq this winter and spring, a similar massacre will have been racked up in 2008. In the Northern Ireland troubles over 30 years, about 3,000 people died, and it was widely considered a bad situation. That death toll is still being achieved every 6 months in Iraq according to the official May statistics.

And, of course, by the rule of 11,that death toll would be like nearly 6,000 Americans dying in political violence every month, or 72,000 a year. (Note that this 72,000 figure would only be political deaths, since it does not include criminal homicides). The annual total murder rate in the US is about 16,000, including political violence, what little there is. The US is one of the most violent societies on earth, and Iraq in May makes it look like a pacifist convention.

In these situations, typically 3 persons are wounded for every one killed. In Iraq, I suspect it is higher, because US bombings and guerrilla bombings are such a big part of the violence. But let us be conservative.

That would mean 3 million Iraqi wounded in the past five years.

Equivalent to 33 million Americans wounded, that is, the entire state of California crippled or in bandages.

As for the displaced (i.e. homeless), they amount to a startling 5 million persons. There were 1.8 million internally displaced in January of 2007, and by December it had risen to 2.4 million. There are 2.3 million externally displaced, 2 million of them in Jordan and Syria.

In fact 5 million displaced persons is almost the entire population of nearby countries such as Jordan or Israel! 5 million is about the number of Jews in Israel, for instance. In absolute numbers, that is how many Iraqis are living in some other country or some other province, having lost their homes.

Some 1.4 million Iraqis are stuck in Syria, many becoming increasingly penniless. Another 500,000 to 800,000 have been displaced to Jordan, which has now closed its borders to them. Please read this excellent piece of reporting, which points out that the US has done diddly squat for these millions of people upon whom it has visited a world class catastrophe, neither allotting meaningful amounts of aid nor admitting more than a token number as immigrants. Sweden has admitted 40,000 Iraqis, nearly 4 times what the US even plans to. Please write the Senate and the Congress and demand that something be done for these, our victims.

40% of Iraq's middle class is outside the country.

Very few of the refugees abroad have returned, only a few thousand. Only 12% of the returnees say they are going back because they think it is safe now, according to UN border polls.

The refusal of the refugees to return makes me suspicious of the good news stories about security improvements in Iraq. There is an Arabic proverb that "The people of a house know best what is in the house."

2 Shiite brothers who returned home to Baquba an hour northeast of Baghdad were just kidnapped and killed by Sunnis.

5 million displaced Iraqis would be like 55 million displaced Americans, or the equivalent of everybody in California and New York combined

American commentators peculiarly lack a social dimension to their analyses. So if PM Nuri al-Maliki sends some troops up to Mosul and the guerrillas there lie low for a while, that is "progress" and "good news." Well, maybe it is, I don't know.

I do know that the apocalypse that the United States has unleashed upon Iraq is among the greatest catastrophes to befall any country in the past 50 years. It is a much worse disaster over time than the Burmese cyclone or the Mississippi floods.

You won't see it on television very much these days.

Even if it gets better, it won't get better very fast for all those millions wounded, widowed, orphaned, and displaced; as for the 1 million dead, as they say in Arabic, God have mercy on them (Allah yarhamhum). Maybe it will get better sooner for the politicians in the Green Zone. They are the sort of people that the think tanks in Washington seem to care about.

McClatchy reports political violence in Iraq on Saturday:

' Baghdad

- Around 1 p.m. a bomb planted in the car of the office manager of the Iraqi minister of Higher Education and Scientific Research exploded in Al Tobchi neighborhood injuring three including the minister's office manager.

- Around 4 p.m. a bomb planted in a civilian car exploded in Al Nidhal Street injuring two Iraqi employees of a local LG Company branch.

- Around 5 p.m. a bomb planted in a police vehicle exploded in Al Andalus square injuring two policemen.

- Police found two dead bodies throughout Baghdad; one in Al Baladiyat, one in Mansour.


- Police found the bodies of two brothers, Ali and Mohamed Zaid, in Al Tahrir neighborhood in Baquba . . .


- Around 8 a.m. a car exploded in central Kirkuk injuring the two passengers in the car. Police said they suspect the two passengers were planning a car bomb attack. The two suspects are under investigation, police said.'

Mortgage Crisis Hurts Black, Latino Economic Progress

Mortgage Crisis Hurts Black, Latino Economic Progress

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Not only has the nation's slumping economy hit [1] black workers and [2] Latino workers hard, the [3] mortgage crisis has had a disproportionate impact on them as well. In fact, some experts fear the mortgage crisis could undo a huge portion of the wealth built up by the growing African American and Latino middle classes.

The [4] Joint Center for Political and Economic Studies reports that the rate of subprime mortgages for Latinos and African Americans is about double the rate for whites. In 2006, subprimes made up one in four mortgages (26 percent) made to whites, 47 percent of those to Latinos and 53 percent of mortgages that went to African Americans.

At a recent forum sponsored by the Economic Policy Institute ([5] EPI) and its [6] Agenda for Shared Prosperity, Wilhelmina Leigh of the Joint Center said the legacy of discrimination against people of color combined with a recent federal push for higher homeownership rates created the opportunity for predatory subprime lenders to prey on people of color.

Graciela Aponte of the [7] National Council of La Raza, a former housing counselor, recalls ads in Spanish-language newspapers that promised zero-down, 1 percent mortgages and other exotic vehicles that paid high commissions to the brokers who pushed them. She estimates that one in 12 home loans made to Latinos in recent years will end in foreclosure.

EPI economist Algernon Austin, who heads the institute's Race, Ethnicity and the Economy program, says in a [8] study released last week that creditworthiness—alone or in combination with factors other than race—cannot account for the disparities in subprime loan rates. When the Federal Reserve and the Wharton School of Business conducted an analysis that took into account how many adults in a neighborhood were high-credit risks, they still found a link between the amount of subprime loans and the number of minorities in the neighborhood. An analysis by [9] the Center for Responsible Lending found that even after taking into account individual credit scores, Latino and African American borrowers were more than 30 percent more likely to receive higher-rate subprime loans.

Meanwhile, a startling new report has predicted the subprime mortgage crisis will cause people of color to lose up to $213 billion, leading to the greatest loss of wealth in modern U.S. history. The report, [10] Foreclosed: State of the Dream 2008, by [11] United for a Fair Economy, accuses mortgage lenders of deliberately targeting the poor and people of color with high-cost loans.

According to the report:

The spillover effect from the wholesale writing of bad loans is that communities are torn apart. As one house after another in a neighborhood goes vacant, squatters move in, crime and the likelihood of fires spike, local stores and businesses close. The value of the houses other people in the vicinity, who have not taken out subprime loans, live in deteriorates by thousands of dollars. The subprime crisis has pulled a large chunk of wealth away from many, many middle- and lower-income people, in the form of homes and home equity—a primary, even sole, asset for those without great wealth. The government has remained silent and inactive.

Click [12] here to download a copy of the report.

The [13] AFL-CIO Executive Council in March outlined several steps to address the mortgage crisis, including a six- to 12-month moratorium on mortgage foreclosures and changes in bankruptcy laws to allow mortgages to be modified so families can keep their homes. The council also called for an end to servicing agreements that reward mortgage companies for foreclosing on homes rather than encouraging refinancing or other workout strategies and supported strong new rules for the mortgage and financial markets that hold the industry accountable.

URLs in this post:
black workers: http://blog.aflcio.org/2008/02/26/nations-economic-woes-hit-black-workers-hardest
Latino workers: http://blog.aflcio.org/2008/06/13/latinos-being-hit-hard-by-economic-slump
mortgage crisis: http://blog.aflcio.org/2008/03/04/afl-cio-executive-council-outlines-steps-to-address-mortgage-crisi

Joint Center for Political and Economic Studies: http://www.jointcenter.org/
EPI: http://www.epi.org/
Agenda for Shared Prosperity: http://www.sharedprosperity.org/
National Council of La Raza: http://www.nclr.org/
study: http://www.epi.org/content.cfm/webfeatures_snapshots_20080611
the Center for Responsible Lending: http://www.responsiblelending.org/
[10] Foreclosed: State of the Dream 2008: http://www.faireconomy.org/issues/racial_wealth_divide/foreclosed_state_of_the_dream_2008_0
United for a Fair Economy: http://www.faireconomy.org/
here: http://www.faireconomy.org/issues/racial_wealth_divide/foreclosed_state_of_the_dream_2008_0
AFL-CIO Executive Council: http://blog.aflcio.org/2008/03/04/afl-cio-executive-council-outlines-steps-to-address-mortgage-crisi

Blackwater skirts law using cache of AK-47s

Blackwater using cache of AK-47s

Rifles given to sheriff in deal that skirts law

Joseph Neff

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The private military company Blackwater has found an unusual way to skirt federal laws that prohibit private parties from buying automatic weapons. Blackwater bought 17 Romanian AK-47s and 17 Bushmasters, gave ownership of the guns to the Camden County sheriff and keeps most of the guns at Blackwater's armory in Moyock.

Tiny Camden County -- population 9,271 -- is one of the most peaceful in North Carolina. In the last 10 years, there have been two murders, three robberies and seven rapes reported. The sheriff has just 19 deputies.

Sheriff Tony Perry said his department has never used the 17 AK-47s outside of shooting practice at Blackwater. None of his 19 deputies are qualified to use the AK-47s, Perry said, and his department's need for automatic weapons is "very minimal."

In the summer of 2005, Blackwater CEO Gary Jackson signed two agreements with Maj. Jon Worthington of the Sheriff's Office. Worthington has worked as a firearms instructor for Blackwater.

"Blackwater has financed the purchase of 17 Romanian AK-47 rifles for the Camden County Sheriff's Office for use by Sheriff's Office," the agreement says. "The Camden County Sheriff's Office will have unlimited access to these rifles for training and qualification, and state of emergency use." Worthington and Jackson also signed an agreement for the purchase of 17 Bushmaster XM15 E2S automatic rifles.

Why did Blackwater strike this deal with the Camden County sheriff?

"Because they needed guns, I imagine," Jackson said.

Jackson said Blackwater was a good corporate citizen that provided equipment and training, often free, to local law enforcement.

Did Camden County need more automatic weapons than deputies?

"They are very well equipped," Jackson said.

Perry said he can't remember who came up with the idea for the weapons deal. He said the county was trying to put together a SWAT team at the time.

Not the best choice?

The AK-47 would be a poor choice of weapon for a SWAT team, said John Gnagey, executive director of the National Tactical Officers Association, the national organization of SWAT officers.

As a combat weapon, the AK-47 is too large and powerful for SWAT teams, Gnagey said. It is rugged but relatively inaccurate.

"And there's the perception problem," Gnagey said. "Every terrorist attacking the U.S. is armed with AK-47s. "

Most SWAT teams use the H&K MP5 submachine gun or the Bushmaster M4, he said.

Under federal law, only government agencies -- military or law enforcement -- are allowed to acquire and possess automatic weapons. There is an exception for automatic weapons purchased before May 1986, when the law went into effect.

Firearms dealers are allowed, under strict conditions, to acquire an automatic weapon if they need to demonstrate the weapon to a police department or other government agency interested in buying the weapon.

Under federal law, it is illegal for a person to receive or possess an automatic weapon that is not registered to that person in the National Firearms Registration and Transfer Record. The 34 weapons are registered to the Camden County sheriff. Seventeen AK-47s and five Bushmasters are stored and used at Blackwater. The other 12 Bushmasters are assigned to Camden County deputies, the sheriff said.

Weapons' use defended

Jackson, the Blackwater CEO, said he was not violating federal firearms law.

"I don't believe so," Jackson said. "As long as I have contracts, I can buy fully automatic weapons."

Jackson and Erik Prince, Blackwater's owner, said Blackwater used the AK-47s in training to familiarize police officers or members of the military with a foreign weapon that they might come across while making an arrest or on a battlefield.

Blackwater may also use the AK-47s to train military personnel from other countries who come to the United States for anti-terrorism training funded by the State Department, Prince and Jackson said.

"If the contract tells us to, we do it," Jackson said.

The agreement between Blackwater and the Sheriff's Office could be an illegal straw purchase, said Richard Myers, a law professor at the University of North Carolina at Chapel Hill. A straw purchase, Myers said, is when one person fills out the federal firearms registration form to obtain a weapon for another person's use.

"I prosecuted several when I was with the U.S. attorney," Myers said. "If I were Blackwater's attorney, I would be concerned about whether this is a genuine purchase or a straw purchase."

Sheriff Perry said he did not consult a lawyer about the agreement until recently, when the federal Bureau of Alcohol, Tobacco and Firearms and the FBI inquired about the arrangement. Last year two former Blackwater employees pleaded guilty to federal firearms violations. They were sentenced to probation on the condition that they assist federal investigators.

Perry said his department was cooperating fully.

"We're not a target," Perry said. "We may be a victim in it."

Health Plans Put Profit Margins Before Members

Health plans say they'll risk losing members to protect profit margins

Meanwhile, businesses and individuals are dropping coverage in the wake of higher insurance premiums.

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The nation's largest publicly traded health plans say they don't plan to temper premium increases for the sake of keeping members on their rolls -- particularly not while they are under pressure from Wall Street over what it sees as their disappointing earnings.

Wall Street analysts were shaken over the long-term prospects of the health plan business after bellwethers WellPoint and UnitedHealth Group, the nation's two largest private-pay plans, reported less-than-expected profits from the first three months of this year.

While no plan said its overall membership has gone down, most say their risk-based commercial numbers -- representing traditional employer health benefits -- are declining or are not growing as quickly as anticipated. But health insurers say cutting premiums or reducing the rate of increase to keep customers would affect their bottom lines more than losing some members over premium hikes.

"We will not sacrifice profitability for membership," WellPoint President and CEO Angela Braly told analysts during a conference call.

Coincidentally, WellPoint and other health plans reported their earnings -- and their willingness to sacrifice members to keep them up -- soon before, or during, Cover the Uninsured Week. The project, sponsored by the Robert Wood Johnson Foundation, puts a spotlight on the growing number of uninsured.

The foundation, during the April 27-May 3 event, put out a report saying that the number of private-sector establishments offering health insurance declined to 56.3% in 2005 from 58.3% in 2001 as the cost of those benefits went up nearly 29.6% in the same period. Increasing premiums have been "a big driver in the rise of the uninsured," foundation spokesman Michael Berman said. According to the U.S. Census, the number of uninsured in the U.S. rose from less than 45 million in 2005 to 47 million in 2006, the most recent estimate available.

Plans say they are not trying to price people out, pointing out various niche products they have introduced to make insurance more affordable.

"Our members are trying to provide the most affordable coverage options they can to meet people's needs," said Robert Zirkelbach, spokesman for trade group America's Health Insurance Plans. But he also noted that as medical costs rise -- with most plans reporting the percentage of revenue they spend on care up sharply -- plans generally must boost premiums to cover them.

Consolidation over recent years is allowing insurers to raise premiums as well as continue to attack physician reimbursement as a means of attempting to keep profits up, said Susanne Madden, president and CEO of the Verden Group, a health care consulting group in Nyack, N.Y. "With consolidation and there being fewer players comes a certain amount of arrogance," she said. "The response from the insurers is quite miserly."

In addition, consolidation gives health plans negotiating power over physician reimbursement, thereby driving down medical costs. In trying to persuade investors that WellPoint's problems are "fixable," CEO Braly emphasized WellPoint's market power, which she said gives it the ability to lean hard on its network doctors to accept lower reimbursement.

Insurers, along with analysts, blamed profit pressures on plans' difficulty in keeping a lid on medical costs, along with lower investment income, fewer people employed with benefits, and a particularly hard flu season.

Falling numbers

WellPoint, with 35.4 million medical members, and United, with 32.4 million, were among the plans saying that small businesses were the most likely to drop coverage in the face of premium hikes. A survey released by the consulting firm Mercer found that 61% of businesses with 10-199 employees offered health benefits in 2007, down from 69% in 2001.

Meanwhile, analysts say large employers are fighting premium increases by self-insuring, which shifts the medical cost risk to themselves but puts plans in the less profitable role of administrators.

For example, United reported that its commercial risk-based membership decreased to 10.6 million, down 4.2% from last year, while its fee-based membership increased 8.9% to 16 million. (Overall, commercial membership growth at United was up 3.2%, to 26.6 million.) United expects to lose $1 billion in revenue this year because of a greater-than-expected number of businesses switching from risk-based to fee-based services.

Health plans' business models will prevent them from doing anything other than addressing their profits, said James King, MD, a family physician in Selmer, Tenn., who is president of the American Academy of Family Physicians.

"They have a problem in that they are for-profit corporations. They've got to answer to their stockholders and look for profit," he said. "At the same time they do have a responsibility to society. They need to make sure they are working together to make sure as many people are insured as possible by holding down premiums."

And while the trade group AHIP has offered its own market-based plan for reducing the number of uninsured, individual insurers say they aren't in a position to slash rates just to keep members.

United CEO Stephen Hemsley told investors: "We continue to protect our margins. ... We are committed to sustaining a quality business without taking shortsighted pricing positions." He spoke after United's stock dropped 11.5% in a day when it reported earnings of 78 cents per share -- up 12 cents over last year, but falling short of analysts' estimate of 80 cents.

Madden said insurers might be reaching the limit of their ability to keep hiking premiums and extracting savings from physicians without significant backlash. "Are we at the end of where insurance companies can actually charge these premiums? I think it's right around the corner, but the insurance companies don't recognize that yet."