Monday, August 4, 2008

FDIC warns four US banks over liquidity

FDIC warns four US banks over liquidity

By Sarah Mishkin in New York

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The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.

The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws.

Losses on mortages and other loans have helped bring down eight US banks this year, including one small Florida institution on Friday. Last month, Indymac, a California lender with $32bn in assets, became one of the largest banks to go under in US history. It filed for Chapter 7 bankruptcy protection on Friday.

The banks receiving cease-and-desist orders in June were MetroPacific Bank in Irvine, California; Bank Haven in Haven, Kansas; Clarkston State Bank in Clarkston, Michigan; and Hastings State Bank in Hastings, Nebraska.

Non-performing loans in Clarkston State’s portfolio nearly doubled to 4.6 per cent between the close of 2007 and the end of the first quarter of 2008, according to first-quarter earnings report released in April.

Clarkston State’s chief executive, J. Grant Smith, said in a statement accompanying first quarter earnings that ”business conditions remain weak and commercial loan demand is anemic.”

The FDIC instructed the banks to reevaluate their allowances for potential losses. MetroPacific in California was also told to stop issuing credit “for speculative construction and land development purposes.”

The fifth bank – Columbus Bank and Trust in Columbus, Georgia – received a cease-and-desist order because its credit card program violated consumer protection laws.

Government report shows sharp fall in US economic growth

Government report shows sharp fall in US economic growth

By Andre Damon

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The US economy grew at a less-than-expected rate of 1.9 percent in the second quarter of this year, according to figures released Thursday by the Commerce Department. The department also announced revisions to its previous growth estimates, concluding that the US economy contracted for the first time since 2001 in the fourth quarter of 2007.

“We’re in a recession,” Allen Sinai, chief economist at Decision Economics Inc., told Bloomberg News. “It’s going to widen, it’s going to deepen.” The second-quarter growth figures were lower than the 2.3 percent predicted by a Bloomberg survey of economists.

The anemic second-quarter growth estimate is particularly ominous since it covers the period when US taxpayers received hundreds of dollars in rebate checks as a result of a $170 billion stimulus package submitted by the Bush administration and passed by Congress last February. The bounce in consumer spending turned out to be far less than expected, and the impetus to the growth rate for April through June resulting from the rebates will likely be followed by an even deeper slump in the coming months, as consumer spending retreats even further.

Personal consumption, which accounts for two-thirds of total spending, increased by 1.5 percent, slightly higher than the 0.9 percent increase in the first quarter. “The increase in real consumer spending was quite minimal, despite the massive fiscal stimulus,” John Lonski, chief economist at Moody’s Investor Service, told the New York Times. The economy would have contracted by 0.5 percent were it not for a surge in exports, largely the result of the slumping US dollar, which makes US exports relatively cheaper. Exports increased by 9.2 percent, even faster than the 5.1 increase in the first quarter. Imports dropped by 6.6 percent, compared with a 0.8 percent fall in the second quarter. This narrowed the trade deficit to its smallest level in seven years. The growth in exports added some 2.4 percentage points to the growth rate.

The housing sector continued to contract rapidly, with revenues falling by 15.6 percent after a drop of 25 percent in the first quarter.

While the Commerce Department initially estimated the growth rate for the fourth quarter of 2007 at 0.6 percent, in its latest report it revised the estimate downward to minus 0.2 percent, marking the first quarterly contraction of the US economy since 2001. The Commerce Department also announced a small reduction in first quarter 2008 growth estimate, from 1.0 percent to 0.9 percent.

Meanwhile, the financial crisis has only intensified. Merrill Lynch announced Tuesday that it plans to sell $30 billion in mortgage-backed securities at 22 percent of their original value, resulting in a $5.7 billion write-down. The deep discount at which Merrill Lynch was obliged to sell off these assets will place further pressure on the balance sheets of other financial institutions, resulting in tens of billions in additional debt writ-downs and losses.

The sale came only ten days after Merrill reported $9.4 billion in second quarter write-downs and a $4.6 billion loss for the quarter. To compensate for the latest bout of write-offs, the firm has announced an $8.5 billion share offering, bringing the total capital it has been forced to raise to $26 billion.

Deutsche Bank announced a $2.3 billion dollar write-down on Thursday, bringing its total write-downs for this year to over $5 billion. Moody’s, the investment rating agency, warned Thursday that the coming months will bring an intensification of write-downs as housing prices continue to fall and the economy deteriorates. Home prices are down by over 15 percent in the past year, according to the S&P/Case-Schiller index. Former Federal Reserve chairman Alan Greenspan said yesterday that the fall in home values was “nowhere near the bottom.”

In the same speech, Greenspan noted the precarious position of Fannie Mae and Freddie Mac, the giant mortgage finance companies, saying, “I think the ultimate solution is a nationalization of both Fannie and Freddie.”

The Labor Department said Thursday that claims for unemployment insurance jumped by 44,000 to 448,000 this week, the highest level in five years. The department is expected to announce a payroll decline of some 75,000 jobs for July, according to Bloomberg. This would bring total net payroll losses this year to over 500,000.

The number of US workers classified by the government as involuntarily employed part-time has reached 5.3 million, up by one million from a year ago. This figure includes both those who are looking for full-time work but cannot find it and those who have had their hours cut from full-time to part-time. The number of people who have had their hours reduced from full- to part-time at their current job has reached over 3.7 million, the highest figure on record.

“The change in working hours is the canary in the coal mine,” Susan J. Lambert, a professor at the University of Chicago, told the New York Times. “First you see hours get short, and eventually more people will get laid off.” If current layoff rates continue, 2008 will see a net jobs loss of over one million.

Speculation behind global commodity price rise

Speculation behind global commodity price rise

By Ramgopal Agarwala

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T
here is now a growing discomfort about the role of speculative finance in the US, the capital of global finance. In an open letter addressed to all airline customers, leaders of airlines in the US have recently requested the passengers to join them in pushing legislation to add more transparency and disclosure in the oil markets.

They argue that "twenty years ago, 21% of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66% of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs."

Speculators have indeed sharply increased their allocation to commodity markets from $13 billion in 2003 to $260 billion in 2008 and at present they are not adequately constrained by rules about margin requirements and other regulations about buying and selling which apply to equity trades. In fact, there has been further deregulation in the US in recent years with respect to speculative futures trading in oil and commodity indices covering a wide spectrum of commodities including food and metals.

Eminent financiers such as George Soros and powerful US senators, such as Joe Lieberman, are arguing that commodity index speculators are a big part of the increase in commodity prices. Michael Masters, a hedge fund manager in his testimony before the US Congress, has said that gasoline prices could fall to $2 a gallon, half of today's price with legislation barring commodity index funds. There are now more than 10 legislative proposals before the US Congress calling for better regulation of commodity index markets.

At the same time, there are powerful forces in the US against regulation of such transactions. Investment funds managers and investment houses such as Morgan Stanley are benefiting from these speculative activities and they are mobilising public opinion against increased regulations. California's public employees' pension fund, the world's largest, earned a 68% rate of return on its investments in commodity futures and other investors are rushing in commodity markets.

The vested interests are trying to divert the attention from regulation by arguing that other factors, including growing demand from emerging markets such as China and India, is responsible for commodity price increases. This game of blaming emerging economies in which the President of the US has also joined is patently absurd because the rapid growth in India and China has been going on for more than a decade with no increase in commodity prices even in nominal terms and cannot explain the sharp increase in last two years.


Other factors such as drought in Australia and switch of corn to biofuels can explain part of the increase in food prices but none of them can explain increases of more than 100% in many commodity prices in a single year as it has happened in 2007 and 2008. There is little doubt that speculative finance is a key factor in sudden price increases in oil, food and metals in the last two years. Amartya Sen in his classical work on famines pointed out that even when supply situation for food is healthy, famines can occur because of collapse of purchasing power of the common man. Today we are witnessing a phenomenon of food riots caused by food price increases due not to demand-supply imbalance but to greed of speculators facilitated by lax regulatory system in the key trading centre of the world.

Given the play of vested interests in US Congress it is not clear which way the legislation on regulating speculative finance in commodity futures will move. Policymakers in developing countries in which price increase in fuel and food are matters of life and death for the poor cannot remain silent and accept vulnerability to the price fluctuations originating in developed countries' financial markets. This must reflect on what they can do to safeguard their people against the onslaught of the speculators in foreign lands?

Over the long-term, the dominant role of a few commodity markets in the West must be reduced. As the centre of gravity of the world economy shifts to the South and South is becoming a dominant source of both demand and supply for commodities, it must develop its own markets with its own rules.

However, in the short run when the contagion effects of the markets in developed countries are still strong, the South must stake its claim in contributing to reform of the regulatory systems in the developed countries because its vital interests are involved. It should not remain silent when the contagion from developed economies is leading to mass starvation in its economies. It should demand, perhaps through international forums such as G-20, proper regulations in the developed countries so that the greed of the few in developed countries does not lead to misery of the many in the developing countries. It should also use its leverage through institutions such as Opec to persuade the developed countries to check the excesses of speculators which could have adverse effects in the long run on both producers and consumers of oil.

Big Oil's biggest quarter ever: $51.5B in all

Big Oil's biggest quarter ever: $51.5B in all

By JOHN PORRETTO

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Oil giants Chevron Corp. (CVX) (CVX) and Total SA (TOT) wrapped up a string of gargantuan, record-breaking earnings reports Friday, a stretch in which six of the major international oil companies topped $50 billion in combined profit for the first time.

While the profits of unparalleled size have brought withering criticism from Washington and disgust from consumers across the country, very few were surprised. Crude prices during the second quarter were nearly double what they were a year ago.

Chevron said Friday its second-quarter profit rose 11 percent to a record $5.98 billion.

Revenue rose significantly to $82.9 billion from $56.1 billion a year ago.


Like its competitors, Chevron made the bulk of its money at its exploration and production arm, also known as the upstream, where income nearly doubled from a year ago to $7.25 billion.

Chevron said the average sales price for crude and natural gas liquids was $109 a barrel in the quarter, up from $57 a barrel in the year-earlier period.

In addition to Chevron, soaring commodity prices led to record quarters for Exxon Mobil Corp. (XOM), ConocoPhillips, BP PLC (BP) and Royal Dutch Shell PLC. (RDSB) Exxon Mobil stood apart even from this crowd, logging the largest ever quarterly operating profit for a U.S. company. Barring companies that made huge profits on one-time gains like bankruptcy settlements and spin-offs, Exxon Mobil holds the top 10 records for biggest U.S. quarterly earnings.

French energy company Total SA said Friday its profit climbed 38.7 percent in the second quarter to $7.38 billion. Quarterly sales rose 23 percent to $75.25 billion.

Altogether, the profits of the six companies jumped more than 40 percent in the second quarter to $51.5 billion, the first time big Western oil companies have ever reached that level.

Total's earnings were at the top end of analysts' expectations.

Unlike some other oil majors, Total reported production growth of 1.3 percent in the second quarter.

Also Friday, Norway's state-controlled StatoilHydro ASA (STO) reported a 37 percent rise in second-quarter net profits to $3.7 billion.

At Chevron, the company division that refines and sells gasoline actually swung to a loss of $734 million in the quarter after earning $1.3 billion a year ago. The culprit: those same crude prices that lifted upstream earnings.

Like its peers, Chevron doesn't produce enough oil on its own to feed its refineries, forcing it to buy some on the open market. And it wasn't able to raise the price of gasoline and other products fast enough to recover its own rising costs for oil.

Chevron also said that planned downtime at some refineries contributed to the loss.

"The higher cost of crude oil used in the refining process was not fully recovered in the price of gasoline and other refined products," said Chairman and CEO Dave O'Reilly. "As a result, our downstream operations incurred a loss in the second quarter, with most of the loss taking place in the United States."

Chevron said overall production in the quarter fell about 3 percent from a year ago, hurt in part by production-sharing contracts. However, on a conference call with analysts Friday, company officials said project startups will increase production in the second half of 2008 and the company should meet or exceed its full-year volume target.

Chevron shares slipped 71 cents in afternoon trading to $83.85. They've traded in a range of $76.40 to $104.63 in the past year.

Total shares fell 1.2 percent to 48.79 euros ($75.95) in Paris.

•Consumer Inflation in U.S. Rises Most in Three Years, Eroding Buying Power

Prices Erode Buying Power, Tax Rebates

By Bob Willis and Shobhana Chandra

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The biggest increase in prices in almost three years eroded consumers' buying power, reinforcing speculation the Federal Reserve won't raise interest rates in the face of faster inflation and slow growth.

Consumer inflation in June climbed 0.8 percent, the most since September 2005, the Commerce Department said today in Washington. Spending increased 0.6 percent, more than forecast, compared with a gain of 0.8 percent the prior month. Price jumps in petroleum and chemicals also swelled the value of orders to American factories in June.

Tax rebates from $168 billion in fiscal stimulus will provide only a temporary boost for Americans facing $4 a gallon gasoline and unemployment at the highest level since 2004. Fed officials, meeting tomorrow, must find a way to acknowledge the risk of accelerating inflation without signaling a rate increase that would worsen the economic slowdown, economists said.

``There is a bit more inflation pressure than many people anticipated,'' said Kevin Logan, a senior market economist at Dresdner Kleinwort in New York, who correctly forecast the gain in spending. ``Inflation pressure is more widespread and that has to be some concern for the Fed.''

The Fed's preferred gauge of prices, which excludes food and fuel, climbed 0.3 percent, more than economists forecast.

Treasuries fell after the reports and stocks dropped. The yield on the benchmark 10-year note was 3.96 percent at 4:17 p.m. in New York, up from 3.93 percent late on Aug. 1. The Standard & Poor's 500 Index dropped 11.3 points, or 0.9 percent, to close at 1,249.01.

Focus on Language

``I'd expect more hawkish language from the Fed tomorrow because of where inflation is, but I don't expect a change in the policy rate,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``The economy is fairly weak, there are ongoing problems in financial markets and there's not a whole lot of support for consumer spending after the rebate checks are spent.''

Economists had forecast spending would rise 0.4 percent, after an originally reported 0.8 percent increase in May, according to the median of 67 estimates in a Bloomberg News survey. Projections ranged from a 0.5 percent decline to a 0.9 percent gain.

The core inflation rate exceeded economists' forecasts for an increase of 0.2 percent, according to the median estimate in the Bloomberg survey. The price measure was up 2.3 percent from June 2007, the biggest year-over-year increase since December.

European Scene

Price pressures are also building in Europe, where producer prices rose the most in at least 18 years in June on soaring energy costs. The 8 percent increase from a year ago in factory prices in the 15 nations that use the euro was the biggest since the series began in 1990, the European Union statistics office in Luxembourg said today.

U.S. incomes increased 0.1 percent after jumping 1.8 percent the prior month, today's report showed. The median forecast was a decline of 0.2 percent. About $28 billion in rebates went out in June, compared with about $50 billion in late April and May, according to Treasury Department figures.

Investors are betting the Fed will hold the benchmark rate unchanged at 2 percent tomorrow, according to federal funds futures contracts. Fed Chairman Ben S. Bernanke on July 15 told lawmakers that the economy faced threats to both growth and inflation.

Adjusted for inflation, spending decreased 0.2 percent after rising 0.3 percent in May.

Factory Orders

A separate Commerce Department showed factory orders in the U.S. increased more than forecast in June, propelled by gains in petroleum and chemicals that reflected soaring prices. The 1.7 percent gain in bookings to $457.6 billion was the biggest jump this year, the report showed.

``These numbers are somewhat inflated by prices, maybe even outside of petroleum,'' said David Sloan, senior economist at 4Cast Inc. in New York. ``The underlying picture is fairly flat'' for manufacturing.

A private report showed planned job cuts by U.S. employers soared last month.

Firing announcements increased to 103,312 last month, up 141 percent from 42,897 in July 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. It was the biggest year-over-year percentage increase since November 2001, at the end of the last official recession.

Rebate Benefit Fades

Most economists are forecasting the lift from the rebates will fade in the second half of the year. Purchases of autos and light trucks dropped in July to the lowest level since 1993, industry figures last week showed.

Economists surveyed by Bloomberg in the first week of July forecast economic growth to slow to 1.4 percent in the third quarter and to 0.5 percent in the fourth quarter. The Labor Department last week said U.S. nonfarm payrolls fell by 51,000 in July, bringing the total payroll reductions so far this year to 463,000.

The economy shrank at a 0.2 percent pace in the last three months of 2007 and grew at about an average 1.5 percent annual pace in the first six months of 2008, government data last week showed.

With the economy on the brink of a recession, consumers are focusing their purchases on staples while cutting back on luxuries like $4 lattes, causing sales to slump at Starbucks Corp. the world's largest chain of coffee shops.

Starbucks last week said it will close more U.S. stores than it will open next year after it posted its first loss in 16 years as a public company.

``Until the economy significantly improves, we're just trying to do what we can to get through this storm,'' Starbucks Chairman Howard Schultz said on a conference call.

Employers in U.S. Cutting Jobs, Hours, Signaling Slower Growth

Employers in U.S. Cutting Jobs, Hours, Signaling Slower Growth

By Shobhana Chandra

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Employers in the U.S. fired workers in July for a seventh straight month and cut hours for remaining staff to a record low, signaling economic growth weakened at the start of the second half of the year.

Americans labored an average 33 hours and 36 minutes per week, six minutes less than in June and matching the shortest workweek since records began in 1964, the Labor Department said yesterday in Washington. The jobless rate jumped to 5.7 percent, the highest level in more than four years.

Combined with the drop in payrolls, the total number of hours worked in July declined by 0.4 percent, indicating the economy took a turn for the worse entering the third quarter. Businesses are broadening efforts to trim labor expenses as surging fuel bills hurt profits.

‘‘Companies have already cut the fat and some muscle, and are now trimming hours,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. The drop in hours ‘‘is going to have a huge impact'' on growth.

Private employers cut 76,000 jobs in July while government hiring increased by 25,000. That brought the decline in total payrolls to 51,000, spanning transportation companies, retailers, manufacturers and temporary help agencies.

In terms of the impact on gross domestic product, every tenth of an hour drop in the workweek is equivalent to a loss of 300,000 to 350,000 jobs, LaVorgna estimated. He cut his third- quarter growth forecast to 0.7 percent at an annual rate, less than half his prior projection of 1.5 percent.

‘Case' for Recession

‘‘The decline in hours worked has a suggestion of more job losses to come,'' said John Ryding, chief economist at RDQ Economics LLC in New York. The report ‘‘adds to the case that the U.S. is in recession.''

The economy grew at a 1.9 percent annual pace from April through June, less than economists anticipated, according to figures from the Commerce Department. Revised estimates also showed GDP shrank at the end of 2007. Some economists said this indicated the U.S. slipped into a recession late last year.

One reason for the drop in the workweek may be a jump in part-time employment. The number of Americans having to work fewer hours because they couldn't find full-time jobs as the economy weakened jumped by 308,000 to 5.7 million in July, the most since December 1993. The figure has grown by 1.4 million in the past 12 months, the report showed.

General Motors Corp., the largest U.S. automaker, on July 28 said it'll eliminate shifts at two truck plants and slow output at two others under a plan to build fewer vehicles as U.S. sales decline.

Cost Reduction

‘‘As costs go up, companies are driven to cutting back on the number of hours of work they're paying for, even if they're not cutting the actual number of workers,'' said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. ‘‘I'd look for restraint in output this quarter.''

The average workweek has been drifting down in the last five decades as businesses attempt to increase efficiency, Labor figures show.

With hours already so low, companies may now start firing more workers as demand slows, said David Rosenberg, chief North American economist at Merrill Lynch & Co. in New York.

‘‘Any reduction in demand and order books is going to be met disproportionately by cuts in headcount rather than cuts in hours,'' Rosenberg said in a note to clients.

Schwarzenegger slashes wages and social programs, fires state workers

Schwarzenegger slashes wages and social programs, fires state workers

By Rafael Azul

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California Governor Arnold Schwarzenegger signed an executive order July 31 ordering the layoff of 22,000 part-time employees and cuts in the wages of most of the state’s 200,000 employees. In addition, the state order implements measures that would affect health and welfare programs for millions of Californians. This broadside against the California working class evokes measures taken in the Great Depression against wages and jobs.

The governor justified his order as a way of pressuring the state legislature into approving a budget. Schwarzenegger declared that California is running out of funds and that borrowing more money by selling bonds to Wall Street investors would come at very high interest rates unless a budget is in place. Without a budget, the state cannot issue bonds; instead it would have to borrow directly from a consortium of banks at usurious interest rates that would raise the cost of short borrowing by more than $100 million.

California is in the throes of a recession; state tax revenues are down due to high levels of unemployment and the collapse of the housing market. Years of deficit spending have augmented the state’s debt, resulting in the 49th worst debt rating out of the 50 US states. Given the budget crisis, Moody’s and Standard & Poor’s, agencies that assess risk, are poised to lower the state’s bond rating.

In accordance with the governor’s order, nearly 200,000 employees will have their pay cut from present levels to $6.55 per hour, the federal minimum wage. Part-time jobs are to be eliminated immediately, together with a ban on overtime work and a hiring freeze. Immediately upon the signing of the executive order, 10,300 part-timers were let go. The effect of the wage cuts would be felt on September 1, when workers receive their paychecks for August. None of the sacked workers has any assurance that they will be rehired when the budget issue is resolved. State employees’ wages—now averaging $50,000 a year—would drop to $13,600.

The governor’s order goes well beyond the wage cuts and firings and includes payment cuts to vendors and contractors for “goods and services chargeable to Fiscal Year 2008-09.” These include state grants to university students, state transfers to universities and community colleges, and payments to institutions such as Adult Protective Services, foster care and adoption services, cash assistance for immigrants and tax relief for low-income seniors and the disabled. It is estimated the state would save $1 billion each month if all the governor’s measures were implemented.

Under the impact of the housing crisis—in which record numbers of Californians have had their homes seized and auctioned off—clinics, programs for the elderly, the disabled, and many others run the risk of being shut down or severely constrained by the governor’s decision.

Schwarzenegger’s action, however, explicitly guarantees interest payments to Wall Street bondholders. The order mandates: “The State Treasurer shall take all actions necessary to maintain the State’s ability to pay its bond obligations, including payment of principal and interest with funds in the State Treasury, and shall take all actions that are necessary to protect the State’s funds and investments.”

The state controller, John Chiang, a Democrat, objected to the wage cuts, saying that the authority to cut wages belonged to his office and that he would not obey the governor’s order. He indicated no disagreement, however, on the decision to terminate the part-timers. Schwarzenegger based his decision on a 2003 ruling by the California Supreme Court that requires that most state employees be paid only the federal minimum wage if a budget is not approved by the state legislature before the July 1 deadline. Chiang insisted that the state had enough money to pay its bills until this October.

The state legislature has been at a budget impasse since Schwarzenegger introduced a budget proposal last January. The budget included draconian cuts to state education and health services to make up for a projected deficit of $15.2 billion, over 15 percent of California’s $101 billion general fund.

The budget deadlock is along party lines. Democrats have proposed tax increases of $8-11 billion, while the Republicans have demanded cuts to education and other social programs. While the Democrats control both houses of the legislature they do not have the votes to meet the two-thirds requirement to approve the budget. Republicans in the state assembly oppose tax increases and are demanding that the budget be balanced through massive cuts.

Schwarzenegger’s order comes in the wake of the disclosure by California’s Economic Development Department that the state unemployment rate rose to 6.9 percent in June, higher than at any time since 1996. In all, over 1.3 million people are looking for work, an historic high. In the economically depressed Sacramento area, where over 100,000 state employees reside, the wage cut is expected to extract $15 million day in an area of the state already hard hit by home foreclosures.

Governor Schwarzenegger had announced his intention to issue the executive order for over a week. But apart from a few isolated demonstrations in San Francisco and Sacramento, the response from unions representing state employees has been virtually silent. Rather than mobilize any real opposition to the measures, the SEIU and other state employee unions have sued Schwarzenegger in court over aspects of the order, and worked to foster illusions that State Controller Chiang and the Democrats will mount an opposition to the draconian cuts.

Why is Habeas Corpus Such a Threat to those in Power?

Why is Habeas Corpus Such a Threat to those in Power?

By Maher Osseiran

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Why is the Supreme Court's decision to uphold habeas corpus rights for the Guantanamo detainees so scary that Senator Lindsey Graham, with the support of McCain, will "explore the possibility, if necessary, of a constitutional amendment to blunt the effect of this decision"?

What is so fundamentally wrong with the Supreme Court's decision, whose members are conservative or Bush appointees, to warrant amending our constitution? Have Senators Graham and McCain lost their minds?

I just finished reading a lengthy "friend-of-the-court" brief to the Supreme Court in support of petitioner Boumediene v. responder Bush, et al., a case resulting in a decision that reinstate habeas corpus rights, not just for the detainees, but for all Americans.

As a brief to the Supreme Court, the argument and the conclusion were primarily based in constitutional law and precedent.

A similar brief to a habeas corpus court that would review the legality of detaining the Guantanamo prisoners would undoubtedly take a different form or approach

what the writ of habeas corpus has always ensured: that an independent court can inquire into the legal and factual bases for the Executive's assertion of its power to imprison. This guarantee has always included a meaningful judicial evaluation of the law and facts that underlie the Executive's asserted basis to detain.

Other than the meaningful judicial evaluation of the law and facts, a non-military tribunal would make it easier for a detainee to produce exculpatory evidence, evidence that would exonerate him or her; actually, anyone can produce such evidence and anyone can inject it into the court proceedings simply by providing it to any party.

Such exculpatory evidence is abundant and has been in the hands of U.S. Attorney Patrick Fitzgerald, governors, members of congress such as Conyers and Graham, the judiciary committees to the House and Senate, and a variety of law authorities that have jurisdiction as early as 2005; I know that for fact since I placed it there but no investigations resulted.

In February of 2007, Dr. James Zogby of the Arab American Institute, after familiarizing himself with my work, found it imperative to contact Conyers directly and received assurances, conveyed to me by email, that an investigation would proceed in due course; Conyers is still missing in inaction.

The evidence was uncovered when I decided to authenticate the videotape released by the Pentagon on Dec. 13, 2001, a videotape in which bin Laden was confessing to 9/11. My suspicions about the tape quickly materialized but it took close to a year to distill the information in to a format that would stand in a court of law.

The authentication work, the only work of its kind put forth in the public domain, unveiled the most heinous crime ever committed by a sitting president whose victims not only include the detainees in Guantanamo except for a handful, but the untold number of dead and maimed Afghanis, Iraqis, American citizens and soldiers who have died in this fake "war on terror".

The authentication work revealed that the taping of the bin Laden confession was the result of a sophisticated sting operation run by U.S. intelligence with the help of Saudi intelligence and was taped on September 26, 2001, barely two weeks after 9/11 and ten days before the invasion of Afghanistan.

According to the UN charter, "All Members shall settle their international disputes by peaceful means in such a manner that international peace and security, and justice, are not endangered."

Even though the Bush administration had the evidence that bin Laden was responsible for the 9/11 attacks as early as September 26, 2001, such evidence was only shared with those who were important for the execution of their war, such as NATO and Pakistan, and kept away from those sane entities who were looking for a just and peaceful outcome as the UN Charter dictates.

The Bush administration, with premeditation, ignored its international obligations in deference to war. If the Bush administration had supplied the evidence to the world and specifically the Taliban who were requesting such evidence in exchange for bin Laden, the war might not have taken place and bin Laden would very likely be in custody.

Not pursuing that route makes the Afghanistan war an illegal war under the UN Charter and The Geneva Convention; thereby, the majority of the Guantanamo detainees can no longer be classified as enemy combatants but victims of war crimes.

These findings, which were shared with various authorities, were summarized in the "The Crime Behind the Criminal Wars!".

The authentication work also shows that the Bush administration, with premeditation, aided and abetted bin Laden after 9/11 far beyond any aid your average Guantanamo detainee could have ever provided to Al-Qaeda or bin Laden. There are also very strong indications, worthy of serious investigation, that the Bush administration was very aware of the 9/11 operations beforehand and allowed them to happen or even helped in making them happen. This argument was summarized in "Is Bin Laden Responsible for the 9/11 attacks?"

As a consequence of these findings, those handful of detainees who are charged with the more serious crimes, after review and a proper fact finding by a habeas corpus court, would have those charges against them dismissed only to be re-arrested and appropriately charged with less serious offenses; the rest of the detainees would have to be released.

The same court, and the public at large, will reserve the more serious offenses to high-ranking officials in the Bush administration, including the president.

By not acting in 2005 on the information received, Conyers and congress dug themselves a hole that kept getting deeper as time went by. The implications of the findings are very serious and the remedies go beyond those implemented after Water Gate and might prove to be the remedies that would help us reclaim our democracy.

The fundamental and positive change in how our democracy functions is what Senator Lindsey Graham, John McCain, and others in power are afraid of; a fear worthy of a constitutional amendment.

Their fear is genuine because, unlike other evidence in the public discourse of the Bush administration's abuse of power, which the administration and its supporters have been able to duck, this evidence is solid, all in the public domain, the majority of which the administration mistakenly placed there, it cannot be taken back, it cannot be spun, it is intact and most importantly, will remain so.

I am told that proper investigations would start after Bush leaves office. I do think though that no one should be above the law and no criminal should be given special consideration, especially those who hold public office, otherwise we are simply a nation of outlaws.

Crisis Looms as Corporations Seize Control of Commodities

Crisis Looms as Corporations Seize Control of Commodities

By Barbara L. Minton

T
he global food crisis won’t go away any time soon. Capitalism has the average consumer by the belly. Amid growing signs of famine and outrage, the entire chain of commodities and resources of the world are now being cornered by giant corporations. Farmland, water, fertilizer, seed, energy, and most of the basic necessities of life are falling under corporate control, providing increased wealth and power to the ruling elite while the rest of humanity struggles.

Commodity scarcity in India was recently reflected in the need to distribute fertilizer from the police station in Hingoli. Now police have to control the lines that form outside of dealer outlets, because the dealers won’t open for business otherwise. Without this intervention there would be no fertilizer for the planting that must take place before the rain comes. In Akola and Nanded, police involvement is also needed. Agriculture officers have fled their work places to escape angry farmers. In Karnataka, a farmer was shot dead during protests, while farmers stormed meetings and set up road blocks in other districts.

Despite the success of the genetically engineered Bt cotton crops, the trend in India is now back to soybeans because they cost less to grow and need less fertilizer than cotton.

And it’s not just fertilizer that is scarce. Seeds are also in short supply which is being blamed on agitation that has interfered with freight train traffic. However, the shortfall in seeds is 60 percent, a level more indicative of corporate intervention to drive up prices than the actions of powerless farmers.

As farmers fume, the Wall Street Journal heralds the whopping 42 percent jump in the fiscal third quarter profits of huge agriculture giant Archer-Daniels Midland. This increase includes a sevenfold rise in new income in units that store, transport and grade grains such as wheat, corn and soybeans.

The soaring profits of fertilizer maker Potash Corporation of Saskatchewan are reflected in the parabolic movement of its stock price from a yearly low of $70.35 to its current price of $238.22 per share. Shares of fertilizer and animal feed producer Mosaic Corp. have risen from a yearly low of $32.50 to a current price of $159.38.

Similar windfall profits are reported by GMO seed and herbicide king Monsanto whose last quarterly earnings surged by 45%.

Some onlookers blame the financial speculators for driving up the prices of commodities related to agriculture as wealthy investors have piled on looking to cash in on the rising stock prices. And in many ways, today’s commodity market resembles the dot.com boom seen at the turn of the century, as well as the housing boom now in the throws of its bust.

The Commodity Futures Trading Commission recently held a hearing to investigate the role that index funds and hedge funds are playing in driving up the prices of agricultural commodities. Total public fund investment in corn, soybean, wheat, cattle and hogs has risen by 37 billion dollars since 2006. This figure does not include the huge investments of hedge funds which don’t have to make such disclosure. It also doesn’t include the massive world wide investments in farmland made by the wealthy.

The corporate spin is that these investments are helpful to humanity because they will ultimately result in increased food production at a time of rising world demand. They cite the need for increased corporate profits to invest in and develop new technologies that will help farmers improve productivity. This is how GMO seeds are being driven down the throats of farmers, who are told that the modified seeds can squeeze even more yield from each acre of planting.

India has joined other developing countries in the decision to invest less in agriculture as advised by the World Bank-IMF, whose agenda has been to discourage crops for domestic consumption while encouraging production to spur export driven growth. This advice coupled with corporate sponsored deregulation has paved the way for corporate control of the farming process from seed to market. Research and development that was once the domain of universities has also fallen into corporate control.

Farmers in India are caught in a credit crunch. Even if they are able to get the needed fertilizer, they will not have the credit to pay for it. With no increase in farmer income, larger loans are not advanced. The outlook for the small farmer there is much the same as it was in the U.S. thirty years ago, during the height of the small farms falling to big agribusiness.

Corporations blame food shortages and rising prices on the people of China and India whose burgeoning income from manufacturing has allowed the average worker to increase both the amount and quality of his food consumption. But for the corporations, the increased demand for food is a guarantee of super profits to come.

Of course the other commodity you can’t get along without is water, which is now the focus of huge multinational companies seeking to privatize water world wide, perhaps even patent it as Monsanto did with seeds. The fight over water may bring chaos, conflict and misery on a scale never seen before as corporations and governments go so far as to grab the wells from under people’s houses.

And then there’s oil. To produce chemical fertilizer you must make use of fossil fuel. So rising oil prices and rising food prices are joined at the hip. The behavior of corporations in the oil business has been so egregious that there is talk of a windfall profits tax here and abroad.

No, the food crisis will not go away anytime soon. North Korea, Burma and Western Sudan are currently feeling a real threat of starvation while western governments manipulated by corporations continue to promote the diversion of food into biofuels to further exacerbate the upward movement in food prices. Almost all U.S. corn production between 2004 and 2007 has gone into the production of ethanol. European production of ethanol has more than tripled during the same period. This has led to a fall off in grains relative to overall demand which is not a market phenomenon but is the direct result of the government sponsored, corporate backed programs. This comes at the expense of people looking for something to eat, particularly the world’s poor who are now effectively priced out of the food market.

Barbara is a school psychologist, a published author in the area of personal finance, a breast cancer survivor using “alternative” treatments, a born existentialist, and a student of nature and all things natural.

Military censorship of the war in Iraq

Military censorship of the war in Iraq

By Naomi Spencer

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Five years of bloody US occupation have seen numerous crimes against humanity unfold in Iraq. Millions of Iraqi civilians have been killed and wounded, with millions more made into refugees. Ancient, once-vibrant cities have been destroyed by air raids and chemical weapons. Thousands of Iraqis have been imprisoned by the US military in barbaric conditions, and in many cases tortured. In carrying out the occupation, more than 4,400 military personnel—most of them American—have died and tens of thousands have been wounded.

Little reflection of these realities is to be found, however, in the US media, particularly in visual form. Censorship by the military—and self-censorship by media outlets—is part of an effort by the ruling elite to sanitize the war and keep the American public in the dark about its real nature.

As highlighted in a July 26 piece in the New York Times, titled “4,000 U.S. Deaths, and a Handful of Images,” very few photographs of the occupation have trickled out from the military-embedded journalists and been released by the American media. The military and Bush administration have imposed rules barring photos of flag-draped caskets, as well as documentation of battlefield casualties in which faces, ranks, or other identifiers are visible.

The Times notes, “Even memorial services for killed soldiers, once routinely open, are increasingly off limits. Detainees were widely photographed in the early years of the war, but the Department of Defense, citing prisoners’ rights, has recently stopped that practice as well.” Journalists have also been forbidden from releasing images showing what the military deems to be sensitive information—anything from an image of American weaponry to the aftermath of an insurgent strike.

Journalists interviewed by the Times said that even tighter rules imposed last year, requiring written permission from wounded soldiers before their images could be used, were nearly impossible to satisfy in the case of seriously wounded and dying soldiers.

“While embed restrictions do permit photographs of dead soldiers to be published once family members have been notified,” the Times commented, “in practice, the military has exacted retribution on the rare occasions that such images have appeared.”

Clearly, none of these restrictions have anything to do with “prisoners’ rights” or respect for the families of fallen soldiers. To the contrary, the military’s intent is to obscure from the American people the hellish reality in which prisoners and US soldiers alike have found themselves. Indeed, while employing typical military jargon and doublespeak, Defense Department officials make no secret of the subject: free and easy access to photographs, print journalism, and first-hand accounts of the war are a “vulnerability” for US imperialism because it fuels antiwar sentiment in the population and within the military.

The Times article invites a comparison of Vietnam war-era photojournalism and coverage of the present occupation in Iraq: “If the conflict in Vietnam was notable for open access given to journalists—too much, many critics said, as the war played out nightly in bloody newscasts—the Iraq war may mark an opposite extreme: after five years and more than 4,000 American combat deaths, searches and interviews turned up fewer than a half-dozen graphic photographs of dead American soldiers.”

Significantly, the Times was able to document only five published images of war dead that had been released by embedded journalists. In four of those cases, the paper notes, “the photographer was immediately kicked out of his or her embed following publication of such photos.”

The number of embedded journalists has been cut drastically in the last five years. At the time of the invasion in 2003, 770 journalists accompanied US forces. Currently, according to the newspaper industry journal Editor & Publisher, only a dozen embedded journalists remain, about half of whom are photographers. Even if they were granted complete liberty to witness and document the occupation, the idea that 12 journalists could adequately cover the operations of 150,000 troops around the country is absurd.

The first “disembedded” photojournalist documented by the Times was Stefan Zaklin, then of the European Pressphoto Agency, who was barred from working with the US Army after publishing a photo of a dead US officer in Fallujah in 2004. In 2005, Chris Hondros of Getty Images was “kicked out of his embed” with an Army unit after photographing a young girl, screaming and covered in blood, after US soldiers killed her parents.

Two Times journalists were barred in January 2007 after the paper printed a photo of a fatally wounded soldier. The soldier died within hours of being wounded, but the military insisted that the Times reporters violated rules by not getting his written permission to use his image.

The most recent barring of a photojournalist followed a devastating suicide bombing June 26 in Anbar province. The bombing killed 20 people, including three Marines.

The photographer, Zoriah Miller, who goes by his first name, was among the first on the scene after the blast. He documented scattered body parts, pools of blood and debris, and wounded and shocked survivors.

According to a July 17 piece in Photo District News, a photography industry magazine, Zoriah was told to “stop photographing, delete his memory cards, [and] surrender his cameras”.

Three days after family members had been notified of the Marine deaths, Zoriah published the images on his independent website. The next morning, the Times reported, “high-ranking Marine public affairs officers demanded that Mr. Miller remove the photos. When he refused, his embed was terminated.”

Zoriah wrote on his blog that officers claimed the military “would not allow even the pants or shoes of an injured or killed Marine to be depicted in images.” On July 3, the photographer was handed a letter claiming he had violated embed rules by publishing photos that revealed “tactics, techniques and procedures witnessed during operations,” and provided “information on the effectiveness of enemy techniques.”

“Specifically, Mr. Miller provided our enemy with an after-action report on the effectiveness of their attack and on the response procedures of U.S. and Iraqi forces,” Marine spokesman Lt. Col. Chris Hughes told the Times. Another Marine officer, Captain Esteban Vickers, waxed indignant to the paper: “Mr. Miller’s complete lack of respect to these marines, their friends, and families is shameful... How do we explain to their children or families these disturbing pictures just days after it happened?”

Zoriah countered: “The fact that the images I took of the suicide bombing—which are just photographs of something that happens every day all across the country—the fact that these photos have been so incredibly shocking to people, says that whatever they are doing to limit this type of photo getting out, it is working.”

“It is absolutely censorship,” the photographer told the Times. “I took pictures of something they didn’t like, and they removed me. Deciding what I can and cannot document, I don’t see a clearer definition of censorship.” In an earlier interview with PDN magazine, Zoriah commented: “They embedded a war photographer, and when I took a photo of war, they disembedded me. It’s as if it’s okay to take pictures of them handing lollipops to kids on the street and providing medical care, but photographing the actual war is unacceptable.”

Indeed, the claim that documenting casualties aids the enemy is crafted to stifle information about almost any situation. It has also been used to justify the military targeting of independent journalists and media outlets that document American atrocities. The US bombings of independent Arab media Al-Jazeera offices in Kabul, Afghanistan, and in Baghdad served to quash critical coverage of the wars.

Photographers have been increasingly held back from combat zones. James Lee, a photojournalist embedded with a Marine unit, told the Times that he was thwarted by commanders from entering Basra during the massive air assault and raid offensive in April. He was told the military brass “did not want any Western eyes down there.”

As with Fallujah in 2004, the sieges on Basra and Sadr City constituted major war crimes. Over the course of a few days, hundreds of civilians and militiamen were slaughtered. During the siege in Basra, hospital and health officials were prohibited from speaking to independent journalists. American media dutifully reported Pentagon talking points, referring to killed civilians—even when children were counted among the dead—as “terrorists,” or at best “collateral damage.”

Such suppression of the truth is an expression of the larger crime of the war. More fundamentally, however, military censorship and the self-censoring of the media reflect the immense and growing militarization of American political life.

Verizon demands job and benefit cuts

Verizon demands job and benefit cuts

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Contracts covering 65,000 workers at the US telecommunications giant Verizon expire Saturday at midnight. Verizon executives are demanding that current and retired union workers accept massive health and pension concessions as well as greater flexibility to cut jobs and move workers.

Verizon has made extensive plans to continue operations in the event of a strike. Management employees from throughout the company will be relocated to work in areas affected by a possible strike. The company has also recruited retired supervisors to work during a strike. Contractors and non-union vendors have been hired and are being trained to do work normally performed by union employees.

Verizon employs 230,000 workers. It is one of two major telecommunications companies in the US providing landline, wireless, broadband and long distance service. The company is currently undertaking a massive upgrade to its network that will allow it to enter into the cable TV market.

The contract covers workers in Verizon’s landline division in the northeastern states and Washington, DC.

For their part, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have made it clear that they are willing to sacrifice the jobs and benefits of their members. The chief concern of the union bureaucracies is to maintain a minimum number of dues-paying members, regardless of their wages, benefits and working conditions. The CWA and IBEW are also reluctant to take any action that might interfere with their promotion of Democratic candidates in the November elections.

The unions have not informed their members of any specific bargaining demands. Instead, they have spoken in generalities about defending jobs and maintaining benefits.

Nor have they set a strike deadline. In the past, both the CWA and IBEW have allowed contract deadlines to come and go without calling a strike. They have put forward the absurd claim that by doing so they are hurting the company by forcing it to cover the costs of an anticipated strike.

If the union bureaucracy does call a strike, it will seek to use it to pressure management into allowing unionization of Verizon wireless and business divisions. To achieve this, the union leadership would be willing to agree to wage and benefit concessions for its current members and sub-standard pay and benefits for workers in newly unionized divisions.

The CWA signed a deal with AT&T, which accepted concessions in exchange for allowing workers in its wireless division to join the union. Since 2005, the CWA has been able to sign up 19,000 additional members.

Verizon is aiming to make its employees pay the cost of creating its new network by gutting health and pension benefits and holding down wages. In 2005, Verizon ended pension benefits for more than 50,000 management employees. At the same time, the company eliminated retiree health benefits for those managers with fewer than 15 years. The company is now seeking to impose similar cutbacks on its unionized work force.

Massive US Deficit Spells Austerity Policy For Next Administration

Massive US Deficit Spells Austerity Policy For Next Administration

By Jerry White

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The Bush administration this week predicted that the US budget deficit will hit a record $482 billion in 2009. This means that the next president, whether Democrat Barack Obama or Republican John McCain, will follow a policy of unprecedented austerity, including gutting entitlement programs, such as Medicare and Social Security.

Although the deficit figure is $74 billion higher than what the White House predicted just two months ago, it is widely acknowledged that it severely underestimates the real scope of the coming shortfall. The amount announced by White House budget director Jim Nussle includes only $70 billion for the wars in Iraq and Afghanistan—which could cost at least three times as much.

Moreover, the estimate ignores the $100 billion—or hundreds of billions, which could be the eventual cost—being allocated for the Treasury Department’s rescue of the mortgage finance companies, Fannie Mae and Freddie Mac.

The estimate was based on projections of better-than-expected economic growth, corporate tax revenues, unemployment and inflation estimates and a slowing down of the fall in housing prices. These were quickly discredited by news that real estate prices had fallen by a record 15.8 percent in 20 major US cities over the past year. The same day that the White House released the estimate, Merrill Lynch was forced to write-down $5.7 billion in mortgage-backed assets and was essentially bailed out by investors from Singapore.

“That’s not the real number,” former Bush Treasury Secretary Paul O’Neill said of the deficit in a comment cited in the Washington Post. “It’s upward of $500 billion and counting. It’s a mind-boggling number.”

This staggering rise in government indebtedness—which has more than doubled in the current 2008 fiscal year to $389 billion, from $162 billion in 2007 and will be nearly half a trillion in 2009—further undermines the international creditworthiness of the US and places even greater downward pressure on the US dollar.

According to the New York Times, “When Mr. Bush took office, he predicted that federal debt held by the public—the amount borrowed by the government to pay for past deficits—would shrink to just 8 percent of the gross domestic product in 2009. He now estimates that it will amount to 40 percent.”

There is an overwhelming consensus in the economic and political establishment that ordinary Americans will have to pay for the crisis of American capitalism and a budget deficit that has been fueled by massive war spending, tax cuts for the wealthy and the provision of unlimited public resources to bail out major financial institutions.

“This is going to make it extraordinarily difficult for whoever’s going to become president,” Senate Budget Committee Chairman Kent Conrad (Democrat-North Dakota) told the Washington Post. “I don’t care who the president is—when they come and meet with their secretary of the Treasury, the Federal Reserve chairman, their top economists, it will be a sobering moment.”

If he wins the November elections, whatever minimal spending proposals Barack Obama has made during the campaign—including his so-called universal health care plan, tax credits for middle and low-income families and miniscule increases in infrastructure spending—will quickly be shelved in the name of “fiscal responsibility.”

Moreover, the political groundwork for major cutbacks in vital social services is already being laid. In their reports on the budget deficit, both the New York Times and the Washington Post complained of “fiscal pressures” due to the growing Medicare and Social Security costs—a thinly veiled suggestion that the next president will have no choice but to gut these programs, upon which tens of millions of seniors depend for income and health care.

Nowhere is there a suggestion that military spending—which at nearly $700 billion consumes well over half of the US government’s discretionary spending and is more than the rest of the world’s military spending combined—should be cut, let alone eliminated.

For his part, Obama has pledged to expand the military by nearly 100,000 soldiers and marines and increase spending. Given the costs of the ongoing wars in Iraq and Afghanistan, as well as new weapons systems, “ It’s hard to see how we could spend less on the military in the near term,” Richard Danzig, a former Navy secretary who advises Obama on national security, told Reuters in an interview last week.

While McCain calls for the extension of Bush’s tax cuts for the rich, Obama would only raise the top tax rates to the levels that existed under the Clinton administration—to 36 percent and 39.6 percent, from the current 33 percent and 35 percent. He has repeatedly rejected any return to higher tax rates on the wealthy as “confiscatory” and has told the Wall Street Journal he would also consider cutting corporate taxes.

On Monday, Obama held a Washington meeting with leading figures from corporate America and both Democratic and Republican parties. These included billionaire financier Warren Buffett, the CEOs of JPMorgan Chase, PepsiCo and Google, as well as Bush’s former Treasury Secretary Paul O’Neill, now a special advisor to the private equity firm Blackstone Group.

Also participating were top Obama economic advisors Robert Rubin, chairman of Citigroup and Clinton’s former treasury secretary, and Paul Volcker, who served as Federal Reserve chairman under the Carter and Reagan administrations. Ruben played a decisive role in the deregulation of the financial markets that helped create the mortgage and real estate bubble and made billions for wealthy speculators.

Volcker spearheaded the attack on the working class in the early 1980s by driving up interest rates to record levels and deliberately provoking the worst recession since the Great Depression of the 1930s in order to use unemployment as a hammer to drive down wages and living standards.

With bureaucrats from the AFL-CIO and Change to Win union federations present to perpetuate the fraud that Obama speaks for the interests of workers, the Democratic presidential candidate said, “There were some irresponsible decisions that were made on Wall Street and in Washington. In the past few years, I think we learned an essential truth that in the long run we can’t have a thriving Wall Street if we don’t have a thriving Main Street.”

Bipartisan measures were needed, he said, to “stabilize financial markets” and encourage entrepreneurship and the free market.

On Tuesday, Obama held discussions with current Federal Reserve Chairman Ben Bernanke and Bush’s Treasury Secretary Henry Paulson, where he signaled support for the government’s bailout of mortgage giants Fannie Mae and Freddie Mac.

While unlimited public funds are being made available to bail out wealthy investors, there will be no relief for masses of working people in the US facing layoffs, home foreclosures, unsustainable levels of personal debt, declining wages and skyrocketing prices for basic necessities.

Once again, both parties will use the lie that there is “no money” to meet social needs, while hundreds of billions are squandered on imperialist wars and channeled into the pockets of the wealthiest one percent of the population.

This guarantees that under the next administration, the working class occupants of “Main Street” will continue to face unprecedented levels of social distress and economic insecurity, while the country’s infrastructure—its roads, schools, bridges and public services—continue to crumble from neglect

Meeting the basic needs of the population—for decent paying jobs, high quality health care and education and affordable housing—requires a complete reorganization of economic life. Social and political priorities must be turned inside out, rejecting the anarchic prerogatives of the capitalist market and placing the needs of working people first.

This underscores the need for a break with the Democratic and Republican parties and the building of a mass political movement of the working class based on a socialist alternative to the profit system.

Washington's Lords of Creation

Washington's Lords of Creation

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As the Bush administration heads for "closure," Republican Senator Ted Stevens of Alaska seems to be heading for the same fate in a "redecorating" scandal; Monica Goodling of the (in)Justice Department is back in town for her hiring and firing practices; the eternally Foxy Karl Rove continues to give contempt of Congress real meaning; a federal judge ruled against the administration's typically imperial idea of "immunity"; and rumors are flying about coming "preemptive," blanket presidential pardons for those who organized the administration's torture regime and committed other crimes. All the while, holding up the glorious banner of the Great Tradition, the John McCain campaign continues to be a chop shop for K Street Lobbyists. And that's just a two-second glance at the Washington scene as August begins. As always, give them all high marks for consistency! Après Bush, of course, le déluge.

Thomas Frank, a Kansas boy who once followed conservatism deepop-eds that probably drive the readers of the Wall Street Journal crazy, has had a front seat at the Washington spectacle these last years as the Bush administration applied its "enhanced interrogation techniques" to the Federal government. In his latest must-read book, The Wrecking Crew: How Conservatives Rule, Frank offers nothing short of a how-to history of the conservative era -- specifically how to destroy a government, leave Americans in the lurch, and enrich yourselves all at the same time. It wasn't just, as he argues, that this administration left "smoking guns" littered around the landscape, but that it itself was the smoking gun. If you want to know just what we face as a nation in terms of rebuilding America, his book is a good place to start. Tom into his home state and now writes

Follow This Dime

Why Misgovernment Was No Accident in George W. Bush's Washington
By Thomas Frank

Washington is the city where the scandals happen. Every American knows this, but we also believe, if only vaguely, that the really monumental scandals are a thing of the past, that the golden age of misgovernment-for-profit ended with the cavalry charge and the robber barons, at about the same time presidents stopped wearing beards.

I moved to Washington in 2003, just in time for the comeback, for the hundred-year flood. At first it was only a trickle in the basement, a little stream released accidentally by the president's friends at Enron. Before long, though, the levees were failing all over town, and the city was inundated with a muddy torrent of graft.

How are we to dissect a deluge like this one? We might begin by categorizing the earmarks handed out by Congress, sorting the foolish earmarks from the costly earmarks from the earmarks made strictly on a cash basis. We could try a similar approach to government contracting: the no-bid contracts, the no-oversight contracts, the no-experience contracts, the contracts handed out to friends of the vice president. We might consider the shoplifting career of one of the president's former domestic policy advisers or the habitual plagiarism of the president's liaison to the Christian right. And we would certainly have to find some way to parse the extraordinary incompetence of the executive branch, incompetence so fulsome and steady and reliable that at some point Americans stopped being surprised and began simply to count on it, to think of incompetence as the way government works.

But the onrushing flow swamps all taxonomies. Mass firing of federal prosecutors; bribing of newspaper columnists; pallets of shrink-wrapped cash "misplaced" in Iraq; inexperienced kids running the Baghdad stock exchange; the discovery that many of Alaska's leading politicians are apparently on the take -- our heads swim. We climb to the rooftop, but we cannot find the heights of irony from which we might laugh off the blend of thug and Pharisee that was Tom DeLay -- or dispel the nauseating suspicion, quickly becoming a certainty, that the government of our nation deliberately fibbed us into a pointless, catastrophic war.

Bad Apples All Around

So let us begin on the solid ground of these simple facts: this spectacular episode of misrule has coincided with both the political triumph of conservatism and with the rise of the Washington area to the richest rank of American metropolises. In the period I am describing, gentlemen of the right rolled through the capital like lords of creation. Every spigot was open, and every indulgence slopped out for their gleeful wallowing. All the clichés roared at full, unembarrassed volume: the wines gurgled, the T-bones roasted, the golf courses beckoned, the Learjets zoomed, the contractors' glass buildings sprouted from the earth, and the lobbyists' mansions grew like brick-colonial mushrooms on the hills of northern Virginia.

Democrats, for their part, have tried to explain the flood of misgovernment as part of a "culture of corruption," a phrase at once obviously true and yet so amorphous as to be quite worthless. Republicans have an even simpler answer: government failed, they tell us, because it is the nature of government enterprises to fail. As for the great corruption cases of recent years, they cluck, each is merely a one-of-a-kind moral lapse unconnected to any particular ideology -- an individual bad apple with no effect on the larger barrel.

Which leaves us to marvel helplessly at what appears to be a spectacular run of lousy luck. My, what a lot of bad apples they are growing these days!

Corruption is uniquely reprehensible in a democracy because it violates the system's first principle, which we all learned back in the sunshiny days of elementary school: that the government exists to serve the public, not particular companies or individuals or even elected officials. We Are the Government, insisted the title of a civics primer published in the earnest year of 1945. "The White House belongs to you," its dust jacket told us. "So do all the other splendid buildings in Washington, D.C. For you are a citizen of the United States." For you, young citizen, does the Post Office carry letters to every hamlet in the nation. For you does the Department of Agriculture research better plowing methods and the Bureau of Labor Statistics add up long columns of numbers.

The government and its vast workforce serve the people: The idea is so deep in the American grain that we can't bring ourselves to question it, even in this disillusioned age. Republicans and Democrats may fight over how big government should be and exactly what it should do, but almost everyone shares those baseline good intentions, we believe, that devotion to the public interest.

We continue to believe this in even the most improbable circumstances. Take the worst apple of them all, lobbyist Jack Abramoff, whose astonishing career as a corruptionist has been unreeling in newspaper and congressional investigations since I came to Washington. Abramoff started out as a great political success story, a protégé and then a confidant of the leaders of the conservative faction of the Republican Party. But his career disintegrated on news of the inventive ways he ripped off his clients and the luxury meals and lavish trips with which he bribed legislators.

Journalistic coverage of the Abramoff affair has stuck closely to the "bad apple" thesis, always taking pains to separate the conservative movement from its onetime superstar. What Abramoff represented was "greed gone wild," asserts the most authoritative account on the subject. He "went native," say others. Above all, he was "sui generis," a one-of-a-kind con man, "engaged in bizarre antics that your average Zegna-clad Washington lobbyist would never have dreamed of."

In which case, we can all relax: Jack Abramoff's in jail. The system worked; the bad apple has been plucked; the wild greed and the undreamed-of antics have ceased.

Misgovernment by Ideology

But the truth is almost exactly the opposite, whether we are discussing Abramoff or the wider tsunami of corruption. The truth is as obvious as a slab of sirloin and yet so obscured by decades of pettifoggery that we find it almost impossible to apprehend clearly. The truth slaps your face in every hotel lobby in town, but we still don't get the message.

It is just this: Fantastic misgovernment of the kind we have seen is not an accident, nor is it the work of a few bad individuals. It is the consequence of triumph by a particular philosophy of government, by a movement that understands the liberal state as a perversion and considers the market the ideal nexus of human society. This movement is friendly to industry not just by force of campaign contributions but by conviction; it believes in entrepreneurship not merely in commerce but in politics; and the inevitable results of its ascendance are, first, the capture of the state by business and, second, all that follows: incompetence, graft, and all the other wretched flotsam that we've come to expect from Washington.

The correct diagnosis is the "bad apple" thesis turned upside down. There are plenty of good conservative individuals, honorable folks who would never participate in the sort of corruption we have watched unfold over the last few years. Hang around with grassroots conservative voters in Kansas, and in the main you will find them to be honest, hardworking people. Even our story's worst villains can be personally virtuous. Jack Abramoff, for example, is known to his friends as a pious, polite, and generous fellow.

But put conservatism in charge of the state, and it behaves very differently. Now the "values" that rightist politicians eulogize on the stump disappear, and in their place we can discern an entirely different set of priorities -- priorities that reveal more about the unchanging historical essence of American conservatism than do its fleeting campaigns against gay marriage or secular humanism. The conservatism that speaks to us through its actions in Washington is institutionally opposed to those baseline good intentions we learned about in elementary school.

Its leaders laugh off the idea of the public interest as airy-fairy nonsense; they caution against bringing top-notch talent into government service; they declare war on public workers. They have made a cult of outsourcing and privatizing, they have wrecked established federal operations because they disagree with them, and they have deliberately piled up an Everest of debt in order to force the government into crisis. The ruination they have wrought has been thorough; it has been a professional job. Repairing it will require years of political action.

Conservatism-in-power is a very different beast from the conservatism we meet on the streets of Wichita or the conservatism we overhear talking to itself on the pages of Free Republic. For one thing, what conservatism has done in its decades at the seat of power is fundamentally unpopular, and a large percentage of its leaders have been men of eccentric ideas. While they believe things that would get them laughed out of the American Sociological Association, that only makes them more typical of the movement. And for all their peculiarity, these people -- Grover Norquist, Tom DeLay, Jack Abramoff, Newt Gingrich, and the whole troupe of activists, lobbyists, and corpora-trons who got their start back in the Reagan years -- have for the last three decades been among the most powerful individuals in America. This wave of misgovernment has been brought to you by ideology, not incompetence.

Yes, today's conservatives have disgraced themselves, but they have not strayed from the teaching of their forefathers or the great ideas of their movement. When conservatives appoint the opponents of government agencies to head those government agencies; when they auction their official services to the purveyor of the most lavish "golf weekend"; when they mulct millions from groups with business before Congress; when they dynamite the Treasury and sabotage the regulatory process and force government shutdowns -- in short, when they treat government with contempt -- they are running true to form. They have not done these awful things because they are bad conservatives; they have done them because they are good conservatives, because these unsavory deeds follow naturally from the core doctrines of the conservative tradition.

And, yes, there has been greed involved in the effort -- a great deal of greed. Every tax cut, every cleverly engineered regulatory snafu saves industry millions and perhaps even billions of dollars, and so naturally securing those tax cuts and engineering those snafus has become a booming business here in Washington. Conservative rule has made the capital region rich, a showplace of the new plutocratic order. But this greed cannot be dismissed as some personal failing of lobbyist or congressman, some badness-of-apple that can be easily contained. Conservatism, as we know it, is a movement that is about greed, about the "virtue of selfishness" when it acts in the marketplace. In rightwing Washington, you can be a man of principle and a boodler at the same time.

The Wrecking Crew in Full Swing

One of the instructive stories We Are the Government brought before generations of schoolkids was the tale of a smiling dime whose wanderings were meant to introduce us to the government and all that it does for us: the miner who digs the ore for the dime has his "health and safety" supervised by one branch of the government; the bank in which the dime is stored enjoys the protection of a different branch, which "sees that [banks] are safe places for people to keep their money"; the dime gets paid in tax on a gasoline sale; it then lands in the pocket of a Coast Guard lieutenant, who takes it overseas and spends it on a parrot, which is "quarantined for ninety days" when the lieutenant brings it home. All of which is related with the blithest innocence, as though taxes on gasoline and quarantines on parrots were so obviously beneficial that they required little further explanation.

Clearly, a more up-to-date version is required. So let us follow the dime as it wends its way through our present-day capital. Its story, we will find, is the reverse of what it was in 1945. That old dime was all about service, about the things government could do for us. But the new dime is about profit -- about the superiority of private enterprise, about the huge sums that can be squeezed out of federal operations. Instead of symbolizing good government, the dime now shows us the wrecking crew in full swing.

Our modern dime first comes to Washington as part of some good citizen's taxes, and it leaves the U.S. Treasury in a payment to a company that has been hired to do work on the nation's ports. Back in 1945, the government would have done the work itself, but now it uses contractors for such things. This particular contractor knows how to win a bid, but it doesn't know how to do the work, so it subcontracts the job to another outfit. The dime follows, and it eventually makes up a worker's salary, who incorporates it into his monthly car payment. From there it travels into the coffers of an auto industry trade association, which happens to be very upset about a rule proposed by a federal agency that would require cars to notify drivers when their tire pressure is low.

So the trade association gives the dime to a Washington consultant who specializes in fighting federal agencies, and this man launches challenge after challenge to the studies that the agency is using in the tire-pressure matter. It takes many years for the agency to make its way through the flak thrown up by this clever fellow. Meanwhile, with his well-earned dime, he buys himself a big house with nice white columns in front.

But this is only the beginning of the story. As we make our rounds of conservative Washington, we glimpse something much greater than single acts of incompetence or obstruction. We see a vast machinery built for our protection reengineered into a device for our exploitation. We behold the majestic workings of the free market itself, boring ever deeper into the tissues of the state. Ultimately, we gaze upon one of the true marvels of history: democracy buried beneath an avalanche of money.

Thomas Frank, the author of What's the Matter with Kansas?, is the founding editor of The Baffler, a contributing editor at Harper's, and, most recently, a columnist for the Wall Street Journal. His WSJ columns can be read at his website. He lives, of course, in Washington D.C. and this essay has been adapted from his new book, The Wrecking Crew: How Conservatives Rule (Metropolitan Books, 2008).