Wednesday, June 25, 2008

Faster Inflation May Unleash `Financial Tsunami': Chart of Day

Faster Inflation May Unleash ‘Financial Tsunami': Chart of Day

By Mark Gilbert

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Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a ‘‘financial tsunami,'' according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida.

‘‘Whether it is anecdotal or statistical evidence, I see inflation everywhere, and this is where the financial tsunami cometh,'' Sedacca wrote in a report published yesterday. ‘‘A battered, over-indebted consumer, if forced to retrench, could create even more problems for the banking system as loan delinquencies would begin to rise even further. All sorts of delinquencies are rising. This is now a systemic issue.''

The four-part chart of the day shows how U.S. householders are struggling to pay their home loans. The top white chart shows the surge in delinquencies on all mortgages, while the yellow one measures foreclosures. The green chart tracks delinquencies on subprime adjustable-rate mortgages, and the purple one shows subprime mortgages that are 60 days behind on their payments.

Sedacca wrote that current financial-market conditions remind him of ‘‘someone standing on a lonely beach, armed with only a small bucket, trying to stop a rare tsunami that hits the shores. It is how I feel about our markets and the tools being utilized by the Federal Reserve, the European Central Bank and other regulatory bodies. They are overmatched for what they are facing and, worse yet, they helped create the mess in the first place by being far too easy with money and debt creation.''

Life on the fringes of U.S. suburbia becomes untenable with rising gas costs

Life on the fringes of U.S. suburbia becomes untenable with rising gas costs

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Suddenly, the economics of American suburban life are under assault as skyrocketing energy prices inflate the costs of reaching, heating and cooling homes on the outer edges of metropolitan areas.

Just off Singing Hills Road, in one of hundreds of two-story homes dotting a former cattle ranch beyond the southern fringes of Denver, Phil Boyle and his family openly wonder if they will have to move close to town to get some relief.

They still revel in the space and quiet that has drawn a steady exodus from U.S. cities toward places like this for more than half a century. Their living room ceiling soars two stories high. A swing-set sways in the breeze in their backyard. Their wrap-around porch looks out over the flat scrub of the high plains to the snow-capped peaks of the Rocky Mountains.

But life on the distant fringes of suburbia is beginning to feel untenable. Boyle and his wife must drive nearly an hour to their jobs in the high-tech corridor of southern Denver. With gasoline at more than $4 a gallon, Boyle recently paid $121 to fill his pickup truck with diesel. The price of propane to heat their spacious house has more than doubled in recent years.

Though Boyle finds city life unappealing, it's now up for reconsideration.

"Living closer in, in a smaller space, where you don't have that commute," he said. "It's definitely something we talk about. Before it was, 'We spend too much time driving.' Now, it's, 'We spend too much time and money driving."'

As the realization takes hold that rising energy prices are less a momentary blip than a restructuring with lasting consequences, the high cost of fuel is threatening to slow the decades-old migration away from cities, while exacerbating the housing downturn by diminishing the appeal of larger homes set far from urban jobs.

In Atlanta, Philadelphia, San Francisco and Minneapolis, homes beyond the urban core have been falling in value faster than those within, according to analysis by Moody's

In Denver, housing prices in the urban core rose steadily from 2003 until late last year compared with previous years, before dipping nearly 5 percent in the past three months of last year, according to But house prices in the suburbs began falling earlier, in the middle of 2006, and then accelerated, dropping by 7 percent the past three months of the year.

Many factors have propelled the unraveling of U.S. real estate, from the mortgage crisis to a staggering excess of home construction, making it hard to pinpoint the impact of any single force. But economists and real estate agents are growing convinced that the rising cost of energy is a primary factor pushing home prices down in the suburbs - particularly in the outer rings.

More than three-fourths of prospective homebuyers are more inclined to live in an urban area because of fuel prices, according to a recent survey of 903 real estate agents with Coldwell Banker, a national brokerage.

Some proclaim the unfolding demise of suburbia.

"Many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and '70s - slums characterized by poverty, crime and decay," said Christopher Leinberger, an urban land use expert, in a recent essay in the Atlantic Monthly.

Most experts do not share such apocalyptic visions, seeing instead a gradual reordering.

"It's like an ebbing of this suburban tide," said Joe Cortright, an economist at the consulting group Impresa in Portland, Oregon. "There's going to be this kind of reversal of desirability. Typically, Americans have felt the periphery was most desirable, and now there's going to be a reversion to the center."

In a recent study, Cortright found that house prices in the urban centers of Chicago, Los Angeles, Pittsburgh, Portland and Tampa have fared significantly better than those in the suburbs. So-called exurbs - communities sprouting on the distant edges of metropolitan areas - have suffered worst of all, Cortright found.

Basic household arithmetic appears to be furthering the trend: In 2003, the average suburban household spent $1,422 a year on gasoline, according to the Bureau of Labor Statistics. By April of this year - when gas prices were about $3.60 a gallon - the same household was buying gas at a rate of $3,196 a year, more than doubling consumption in dollar terms in less than five years.

In March, Americans drove 11 billion fewer miles on public roads than in the same month the previous year, a 4.3 percent decrease. It was the sharpest one-month drop since the Federal Highway Administration began keeping records in 1942.

Long before the recent spike in the price of energy, environmentalists decried suburban sprawl as a waste of land, energy, and tax dollars: Governments from Virginia to California have in recent decades lavished resources on building roads and schools for new subdivisions in the outer rings of development while skimping on maintaining facilities closer in. Many governments now focus on reviving their downtowns.

In Denver - a classic American city with snarling freeway traffic across a vast acreage of strip malls, ranch houses and office parks - the city has seen an urban renaissance over the past decade.

A planned $6.1 billion commuter rail system has been going in over the past four years, drawing people downtown without cars, while crystallizing swift sales of densely clustered condos near stations.

Coors Field, the intimate, brick-fronted baseball stadium for the Colorado Rockies, has transformed the surrounding area from a desolate area into trendy Lower Downtown, a neighborhood of restaurants and microbreweries in restored warehouses. Along the Platte River, new condos set on a park strip offer an arresting tableau of glass, steel, and futuristic geometry, attracting throngs of buyers at rising prices.

"This is a city where it's fun to be in the center," said Tim Burleigh, 56, who sold his house in the suburbs and now walks to Rockies games from his downtown condo.

To Denver's Mayor John Hickenlooper, $4 gasoline offers a useful push forward on such plans.

"It can be an accelerator," he said during an interview inside the imposing, column-fronted City Hall. "It's not going to be the dagger in the heart of suburban sprawl, but there's a certain inclination, a certain momentum back toward downtown."

Elizabeth is the archetype of a once-rural community sucked into the orbit of the expanding metropolis, its ranchlands given over to porches, picket fences and two-car garages.

Megan Werner, 39, a mother of three, moved here five years ago from a suburb closer to Denver, where the houses were packed together. She and her husband bought a home set on a 1.5 acre, or 0.61 hectare, lot in the Deer Creek Farm subdivision. The space justified her husband's 40-minute commute.

"We wanted more than a postage stamp," she said, as her 5-year-old daughter walked barefoot across the driveway.

It used to cost her about $30 to fill her Honda minivan with gas. Now, it's more like $50, and she coordinates her trips - shopping in town, combined with dance lessons for her kids. But she has no thoughts of leaving.

"I can open up my door, and my kids can play," Werner said.

For others, though, new math is altering the choice of where to live. Houses are sitting on the market longer than years past. "The pool of buyers is diminishing," said Jace Glick, a realtor with Re/Max Alliance in Parker, next to Elizabeth.

Juanita Johnson and her husband, both retired Denver school teachers, moved here last August, after three decades in the city and a few years in the mountains. They bought a four-bedroom house for $415,000.

Last winter, they spent $3,000 just on propane to heat the place, she said. Suddenly, this seems like a place to flee.

"We'd sell if we could, but we'd lose our shirt," Johnson said. On a recent walk, she counted 15 "For Sale" signs. A similar home nearby is listed below $400,000.

"I was so glad to get out of the city, the pollution the traffic, the crime," she said. Now, the suburbs seem mean. "I wouldn't do this again."

American Express Says Late Payments Are Increasing Faster Than Estimated

American Express Says Late Card Payments Increasing

By Erik Holm

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American Express Co., the biggest U.S. credit-card company by purchases and cash advances, said customers are falling further behind on their debt, signaling the economy is worsening.

‘‘Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,'' Chief Executive Officer Kenneth Chenault said in a statement today announcing the company would receive as much as $1.8 billion in a settlement with competitor MasterCard Inc.

American Express and rivals Capital One Financial Corp. and Discover Financial Services have fallen more than 30 percent in the past 12 months in New York trading as consumers absorb the housing slump, rising unemployment and higher food and fuel bills. New York-based American Express adopted a ‘‘cautious view'' for the year in January after cardholder spending slowed and overdue payments rose in December.

‘‘If you look at the employment situation, clearly that's deteriorated, and consumer confidence is down as well,'' said Sanjay Sakhrani, an analyst with KBW Inc. in New York who has a ‘‘market perform'' rating on the stock. ‘‘Both play a key role in the credit-card industry.''

The U.S. lost jobs in May for a fifth month and the unemployment rate rose by the most in more than two decades. Payrolls fell by 49,000 after a 28,000 drop in April, the Labor Department said June 6. The jobless rate increased by half a point to 5.5 percent.

Consumer Confidence

Confidence among Americans dropped to the lowest level in 16 years, the Conference Board said yesterday.

American Express declined 20 cents to $41.90 at 11:30 a.m. in New York Stock Exchange composite trading.

First-quarter loss provisions in the company's U.S. card business rose 52 percent to $881 million as net income declined 11 percent to $974 million. The company will probably post adjusted earnings per share of 83 cents in the second quarter, compared with 88 cents a year earlier, according to 15 analysts surveyed by Bloomberg.

American Express's affluent customers help shelter the company from problems of borrowers with the riskiest credit histories, Chenault said June 4.

Today's statement didn't specify the types of customers having the most trouble repaying loans, and spokesman Michael O'Neill declined to discuss who had the worst payment rates.

Defaults by cardholders worsened most in areas where U.S. home prices dropped by more than 5 to 10 percent, Chief Financial Officer Daniel Henry said in April in a conference call.

Business Customers

American Express said in March it was buying General Electric Co.'s corporate charge-card unit for $1.1 billion to add business customers as consumers struggle to pay back loans.

The company has dropped 32 percent in the past 12 months, compared with the 46 percent slide at Capital One and 52 percent plunge at Discover.

MasterCard, which runs a network and doesn't extend loans to consumers, gained $14.17, or 5.1 percent, to $294.54. The company has climbed 82 percent over 12 months.

The legal accord is ‘‘an overhang that's eliminated,'' said Sakhrani. ‘‘The amount of the settlement is not ideal, but it's a manageable amount.'' MasterCard had net income of $446.9 million in the first quarter.

MasterCard will pay as much as $1.8 billion in quarterly payments over three years to settle the complaint that it blocked banks from issuing American Express cards.

‘A Cushion'

‘‘The settlement was higher than we thought it would be,'' said Sakhrani. ‘‘It's clearly a cushion'' for American Express against bad loans.

American Express sued competitors MasterCard and Visa Inc. in November 2004 after the U.S. Supreme Court ruled they violated antitrust laws by preventing member banks from offering rival cards. Citigroup Inc. and Bank of America Corp., the two biggest U.S. banks, later agreed to offer American Express services.

Visa settled in November for $2.25 billion.

US housing figures and other data: A picture of rapidly growing social misery

US housing figures and other data: A picture of rapidly growing social misery

By David Walsh

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Millions of people in the US, and not merely those with the lowest incomes, are being hammered by a combination of job losses, rising prices for basic items such as food and gasoline, and the drop in the value of their homes.

Home prices continued to fall last month, according to the S&P/Case-Shiller home-price indexes, a widely followed measurement. In 20 US metropolitan areas home prices declined in April by the most on record, 15.3 percent from a year earlier, following a 14.3 percent decline in March. The drop in prices has erased gains made since 2004.

The figures for selected major metropolitan areas are staggering. Las Vegas and Miami saw annual price declines of 26.8 percent and 26.7 percent, respectively.

Home price declines in Los Angeles are accelerating, falling at an annual rate of 23.1 percent in April, as compared with 21.7 percent in March. “The housing collapse is most severe in the west and Florida,” notes the Los Angeles Times, “with cities in those regions showing price declines much worse than the rest of the country.” Home prices fell by 25 percent in Phoenix, 22.4 percent in San Diego and 22.1 percent in San Francisco.

The price of homes in metropolitan Detroit fell by 18 percent compared with April 2007, and 1.9 percent since March (a 23 percent annual rate). pointed out, “Home prices surged in 2003 through 2006, climbing by a cumulative 52%, according to Case-Shiller. Since then, however, the housing and credit bubbles have burst and homeowners have given up half of their gains from earlier in the decade.

“Falling prices have eroded Americans’ wealth, cutting into their ability to borrow against the equity in their homes or refinance or sell for a profit. Millions of Americans now owe more on their homes than they’re worth.”

Michelle Mayer, an economist for Lehman Brothers, told MarketWatch that she expected home prices to fall by another 15 to 20 percent, “translating to a peak-to-trough drop of 30% to 35%.”

Meanwhile, now that the warmer weather is upon us, combined with the growing economic distress, private utility companies are cutting off electricity and natural gas at rates 15 percent higher than last year. There are restrictions on the ability of the utilities to halt service to homes during the winter months.

USA Today reported Tuesday that “utilities are disconnecting many more customers who fall behind on their bills, and even moderate-income households are getting zapped...Totals for some utilities have more than doubled.”

Utility disconnects are up 56 percent for Detroit Edison; more than one in five of its customers were behind in their electric bills in May.

An article in the New York Times June 23 took note of the wretched state of Flint, Michigan, once an auto-producing center and now experiencing virtually “Third World” conditions.

In Flint’s schools, reports the Times, half or more of the students change in the course of a school year. “The moves are usually linked to low, unstable incomes, inadequate housing and chaotic lives, and the recent rash of foreclosures on landlords is adding to the problem, forcing renters from their homes....

“Flint has yawning concrete fields where auto factories once stood. Between the mass loss of factory jobs and middle-class flight, many streets are left with rental houses in various states of disrepair, punctuated by boarded-up houses.... [T]he churning of students in the early grades imperils their ability to complete high school, let alone college.”

All in all, it’s no wonder then, as the Wall Street Journal reported Tuesday, that “consumer confidence dropped like a stone in June, and expectations hit an all-time low, according to the latest survey from the Conference Board.” Lynn Franco of the Conference Board told the paper, “Perhaps the silver lining to this otherwise dismal report is that consumer confidence may be nearing a bottom.”

June’s confidence figure, based on a survey of 5,000 households, was the fifth lowest reading ever. Only 11.5 percent of those surveyed said business conditions were good.

Harvard University report on housing

The State of the Nation’s Housing, released June 23 by the Joint Center for Housing Studies of Harvard University, reveals a number of extraordinary facts. Whether the authors of the report are aware of it or not, the language they use is revealing: “misery,” “plummeted,” “crisis,” “disastrous,” “slump,” “abysmal,” “decline,” “drop,” “deterioration,” “grim,” “troubles,” “depressed” and so on.

They speak of the housing slump “shaping up to be the worst in 50 years.”

Behind the somewhat dry, academic language lies a reality of increasing economic desperation for wide layers of the population.

The study notes that the number of loans in foreclosure nearly doubled to one million by the end of 2007, while the number entering foreclosure topped 400,000 in the final quarter alone. “The most rapid and dramatic increase was among riskier subprime loans. Indeed, foreclosure rates on adjustable subprime mortgages were over five times higher than those on adjustable prime loans. ...

“Hundreds of thousands of foreclosed homes have flooded already bloated markets, with more to come....In these communities, nearby homeowners will suffer drastic declines in home equity and local jurisdictions will face a drop in property tax collections.”

The report notes that the most at-risk areas are those with ailing economies, high shares of subprime and “so-called affordable loans” and large oversupplies of housing. “Unfortunately,” it goes on, “the majority of large metropolitan areas now fall into at least one of those three categories.” The worst-hit locations are Midwestern metropolitan areas with “weak economies,” such as Detroit and Cleveland.

One of the most telling social realities, and one with considerable implications, is detailed in the section somewhat blandly entitled, “Heightened Housing Challenges.” The Joint Center study notes that in 2006 nearly 40 million households in the US were at least “moderately cost burdened”—paying more than 30 percent of income on housing—and nearly 18 million “were severely cost burdened (paying more 50 percent)”. The number of severely burdened households “surged by almost four million” from 2001 to 2006, or some 20 to 25 percent.

“The weight of high housing costs falls especially heavily on households in the bottom income quartile. Fully 47 percent of low-income households were severely cost burdened in 2006, compared with 11 percent of lower middle-income households and just 4 percent of upper middle-income households. On average, households with children in the bottom quartile of spenders with severe housing cost burdens have just $257 a month left over for food, $29 for clothing, and $9 for healthcare. With food and energy costs climbing, these households will have less to spend on bare necessities.” (Emphasis added)

And this was before the sharp rise in prices over the past 12 months.

“These are often families with one or more members working. Four in ten low-income households with at least one full-time worker, and nearly six in ten households with one part-time worker, are saddled with severe housing cost burdens.”

While low-income and minority households have been hard hit, “Affordability problems are edging up the income scale,” the study observes. “A rising number of middle-income homeowners also face cost pressures....For homeowners earning more than the median income, the likelihood of being housing cost burdened nearly doubled between 2001 and 2006.”

The conditions for millions of children are a national disgrace. More than one in six children in the US lives in households paying more than half their incomes for housing. The poorest quarter of American households “spent 32 percent less on food, 56 percent less on clothes, and 79 percent less on healthcare than families with low housing outlays.”

The study continues: “As if this were not enough, households with children are more likely to face crowded or inadequate living conditions. Nearly one in five low-income families...reported living in structurally inadequate housing in 2005.”

With many former homeowners now turning to the rental market, “the pressure on the limited supply of affordable rentals is mounting. Worse, losses of low-cost rentals affordable to households earning less than $16,000 in constant 2005 dollars shrank by 17 percent....Meanwhile, only a quarter of eligible renter households receive housing subsidies, and the federal government does even less to relieve the cost burdens of low-income homeowners.”

Some 3 million affordable (not necessarily decent or even inhabitable) rental units are available to the approximately 9 million lowest-income households that need them.

The study notes that with housing permits falling 24 percent nationwide in 2007, and a decline of 35 percent since the peak in 2005, by the end of last year, “the nation had 232,000 fewer construction jobs than a year earlier.” Florida lost 74,000 construction jobs, Arizona lost 25,000 and California lost 58,000.

The short-term outlook for homeownership is “grim.” Some $314 billion of subprime debt is scheduled to reset this year, i.e., mortgages that will jump in cost. “The wave of foreclosures will take months to process and the number of homes entering foreclosure could continue to rise even if the volume of loans with resets drops from last year’s levels. Job losses and falling home prices are now adding to foreclosure risks.”

As for the impact of this process on the economy as a whole, “When house values increase and homeowners borrow against their equity, they typically spend more. When prices fall, the opposite is true. As a result, the sharp drop in prices has turned these housing wealth effects from an engine of growth to a drag on the economy. Real home equity fell 6.5 percent to $9.6 trillion in 2007.”

Despite the “alarming” housing situation, particularly the “affordability” crisis, “housing assistance represents a small and shrinking share of the federal budget.” Housing assistance programs fell from 10 percent to 8 percent “of the nation’s dwindling domestic discretionary outlays” from 1997 to 2007.

Referring obliquely to the indifference or hostility of the major parties and media establishment to the plight of a broad swath of the population, the study concludes, “Thus far, there has been little national outcry about the fact that growing numbers of low- and middle-income families are spending half or more of their incomes on housing, and that so many children are living in unhealthy, unsafe conditions—or, worse yet, forced to make their way on the streets.”

And there will be none from those quarters.

Wall Street sheds jobs amid talk of bank failures

Wall Street sheds jobs amid talk of bank failures

By Andre Damon

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Job losses on Wall Street are set to escalate as Goldman Sachs, the best performing of the major banks, began implementing a series of layoffs last week. The bank intends to cut 10 percent of its workforce in mergers and acquisitions advice and corporate fund raising, aside from its normal workforce rotation.

The layoffs come on top of rival Citigroup’s 10 percent reduction of its investment banking workforce, as well as other cuts throughout the financial sector. Adekunle Ademakinwa, a credit strategist at Deutsche Bank, recently said that, given further market turbulence, “[T]he overall available profit pool going forward is too small to support the current size of the financial sector. The only outcomes are either defaults or ...consolidation. The latter is the better of two evils.”

Meanwhile, bond insurers—known as monolines—are under increasing pressure. Ambac and MBIA, the two such largest firms, lost their AAA credit ratings last week, resulting in cascading downgrades on the debt they insure. With other options cut off, the firms have sought to recover their creditworthiness by requesting that banks “commute” insurance policies on over $125 billion of assets in order to prevent broader damage to the financial system.

Turbulence in the monoline sector has intensified as falling real wages and rising unemployment have led to increased default rates on all forms of debt. Delinquencies on home-equity loans have reached record levels, and late payments on auto loans issued by dealerships are at their highest level in 18 years, according to the American Bankers Association. The home mortgage delinquency rate has now reached 2.24 percent, according to the FDIC.

Meanwhile, the downward real estate price spiral, which started with sub-prime home mortgages, has spread into commercial real estate, dealing further damage to bank balance sheets. Wachovia senior economist Ryan Lentell recently predicted that commercial real estate prices would fall by 15 to 20 percent. The four major Wall Street firms held some $84 billion of commercial real estate loans last year and have written down the values of these holdings by $7 billion in the past 18 months.

House prices have continued to fall. The most recent S&P/Case-Shiller index statistics show that home values plunged by 15.3 percent year-on-year in April, the sharpest fall on record. Harvard University’s latest “State of the Nation’s Housing” report, published Monday, notes that homeowner equity fell by 6.5 percent in 2007. Meanwhile consumer confidence figures have reached their lowest level in 16 years.

Paul Kasriel, an analyst at Northern Trust Securities, observed, “We are not finished with the mortgage problem, but you are starting to see increased delinquencies in other forms of consumer debt.” He continued, “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.”

As default rates skyrocket, banks—especially smaller ones—have encountered serious difficulties raising capital. Investors have become wary of holding bank stocks, as prices have plummeted in recent weeks by as much as 40 percent. “The window for capital-raising is closing,” Brad Evans, a portfolio manager who works with regional banks, told the Wall Street Journal. “Investing in a bank right now means investing in a large portfolio of loans that are essentially a black box.”

Washington Mutual, the United States’ largest Savings and Loan association, received a capital infusion of $7 billion from a private equity firm in April at about $13 per share. The firm’s stock was trading at about $5.80 on Tuesday. Earlier in the year, Federal Reserve chairman Ben Bernanke warned that there bank failures would likely crop up as the downturn intensifies. This prediction is now coming true, as some small banks have already folded and others are finding it ever harder to keep afloat. In keeping with the Fed’s policy, this will likely end with further bailouts by the federal government. As the Wall Street Journal reported Monday, “If problems at US banks worsen, the federal government—in other words, taxpayers—is likely to be on the hook for sorting out much of the mess.”

These developments hang in the air as the Federal Reserve Open Market Committee is set to meet on Wednesday. All 101 economists questioned in a recent Bloomberg survey said they expect the Fed to keep rates unchanged at the meeting. Increasing inflation—which reached 4.2 percent year-to-year in May—and skyrocketing gas prices have led the Fed to hint that it will raise rates in the future, but the new threats to bank solvency, surging default rates and rising unemployment are pushing against such action.

More bad news for US economy

More bad news for US economy

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US consumer confidence has fallen to its lowest level in 16 years while US home prices fell in April at the fastest rate in years, two economic reports have said.

The news is the latest sign that the US economy continues to slide towards possible recession.

Consumer expectations fell to 50.4 points this month from 58.1 in May, the lowest level since February 1992 and a steeper decline than expected, according to a survey by the Conference Board, a private industry group.

Financial experts have blamed tight credit conditions, falling housing wealth, rising gasoline prices and the nation's increasing unemployment rate for the confidence slump.

Bleak outlook

Meanwhile housing prices in all 20 US cities tracked by the Standard & Poor's/Case-Shiller home price index showed annual declines at levels not seen since August 2004.

The index's smaller 10-city index fell 16.3 per cent in April, the largest decline in its two-decade history.

"Looking ahead, consumers' economic outlook is so bleak that the expectations index has reached a new all-time low," Lynn Franco, consumer research director at the Conference Board, told AFP.

"Perhaps the silver lining to this otherwise dismal report is that consumer
confidence may be nearing a bottom."

The reports coincided with the opening of a two-day meeting held by the US central bank, the Federal Reserve, to discuss interest rates, which are expected to be left unchanged in a decision to be released on Wednesday.

The US Federal Reserve has cut interest rates by 3.25 percentage points since last September in a bid to stave off the nation's growing housing and credit crises.

Gas-Pump Gouging; Just Don't Blame The Saudis

Gas-Pump Gouging; Just Don't Blame The Saudis

By Mike Whitney

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I've seen this bad movie before. It's the Enron movie, which hit the West Coast power-markets like a bomb because the federal government was asleep at the switch. Now it's happening again with oil prices." Rep. Jay Inslee D-WA

There is no oil shortage, not yet at least. That doesn't mean we're not quickly sliding towards Peak Oil. We probably are, but that has nothing to do with today's gas prices. The reason oil has skyrocketed to nearly $140 per barrel is because of speculation; rampant, "unregulated" speculation. The peak oil doom-sayers are simply confusing the issue. This is not about shortages or scarcity; it's about gaming the system to fatten the bottom line. The whole scam is being executed with excruciating precision by the same carpetbagging scoundrels who engineered the subprime fiasco; the investment bankers. The Wall Street Goliaths are using the futures market to recapitalize their flagging balance sheets after sustaining massive losses in the mortgage-backed securities boondoggle. That's the whole thing in a nutshell. Now they're on to their next swindle; distorting the futures market with humongous leveraged bets on food and oil.

MarketWatch summed it up like this on Monday:

NEW YORK (MarketWatch) -- Speculators now account for about 70% of all benchmark crude-oil trading on the New York Mercantile Exchange, up from 37% in 2000, according to congressional findings cited in a Wall Street Journal report Monday. The report comes ahead of a House oversight subcommittee hearing slated for later Monday on Capitol Hill to study the role of financial investors in the crude futures market. There has been much discussion recently about how big a role so-called speculators have been playing in the sharp rise in energy prices, though no consensus has emerged on this point.
Congress, however, has grown increasingly concerned over speculative investors' role in the energy market in comparison with those buying futures contracts to hedge against risk from price changes. Lawmakers are expected to consider legislation to set strict limits -- or in some cases, an outright ban -- on speculative trading in energy futures in some markets, the Journal reported.

In 1991, the Commodity Futures Trading Commission authorized the first exemption from position limits for swap dealers with no physical commodity exposure, the report said. This began what Dingell said was "A PROCESS THAT HAS ENABLED INVESTMENT BANKS TO ACCUMULATE ENORMOUS POSITIONS IN COMMODITY MARKETS," according to the report. (MarketWatch)

So its not really Big Oil or "greedy Arabs" after all? Nope, it's the cutthroat banksters again.

Over the weekend, Saudi Arabia's King Abdullah convened an emergency Oil Summit in Jiddah, Saudi Arabia to deal with the disastrous effects that oil prices were having on the global economy. Rising prices are responsible for everything from food riots in Haiti to truckers strikes in Spain, Portugal and France. US Energy Secretary Samuel Bodman delivered a prepared statement supporting the Bush administration's position on the issue:

"Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing -- and increasingly volatile -- prices. Even despite higher global production for oil so far this year, inventories have been drawn down and current world production (spare) capacity is below historic levels -- at fewer than two million barrels per day."


Demand is not out-pacing supply. That's a myth started by the people who are profiting by betting up oil futures; investment bankers. They're led by their chief defender and former G-Sax scalawag, Henry Paulson.

Consider the remarks of Philip Davis in a recent post at Seeking Alpha:

"Now we have the Saudi oil summit this weekend and Saudi Arabia took 1.5M barrels a day off-line since July of ‘05 in a series of cuts and is currently producing just over 8Mbd out of their estimated 10.5Mbd maximum capacity. It is forecast by the EIA that next year OPEC alone will have over 3Mbd of spare capacity so this would be a terrible time for global demand to take a nose dive or there are going to be a lot of idle wells… Should global demand drop another 5% in the next 12 months, we could be looking at 8Mbd less demand than there was just a year ago.

As the London Telegraph points out, not only does OPEC have a current production surplus of 2M barrels a day but that surplus will rise to 3.5M barrels a day BY NEXT YEAR. Also, non-OPEC production is rising fast with a 1.5Mb gain in non-OPEC production coming down the pike next year. ...Iraq, by the way, is no longer included as OPEC or non-OPEC production, a very clever way to hide 2.4 million barrels of production by the energy apologists." (Philip Davis, "The Oil Shortage, and Other fairy Tales" Seeking Alpha)

There's no shortage, no scarcity. In fact, oil is being deliberately kept off the market to keep prices high. Consider this: if supply isn't keeping up with demand then why aren't there any lines at the gas stations like there were during the '70s?

Because it's all a fabrication. Prices are up because of speculation; that's all.
Here's what Saudi Arabia's King Abdullah's said on Sunday: "Among other factors behind this unjust increase in oil prices is the abhorrent acts of speculators seeking to undermine the market." That's why he called the meeting to begin with. The King insists that "speculators" have played a key role." (AFP)

How about Kuwait?

The Kuwaiti Oil Minister Mohammed al-Olaim insisted that "there is enough oil to supply the market....We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply. Why would you have a supply problem WHEN DEMAND IS GOING DOWN". (AP)

Of course, demand goes down in a recession.

What about Libya?

"We believe speculation has its impact," the OPEC chief said. Libya may reduce its oil production because THERE IS MORE THAN ENOUGH OIL ON THE MARKET Oil Minister Shokri Ghanem said. "We may have to cut production.... We don't see any need for more oil. There is plenty of oil in the market,'' Ghanem said, commenting on Saudi Arabia's decision. (Bloomberg News)
How about Iraq? Can we at least count on our brothers in Iraq to maintain the administration's falsehoods about supply problems?

According to Reuters: Iraq's Oil Minister Hussain al-Shahristani said, "Any increase in world oil output would not have a significant impact on record-high crude prices that are being driven by speculation... Regulations needed to be introduced to stabilize oil markets. I do not think increasing any amount in the international market will have a significant impact on the prices. It is up to the stock exchange and the regulations in the industrialized nations. It is not something OPEC can contribute to. We did not see any impact on the prices from the Saudi's previous increase." (Reuters)


Venezuela Oil Minister Rafael Ramirez refused to join the weekend conference because "We believe it is not necessary to increase output...Oil production levels aren't behind the increase in prices," Ramirez said adding that soaring oil prices were caused by 'speculative interest, a falling dollar and global inflation'. (Reuters)

So, are all the oil ministers lying or is the Bush administration intentionally misleading the public about supply problems?

Its always easy to point the finger at Big Oil or "greedy" Arabs for price gouging, but that's not what's really going on. The Bush administration is colluding with their Wall Street buddies to fleece the public by inflating another bubble; this time in commodities. It's just way of further enriching the wealthy at the expense of working people. Meanwhile the middle class continues to get hammered by soaring food and fuel costs and a steadily deteriorating standard of living.

Congress could end this charade in a minute by passing legislation that would close the Swaps Loophole and require steeper margin limits on oil futures. But don't hold your breath. Wall Street is the biggest contributor to political campaigns which explains how we got into this pickle to begin with. It also explains why Congress's public approval rating has shriveled to a measly 12 per cent.
Do Bush and Bernanke know what the banks are up to? Do they know that billions that are being loaned to the banks via the Fed's "auction facilities" are probably being diverted into the commodities market and driving up the prices of raw materials and oil, while pushing the world towards global recession?

You bet they do and they're probably doing everything in their power to keep the banking system from buckling beneath the weight of its own massive debts.
Here's an excerpt from Spiegel Online "Are Pension Funds Fueling High Oil? which explains the whole scam:

"Commodities exchanges limit the number of positions an investor can take in the market, but Michael Masters, of Masters Capital Management, says the Commodity Futures Trading Commission has allowed unlimited speculation in these markets through a loophole. This so-called SWAPS LOOPHOLE EXEMPTS INVESTMENT BANKS LIKE GOLDMAN SACHS AND MERRILL LYNCH FROM REPORTING REQUIREMENTS AND LIMITS ON TRADING POSITIONS THAT ARE REQUIRED OF OTHER INVESTORS. THE LOOPHOLE ALLOWS PENSION FUNDS TO ENTER INTO A SWAP AGREEMENT WITH AN INVESTMENT BANK WHICH CAN THEN TRADE UNLIMITED NUMBERS OF THE CONTRACTS IN FUTURES MARKETS."
"Some experts fault the CFTC, charged with regulating commodities markets, for allowing such loopholes. "Congress has provided the CFTC the power to control this unlimited [speculation]; the law is very specific about establishing position limits," says Steve Briese, author of The Commitments of Traders Bible and, a site that focuses on US futures markets. "The problem is they have abdicated this role." The dramatic surge in energy prices has helped to spark inflation across the economy and, as others at the hearing testified, has cut into profits of most in the supply chain. Briese points to Treasury reports that the THE TOP FIVE USERS OF SWAP AGREEMENTS ARE INVESTMENT BANKS, FOUR OF WHICH DOMINATE SWAP DEALING IN COMMODITIES AND COMMODITIES FUTURES: Bank of America, Citigroup, JP Morgan Chase, HSBC North America Holdings, and Wachovia. (Spiegel Online)

The bloody footprints lead straight to Wall Street.

Here's more proof.

Citing the harmful impacts record high crude oil prices are having on consumers, US Rep. Bart Stupak (D-Mich.) introduced a bill to close regulatory loopholes:

"The numbers back this up: Between Sept. 30, 2003, and May 6, 2008, contracts held by traders jumped from 714,000 to more than 3 million, a 425% increase. Since 2003, commodity index speculation has increased 1,900% from an estimated $13 billion to $260 billion invested. Stupak said CFTC data show that in 2000, physical hedges that airlines and other businesses use to ensure a stable price for fuel in coming months and actually imply delivery, accounted for an estimated 63% of the total futures market, while speculators represented about 37%. "By April 2008, physical hedgers only controlled 29% and speculators had taken over a whopping 71% of the oil futures market."
He said 85% of the futures purchases tied to commodity index speculation comes through swap dealers—investment banks that serve as intermediaries for their pension fund and sovereign wealth fund customers. One report found that $55 billion of total worldwide commodity trading over 55 days came in as swaps. "The CFTC has allowed 117 exceptions to swaps. When that many exceptions are allowed, they are not really subject to oversight. We have a CFTC that's supposed to be doing its job. I'm not certain that it is," he said. ("Oil and Gas Journal" Texas's-new-bill-attacks-excessive-oil-market-speculation/)


On May 20, 2008 Michael Masters, testified before the Senate Committee on Homeland Security and Governmental Affairs, on the role that speculation has played in recent commodity price movements. He said:

"In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels. Over the same five-year period, INDEX SPECULATORS DEMAND FOR PETROLEUM FUTURES HAS INCREASED BY 848 MILLION BARRELS. The increase in demand from Index Speculators is almost equal to the increase in demand from China!"

Masters is right; there is massive speculation which is distorting the market, but who is responsible? Clearly, the pension fund managers aren't to blame. After all, the largest US pension funds, which is the California Public Employees Retirement System (CalPERS), has only invested about $1.1 billion in commodities swaps contracts. That's a far-cry from $260 billion. The investment giants and hedge funds are probably leveraging the money they receive from the pension funds many times over to increase the size of their bets. Keep in mind, oil futures can be purchased for a mere $.06 on the dollar; that's a lot of potential leverage.

Masters again: "Commodities prices have increased more in the aggregate over the last five years than at any other time in U.S. history. We have seen commodity price spikes occur in the past as a result of supply crises, such as during the 1973 Arab Oil Embargo. But today, unlike previous episodes, SUPPLY IS AMPLE: there are no lines at the gas pump and there is plenty of food on the shelves. Today, Index Speculators are pouring billions of dollars into the commodities futures markets, speculating that commodity prices will increase."

Index Speculators have now stockpiled, via the futures market, the equivalent of
1.1 billion barrels of petroleum, effectively ADDING EIGHT TIMES AS MUCH OIL TO THEIR OWN STOCKPILE AS THE UNITED STATES HAS ADDED TO THE Strategic Petroleum Reserve over the last five years:

"We calculate that Index Speculators flooded the markets with $55 billion in just the first 52 trading days of this year. That’s an increase in the dollar value of outstanding futures contracts of more than $1 billion per trading day.
Doesn’t it seem likely that an increase in demand of this magnitude in the commodities futures markets could go a long way in explaining the extraordinary commodities price increases in the beginning of 2008?"

Yes, it does. And it also explains where billions of dollars from the Fed's "auction facilities" are going. After all, they're certainly not going into mortgage-backed securities anymore, and MBS represented nearly 70 per cent of bank revenue. So, where would a desperate banker turn if his main revenue-stream had dried up and the corporate bond market was frozen solid?

How about oil futures and commodities; the only game in town?

Why would an investment banker care if the economy tanks and people in Asia starve? That's not his problem. His job is to keep the shareholders happy, right?

As the MarketWatch article suggests, oil prices are inflated by about 70 per cent. Bernanke could stop Wall Street's feeding frenzy in short-order by just raising interest rates by 50 basis points at the next FOMC meeting on Wednesday. That would poke a hole in the oil bubble and send the speculators scuttling for the exits. But don't count on it. There's as much chance that Bernanke will do the right thing as there is of Congress actually doing their job. Only a fool would take that bet.

Occupations Abroad Always Lead To The Erosion Of Liberties At Home

Occupations Abroad Always Lead To The Erosion Of Liberties At Home

Guantánamo has exposed the Bush regime's disdain for human rights. But there's nothing uniquely American about this

By Gary Younge

The Guardian

Monday June 23, 200 -- Before his show trial in Hungary in 1948, Robert Vogeler spent three months in a cell sleeping on a board that hovered just above two inches of water. Day and night a bright light bathed his cell, and even then someone would bang on the wall next door just to make sure he couldn't get any sleep. "It is just a question of time before you confess," he said afterwards. "With some it takes a little longer than others, but nobody can resist that treatment indefinitely."

And so Vogeler, who was arrested for spying, buckled under the pressure and played his role in the gruesome farce of Stalin's postwar purges in eastern Europe. "To judge from the way our scripts were written," wrote Vogeler shortly after his forced confession, "it was more important to establish our allegorical identities than to establish our 'guilt'. Each of us in his testimony was obliged to 'unmask' himself for the benefit of the [Soviet-led] press and radio."

A similar script, it has long been clear, has been written at Guantánamo Bay, although this time the lines were for the prosecution rather than the defence. The point of these detentions has never been to see justice done, but rather to provide a teachable moment about the lengths and depths the American state would go to pursue its perceived interests in the war on terror. It was to find a place in which America could operate above and beyond not only international law but its own - a display of unfettered power not merely indifferent to, but openly contemptuous of, global and local norms.

It is a brutal allegory in which Guantánamo is not the exception but the rule: a grotesque exemplar of the Bush administration's reflexive and opportunistic response to the terrorist attacks of 9/11, from the bombing of Iraq to the phone-tapping of its own citizens. Like Abu Ghraib and the "black sites" of rendition, the violations that have taken place there are systemic and systematic. Like the broader war on terror, they have been characterised by criminality and ineptitude. The camp has not hosted a single trial, and only 19 of the remaining 270 detainees have been charged.

"To protest in the name of morality against 'excesses' or 'abuses' is an error that hints at active complicity," wrote Simone de Beauvoir, referring to French atrocities in Algeria. "There are no 'abuses' or 'excesses' here, simply an all-pervasive system."

Detain, bomb, invade, torture and spy now - ask questions later. Such have been the impulses of the Bush years. But "now" inherits a past and bequeaths a legacy. "Later" keeps arriving with answers for which a largely quiescent if not compliant American public appears to have little stomach. A power grab for the state; a black hole for legality; a free rein for the military; a vacuum for democracy. Such have been the hallmarks of the Bush years.

And like so much else in these twilight months of this administration, the warped logic that underpins Guantánamo is unravelling at great pace. The recent supreme court ruling that inmates have the same rights to habeas corpus protection as "enemy combatants" held on US soil has shed its final fig leaf. Meanwhile, last week's congressional testimony and the dissenting voices of some of the inmate's military lawyers bear witness to how low the administration has stooped and how high the decision-making has gone. "The laws and constitution are designed to survive, and remain in force, in extraordinary times," Justice Anthony Kennedy wrote for the supreme court majority. Maybe so. But political cultures are not. They are feathers for every wind that blows, vulnerable to demagogue and democrat alike.

"To hold that the political branches may switch the constitution on or off at will would lead to a regime in which they, not this court, 'say what the law is'," Kennedy continued. But that is precisely what has been happening these past seven years.

Documents released by congressional investigators last week show interrogators have not so much pushed the envelope, as shredded and torched it. Mark Fallon, the deputy commander of the defence department's criminal investigation taskforce, warned Pentagon colleagues in an email in October 2002 that the interrogation techniques they were discussing, and later implemented, would "shock the conscience of any legal body". "This looks like the kind of stuff congressional hearings are made of," he said. "Someone needs to be considering how history will look back at this."

In the same month Jonathan Friedman, a CIA counter-terrorism lawyer, told military and intelligence officials that "torture is basically subject to perception". "If the detainee dies," continued Friedman, "you're doing it wrong."

Throughout, innocence, guilt, facts and evidence have been little more than technicalities. Indeed, the enterprise has been a huge faith-based initiative - guided by the notion that if you believe you are doing the right thing, it doesn't matter what you actually do.

Colonel Morris Davis, the former chief prosecutor for Guantánamo's military commissions, recalled a meeting he had with Pentagon general counsel William Haynes, who oversees Guantánamo's tribunal process, about the forthcoming trials of the detainees. "[Haynes] said these trials will be the Nuremberg of our time," said Davis. Davis then pointed out that the handful of acquittals at Nuremberg had given the proceedings a sense of legitimacy and credibility that across-the-board convictions never would have.

'I said to him that if we come up short and there are some acquittals in our cases, it will at least validate the process," Davis told the Nation. "At which point, [Haynes's] eyes got wide and he said, 'Wait a minute, we can't have acquittals. If we've been holding these guys for so long, how can we explain letting them get off? We can't have acquittals. We've got to have convictions.'"

Over the past four years at least five military prosecutors have resigned from their jobs or from their cases at Guantánamo because they felt their integrity would otherwise be compromised, citing tainted evidence obtained under torture and political interference. As De Beauvoir's quote indicates, there is nothing uniquely American about any of this. The US programme was modelled on Soviet techniques and has been made possible by the cooperation of other nations, including Britain, that have colluded with rendition. According to the New York Times, the former director of the CIA's clandestine service described Poland, where a large amount of the torturing took place, as "the 51st state".

Put the British in Ireland or the Belgians in the Congo and you get the same result. Gordon Brown's bid for 42-day detention without charge fits the mould perfectly. Occupations abroad ineluctably dovetail with the erosion of liberties at home. The only difference seems to be that, on paper at least, the US has set itself higher standards - a fact that exhausts its one truly renewable resource: innocence. "How on earth did we get to the point where a US government lawyer would say that ... torture is subject to perception?" asked Carl Levin, the chairman of the Senate armed services committee, last week. How indeed?

As one inmate warned a US diplomat after he was finally released from prison following torture and a show trial. "Every individual American should realise that what happened to me could happen to anybody." His name? Robert Vogeler.

The Dwindling Anti-War Movement, Where's the Anger?

The Dwindling Anti-War Movement

Where's the Anger?

By Howard Lisnoff

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About a week before a summer training institute for leaders of the antiwar movement I called the sponsoring organization, The War Resisters League, to learn why I hadn't heard anything from the group after completing an application several months earlier to attend the conference. During the Vietnam War, that group was among the premier organizations in the antiwar movement. Activists, many from the group who had been conscientious objectors during World War II, filled their publication, Win Magazine, with great articles. I learned a lot from the War Resisters, and was inspired to become a military resister based partly on the group's high idealism and action-based philosophy of resistance.

The training institute was scheduled to take place at the Voluntown Peace Trust in Voluntown, Connecticut. The land where that group is located was the site of a famous episode in the peace movement depicted in J. Anthony Lukas' book Don't Shoot—We Are Your Children (1971). The commune that had been established at the site was surrounded in the late 1960s by the far-Right group, The Minutemen, in what was perhaps a precursor to the Right-Wing, militaristic juggernaut of the past twenty-five years.

When I reached The War Resisters League's office by phone, I had a lengthy conversation with a staffer for the group. The staffer told me that the institute had been cancelled. I guessed not enough people had signed up for the training. This cancellation came exactly one year after The War Resisters League decided not to hold a conference at the same site dealing with the issue of counter-recruitment. While over seventy-five percent of those polled in the U.S. are opposed to the war in Iraq, it is disconcerting that a major antiwar group can't get enough people to take part in activist training!

Despite my disappointment at the cancellation of the training, the staffer and I discussed the issue of the call to "Support Our Troops," which has become a mainstay of the antiwar movement since the war began in March 2003. He had a nuanced view of the slogan, believing that war resisters followed a continuum of beliefs that often began with strong feelings in support of the military, and often gravitated toward resistance as a result of what soldiers had experienced in the armed forces and while at war. Indeed, I agreed, to an extent, having moved from being a cadet in a R.O.T.C. brigade in college to open resistance to the Vietnam War and the military.

My significant objection to the "Support Our Troops" slogan, which has sometimes taken on the specter of cant, is that blanket support of the military allows for the glossing over of the imperialistic objectives of the U.S. government in Iraq and Afghanistan. Yes, wholehearted support is owed to those who have suffered the consequences of those wars; for those who have entertained thoughts of resistance to the military machine; and to soldiers who have become resisters. That support, however, must be tempered with the realities of Abu Ghraib, Guantanamo Bay and Haditha, so-called extraordinary rendition, the loss of many civil liberties at home, and the policies of torture and abuse that have been the hallmarks of the Bush-Cheney regime. The Nuremberg Principles were clear on the individual's responsibility for war crimes. The Principles apply to both individual soldiers and heads of state.

Following my conversation, I located information about the Voluntown Peace Trust. I recalled the high hopes and idealism I had felt while visiting there when it was simply a commune in the late 1960s and early 1970s. In the literature for that group I found a statement that reads: "Individuals pursuing a just society frequently face isolation and exhaustion."

Meanwhile, at a demonstration in the small town in Massachusetts where I live, I held a sign that read: "How Much Torture Is Enough?" One passerby, shouted in a growling tone from his car stopped at a red light: "That's sick!" an obvious reference to the placard I held. It's revealing that many in the U.S. can condone torture, or ignore what their government has done in their names, but cannot tolerate being confronted with the reality of that aberrant and illegal behavior.

Howard Lisnoff is an educator and freelance writer. He can be reached at .

Deal Allows U.S. To Attack Any Country From Iraq

Deal Allows U.S. To Attack Any Country From Iraq

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A Sunni legislator said on Monday that the security agreement to be signed between Baghdad and Washington would allow the latter to attack any country from Iraqi territories.

"The Iraqi-U.S. agreement contains several items that impinge upon the sovereignty of Iraq, including the right of the U.S. forces in Iraq to attack any nation and raid any Iraqi house and arrest people without prior permission from the Iraqi government," Khalaf al-Alyan, a member of parliament from the Iraqi Accordance Front (IAF), told Aswat al-Iraq – Voices of Iraq – (VOI).

U.S. President George W. Bush had signed a declaration of principles with Iraqi Prime Minister Nouri al-Maliki on December 1, 2007. It was planned to be ratified on July 31, 2008 to be effective as of January 1, 2009.

"The agreement grants the United States the right to set up a large number of bases in Iraq, ranging between 50 and 58 bases," said Alyan.

The IAF is composed of three key political components: Vice President Tareq al-Hashimi's Iraqi Islamic Party (IIP), IAF leader Adnan al-Dulaimi's Iraq People's Congress (IPC) and Alyan's National Dialogue Council (NDC).

The IAF, which has 40 out of a total 275 seats, is the main bloc representing Arab Sunnis in the country's political process.

Meanwhile, Labid Abbawi, the undersecretary for foreign affairs, denied that the agreement contained an item allowing U.S. forces to use Iraqi territories as a springboard to threaten other countries.

"This item does not exist in the agreement because it simply runs counter to the policies of both Baghdad and Washington governments," Abbawi told VOI.

The deal governs the presence of U.S. forces in Iraq after the year 2008. The U.S. presence in Iraq is currently relying on a mandate by the United Nations, renewed annually upon the request of the Iraqi government.

The agreement would not enter into effect if the Iraqi parliament did not approve it.

Telecom Donations Tied to FISA Vote

Telecom Donations Tied to FISA Vote

Supporters of the Spying Bill Received Twice the Contributions as Those Against It

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When scores of House Democrats joined Republicans last week to reauthorize a controversial White House spying program, many critics attributed that support to election-year jitters. But as liberal voters continue to bash Democrats on the issue, some campaign finance reformers charge that political contributions from the telecom industry, which benefited handsomely under the bill, probably also swayed votes.

In an analysis released Tuesday,, a nonprofit campaign finance watchdog group, found that lawmakers voting Friday in support of the wiretap deal averaged roughly twice the donations from the nation's leading telecoms -- Verizon, Sprint and AT&T -- over the last three years as those voting against it.

The figures might not have raised eyebrows except that the proposal contained a gift for the industry, effectively granting retroactive legal immunity to the telecoms that enabled the Bush administration's warrantless eavesdropping program. The immunity provision -- blasted by civil libertarians for putting industry concerns above Fourth Amendment rights against search and seizure -- rescues the companies from the roughly 40 lawsuits pending against them. Some money-in-politics watchdogs say the connection between the contributions and votes is no accident.

(Matt Mahurin) The money-in-politics debate is hardly new to Washington, but it has taken on greater urgency as both political contributions and federal budgets grow larger with each passing year. Under the current system, lawmakers have become ever more reliant on campaign coffers to maintain their hold on power. Industry, meanwhile, is under constant pressure to be at the negotiation table when related legislation is being crafted on Capitol Hill. Money is often the quickest way to gain that seat. This combination of factors has created a near symbiotic relationship between Congress and industry, often lending a sense that business interests take priority over citizens' concerns.

"It's not a dollar given and a vote bought," said Meredith McGehee, policy director at the Campaign Legal Center, a nonprofit campaign finance reform advocate, "but it is a system where large industries can gain influence and direct how policy is decided."

The shame, McGehee said, is that the campaign-finance system leads to conflict-of-interest questions even when none exist. "That undermines confidence in the legislative process," she stated.

Mary Boyle, a spokeswoman with Common Cause, echoed the message. "We certainly know that contributions go a long way to gaining access and influence," she said. "The appearance is that money buys votes."

Maplight's analysis, crunched using contribution data from the Center for Responsive Politics, found that the 293 House members voting last week in favor of the wiretapping compromise received, on average, more than double the amount of money as those who voted against it. They got $9,659 from Verizon, AT&T and Sprint between January 2005 and March 2008, while those voting against got $4,810.

But some campaign finance experts warned against linking campaign donations to votes. "It's way too simplistic just to look at money given to a candidate and claim it's affected a particular vote," said Richard L. Hasen, a professor at Loyola Law School in Los Angeles specializing in election law. "It's something that's often alleged, but much harder to prove."

"There does seem to be a correlation between telecom money and the way people voted," Massie Ritsch, spokesman for the Center for Responsive Politics, said in an email, "but as in all cases when you're following the money, causation is nearly impossible to establish."

Indeed, in the case of the spying proposal, 94 of the 105 Democrats voting for the bill had supported an earlier House proposal to renew the spying law without granting retroactive immunity to the telecoms. House Speaker Nancy Pelosi (D-Cal.), one of those 94, made clear that she opposed telecom immunity, but was forced to accept a compromise for the sake of passing a bill. The immunity language was a concession to the White House, which threatened to veto any bill without it.

"I do not believe that Congress should be in the business of interfering with ongoing lawsuits and attempting to grant immunity to telecommunications companies that allegedly violated the law," Pelosi said on the chamber floor last week. "Those companies have not lived up to the standards expected by the American people … They come out of this with a taint."

In return, Democrats included language previously opposed by the administration, including a clarification that the president has no authority outside the 1978 Foreign Intelligence Surveillance Act to collect foreign-to-domestic communications, even in times of war.

The Senate is expected to pass the bill on Wednesday.

Not all Democrats felt the compromise language was worth the sacrifice of civil liberties.

"I have consistently said that it is not appropriate for Congress to grant these companies immunity for their actions without having an understanding of what it is that they did," said Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee. "This is not only because it will hold the telecommunications companies accountable for their actions, but because it is the only way of finding out just how extensive the president's illegal wiretapping program really was."

Liberal voters have lit up the blogosphere in agreement, charging that Democrats caved to White House demands at the expense of constitutional rights. Some civil liberties advocates also placed blame on the congressional leaders.

"This is all part of the abuse of power that we've seen out of this White House, as well as Congress' refusal to stand up and perform its constitutional duty to check the executive branch," said Boyle of Common Cause. "Congress is complicit here."

Scalia Cites False Information in Habeas Corpus Dissent

Scalia Cites False Information in Habeas Corpus Dissent

Marjorie Cohn

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Marjorie Cohn says, "Scalia bolstered his hysterical claim that the Boumediene decision 'will almost certainly cause more Americans to be killed' with stale information that was proven to be false a year ago."
(Photo: AP)

To bolster his argument that the Guantanamo detainees should be denied the right to prove their innocence in federal courts, Justice Antonin Scalia wrote in his dissent in Boumediene v. Bush: "At least 30 of those prisoners hitherto released from Guantanamo have returned to the battlefield." It turns out that statement is false.

According to a new report by Seton Hall Law Center for Policy and Research, "The statistic was endorsed by a Senate Minority Report issued June 26, 2007, which cites a media outlet, CNN. CNN, in turn, named the DoD [Department of Defense] as its source. The '30' number, however, was corrected in a DoD press release issued in July 2007, and a DoD document submitted to the House Foreign Relations Committee on May 20, 2008, abandons the claim entirely."

The largest possible number of detainees who could have "returned to the fight" is 12; however, the Department of Defense has no system for tracking the whereabouts of released detainees. The only one who has undisputedly taken up arms against the United States or its allies, "ISN 220," was released by political officers of the DoD against the recommendations of military officers.

Scalia bolstered his hysterical claim that the Boumediene decision "will almost certainly cause more Americans to be killed" with stale information that was proven to be false one year ago. Professor Mark Denbeaux, director of the Seton Hall Center, said, Scalia "was relying uncritically on information that originated with a party in the case before him."

The Supreme Court decided in a 5-4 decision that the Guantanamo detainees were entitled to file petitions for writ of habeas corpus to challenge their detention. More than 200 men who have been held for up to six years and have never been charged with a crime will now have their day in court. Many were snatched from their homes, picked up off the street or in airports, or sold to the US military by warlords for bounty.

Scalia, who sits on the highest court in the land, has acted as a loyal foot soldier for the executive branch of government.

New generation plans dissent

New generation plans dissent

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A nude-in with bare bodies arranged to spell "PEACE," traffic- stopping bike blockades, music with a message. Civil disobedience, direct confrontation, radical cheerleading.

That funky fusion of protest, performance and pompoms.

The new generation of activists, and the daisy-in-the-rifle protesters who birthed them, is busy with creative ferment, organizing public dissent for the Democratic National Convention here in August. They are motivated by the desire to create social change with people power, not political power, frustrated by a mounting list of problems, from the housing crisis to soaring prices for gas and food.

"There will be a lot of people at this convention who are progressive and who are angry at the Democrats," says Virginia Trabulsi, who has worked for years with the anti-war group United for Peace and Justice.

"They're saying, 'Why have we not impeached Bush? Why is Homeland Security out of control?' "

Tens of thousands of activists are expected, homegrown and imported. Some plan to drive FEMA trailers up from Mississippi for a media-savvy statement about continuing Hurricane Katrina struggles. Others are coming from Seattle, like the Backbone Campaign, which will haul 70-foot-tall political puppets called The Chain Gang: prison-suited images of Bush, Dick Cheney and Donald Rumsfeld.

Socialists have formed an alliance with military veterans who are against the Iraq war.

Guerilla gardening

Anarchists will give workshops on guerilla gardening, or political gardening, a style of nonviolent action that takes on issues like land ownership by occupying abandoned lots — sometimes in the dead of night — and transforming them into urban gardens.

And then there are the pacifists, groups like the historic American Friends Service Committee founded by Quakers in 1917, which plans to host an exhibition called "The Costs of War," detailing how the $720 million spent each day on the war could be spent on education and housing.

These different factions speak of just one common goal: stopping the Iraq war immediately.

Beyond that, beliefs differ. So do strategies.

Some protesters espouse the right to active self-defense if they are treated too harshly. On the other side are those who say that violence, verbal or physical, is never an acceptable tool on the path toward peace.

In America, this debate is as old as the war between the North and the South.

"It goes back to the abolitionist movement during the Civil War," says Ira Chernus, professor of religious studies at the University of Colorado at Boulder.

"Some were committed to strict nonviolence, and some felt that because the system of slavery, and the military force used to maintain it, was so violent that the only way to break the system of slavery was by using violence."

As Chernus points out in his recent book, "American Nonviolence: The History of an Idea," nonviolence is an integral thread in the fabric of U.S. history.

Significant role

"From the 1820s to the 1950s, scarcely a decade went by that a nonviolent movement did not play some significant role in the practical outcome of political, social and economic events," he says.

"Since the 1960s, scarcely a day has gone by that a nonviolent movement did not play a significant role."

From the Civil War to the civil-rights movement, from the labor movement to the environmental movement — and now, in Denver, activists young and old, the progressives and the radicals, will enact the next chapter of the nonviolent movement in America, addressing everything from the Iraq war to global warming.

CodePink, a national anti-war organization, plans a Restore Democracy Parade, an extravaganza of dissent: floats, political theater, musicians, stilt performers, radical cheerleaders, puppets, drummers and bands.

The local spokeswoman for CodePink is Zoe Williams, a 22-year-old platinum blond with spiky hair, rectangular glasses and a penchant for black-and-white polka-dot canvas shoes.

She's part of the new face of activism, a youth-driven alliance that includes Students for Peace and Justice, Students for a Democratic Society, and Tent State University. Her goal is to help restore the image of activists everywhere.

"That's something our progressive movement is now seriously considering," she says. "How can we make ourselves less frightening? How can we make ourselves look open?

"One of the big things about the colorful, creative protests is to show that we are a very interesting, artistic, positive group of people. We aren't this scary image that protesters often get painted as."

She works closely with guys like Adam Jung, a farm boy from Missouri who now studies at the University of Denver and spends his free time organizing Tent State University, mobilizing students to confront the Democrats and end the war.

"I'm definitely not right-wing or conservative, but I do identify with rural values," Jung says. "If I called my granddad an environmentalist, he'd smack me, but those are his values."

Grassroots movement

The base camp he envisions for Tent State University will include thousands of tents staked in City Park, with a music festival featuring political hip-hoppers The Coup and Wayne Kramer, who played with his old group the Motor City 5 during the 1968 Democratic National Convention in Chicago. Tent State workshops will train activists in nonviolent direct action,and focus on building a grassroots movement.

And from this idea sprang the newly minted Denver chapter of the Students for a Democratic Society.

"We were talking a lot about Tent State, which is not actually an organization but more a technique or strategy," says 25-year-old Jojo Pease. "I was feeling a little disappointed. We were putting in all this work, but I thought, 'What's going to happen afterward?' "

To capture the momentum created at the DNC, they decided to start a Denver chapter of Students for a Democratic Society.

Back in the 1960s, the SDS was the most influential group of radical student activists in the country. It died out in 1969 but was re-created two years ago and is now one of the fast-growing groups of young activists, with more than 300 chapters on college and high school campuses. The goal is to create a society free from poverty, war, racism and sexism.

"SDS is starting to become cool again," says Jung.

Whether rooted in the '60s or the '00s, activists are driven by the same fuel.

"We are passionate people who really spend way too much time thinking about all the awful stuff in the world that's so urgent," says Sarah Gill, program director for the Denver office of the American Friends Service Committee. "We just want to do the right thing, and it matters if we do it the right way, because people's lives depend on it."

Six months ago, with his eye on the convention, longtime activist Ron Forthofer created a group called The People Call for Change.

Their action plan for the convention calls not for a protest, nor a demonstration, but a series of events to be held in churches and community centers — educational evenings that will dangle a hopeful vision of how a grassroots movement might lead the country in a new direction. Topics include health care, consumerism, the environment and civil liberties.

"The thing that is driving all of us is that we want to reclaim our country, to restore it and make it be a government and a country by and for the people," he says.

"There's a lot of alienation out there today, a feeling that both parties have abandoned their responsibilities to the people."

Colleen O'Connor: 303-954-1083 or

Protest groups


Founded: 2002

Mission: CodePink is a women-initiated grassroots peace and social-justice movement working to end the war in Iraq, prevent new military actions and redirect resources into health care, education and other "life-affirming" activities.

United for Peace and Justice

Founded: 2002

Mission: A coalition of more than 1,400 local and national groups that have joined together to protest the Iraq war and support the fight for global economic justice.

Tent State University

Founded: 2003

Mission: A network of student-led projects intended to create a more- effective democracy, with issues that range from war opposition to high tuition costs.

People Call for Change

Founded: 2008

Mission: This coalition hopes to build a grassroots movement for social change, from monitoring corporate power to promoting health care and civil liberties. Spiritual values underlie their positions on issues, which arise from secular and religious traditions.

Students for Peace and Justice

Founded: 2007

Mission: A local vehicle for student action to end the war and create progressive social change.

American Friends Service Committee

Founded: 1917

Mission: The organization, which espouses nonviolence, won the Nobel Peace Prize in 1947. Today, the group takes a strong anti-war position and works on a variety of issues, such as economic justice and immigrants' rights.

Students for Democratic Society

Founded: 2006

Mission: Inspired by the original organization by the same name that dominated the 1960s protest movement, this new version wants to revitalize student activism in the United States, work to stop all wars and create a participatory democracy.

The Backbone Campaign

Founded: 2003

Mission: A grassroots campaign to encourage citizens and elected officials to stand up for progressive values, focusing on issues of democracy, economic justice, ecology and international relations.