Friday, September 26, 2008

FDIC May Need $150 Billion Bailout as More Banks Fail

FDIC May Need $150 Billion Bailout as More Banks Fail

By David Evans

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Deborah Horn tugs on the handle of the glass-paned entrance of the IndyMac Bancorp Inc. branch in Manhattan Beach, California. The door won't budge. The weekend is approaching, and Horn, 44, the sole breadwinner in a family of three, needs cash.

A small notice taped to the window on this Friday afternoon in mid-July tells her why she's been locked out. IndyMac has failed, the single-spaced, letter-sized paper says; the bank is now in the hands of the Federal Deposit Insurance Corp.

‘‘The Receiver is now taking possession of the Bank,'' the sign says.

‘‘I'm physically shaking,'' says Horn, an academic tutor, as she peers into the bank. Inside, an FDIC examiner is talking to six stone-faced IndyMac employees. ‘‘I don't know when I'm going to be able to get my money,'' Horn says. ‘‘I'm a single mom. This is the money I live on.''

Don't worry about Horn. She'll be all right, as will most of Pasadena, California-based IndyMac's 200,000-plus customers.

That's because the FDIC, created in 1934, insures all accounts up to $100,000 at its member banks, and it has never failed to honor a claim. The people to worry about are U.S. taxpayers.

The IndyMac debacle is taking a large bite out of FDIC reserves, and if scores of other banks fail in the year ahead, the fund will be depleted. Taxpayers will have to step in.

Worst Wave

Americans had gotten used to the idea that bank failures were as rare as a category five hurricane. No banks went bust in 2005 or 2006. Seven collapsed in 2007 as the credit crisis began to exact a toll. So far in 2008, 12 more, with total assets of $42 billion, have fallen -- that's the worst wave of bank failures since 1992.

IndyMac, which had $32 billion in assets when it went into receivership, is the most expensive bank failure the FDIC has ever covered. And that record may not stand for long.

By the end of 2009, about 100 U.S. banks with collective assets of more than $800 billion will fail, predicts Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based firm that sells its analysis of FDIC data to investors.

‘‘It's not going to be Armageddon,'' says Mark Vaughan, a financial economist at the Federal Reserve Bank of Richmond, Virginia and a senior lecturer in economics at Washington University in St. Louis. ‘‘But it's going to be bad.''

FDIC's Secret List

The FDIC knows which banks are at risk; it has a watch list with 117 institutions. The agency won't disclose their names because doing so could cause depositors to panic and pull out all of their funds.

It won't take many more failures before the FDIC itself runs out of money. The agency had $45.2 billion in its coffers as of June 30, far short of the $200 billion Whalen says it will need to pay claims by the end of next year. The U.S. Treasury will almost certainly come to the rescue by lending money to the FDIC.

Regardless of who wins control of the White House and Congress in November, no politician is likely to vote in favor of leaving federally insured depositors out in the cold.

A taxpayer bailout of the FDIC would come on the heels of intervention by the U.S. Treasury Department and Federal Reserve to save investment bank Bear Stearns Cos., mortgage giants Fannie Mae and Freddie Mac and the world's largest insurer, American International Group Inc.

Uninsured Deposits

Emergency federal lending to the FDIC could swell the cost of government rescues of failed financial institutions to more than $400 billion -- not including the $700 billion general Wall Street bailout now under discussion in Congress. Under federal statute, the FDIC must pay back any loans from the Treasury.

That number would be even higher if the government were on the hook for uninsured deposits -- which amount to $2.6 trillion, 37 percent of the total of $7 trillion held in the U.S. branches of all FDIC member banks.

The subprime crisis -- which started in the suburbs of California and Florida and migrated through the alchemy of securitization to Wall Street investment banks -- has come almost full circle, spreading its toxins to the very lenders who first extended those teaser-rate, no-document mortgages to homeowners.

In 2006, IndyMac was the largest provider of mortgages that didn't require borrowers to provide proof of their incomes. And as of mid-September, investors were worried that Washington Mutual Inc., the biggest thrift in the U.S., would be the next bank to go belly up.

A federal takeover of Washington Mutual, which has assets of $310 billion, could cost taxpayers $24 billion more, according to Richard Bove, an analyst at Miami-based Ladenburg Thalmann & Co.

Slower To Hit

The reckoning that has run through Wall Street, claiming investment banks Lehman Brothers Holdings Inc. and Bear Stearns among its victims, has been slower to hit Main Street. In mid- 2007, Wall Street firms began disclosing losses on their packages of securitized home loans.

From August 2007 to September 2008, banks worldwide wrote down more than $500 billion. Regional banks, by contrast, have waited to write off their bad mortgages, hoping the housing market would improve and defaults would level off. Instead, they've risen.

FDIC-insured banks charged off $26.4 billion of bad loans in the second quarter of 2008, the most since 1991.

U.S. lenders, in their embrace of subprime lending, committed the same analytical fallacy as their Wall Street counterparts. When it came to assessing risk, they relied on the recent past to predict the near future.

Living in the Past

They were blinded by years of rising home prices and low mortgage default rates.

The FDIC fell into the same trap. As recently as March, an internal FDIC memo estimated the cost to cover bank collapses in 2008 would be just $1 billion, dropping to $450 million in 2009. It wasn't even close.

The IndyMac failure alone, which happened four months after that memo was circulated, will cost the FDIC $8.9 billion -- and the bill for all 12 collapses will be about $11 billion, the FDIC says.

FDIC Chairman Sheila Bair says the agency's forecast was based on models using data from the past 20 years, which included long periods with few bank failures.

‘‘Given the change in economic conditions, we need to weight the more recent data more heavily,'' Bair says. ‘‘You also need a good dose of common sense.''

Bair says depositors shouldn't fret about their banks. ‘‘We do have a handful with some significant challenges,'' she says. ‘‘Overall, banks are quite safe and sound.''

Bair is duty bound to say that, says Joseph Mason, an economist who worked for the Treasury from 1995 to 1998. Part of the FDIC's job is to reassure the public and prevent runs on banks. Mason says Bair's rhetoric masks the agency's inability to grasp the scope of the coming crisis.

‘Ignoring the Problem'

‘‘The FDIC and the banking regulators are ignoring the problems, hoping they'll go away,'' he says. ‘‘They won't.''

The quake that shook markets in September may make the FDIC's task more complicated and expensive. With investment banks in eclipse, deposit-taking institutions will now play a larger role in financing the economy.

Earlier this month, Bank of America Corp. agreed to buy Merrill Lynch & Co. for $50 billion, and Wachovia Corp. and Morgan Stanley were in talks about a potential merger.

'Would Be Miraculous'

From 2002 to 2007, U.S. lenders made a total of $2.5 trillion in subprime mortgages, according to the newsletter Inside Mortgage Finance. ‘‘Given the magnitude of the bad loans still on bank balance sheets, it would be miraculous for the FDIC to squeak by with losses of less than $200 billion,'' Whalen says.

On Sept. 18, in yet another stunning turn of events, Paulson proposed a plan that would cost the government, if not necessarily the FDIC, hundreds of billions of dollars more.

The Treasury secretary says the government will purchase toxic mortgage debt from banks in an effort to cleanse the financial system. In an unprecedented move, the Treasury also pledged $50 billion to insure nonbank money market funds.

Bair says Paulson's plan won't reduce the number of banks on the FDIC's watch list.

One reason the rolling financial crisis is hitting regional banks later than it walloped Wall Street is because the very system that is meant to protect depositors -- federal insurance -- has also served to prop up weak lenders. So has the ready supply of credit extended to banks by another government-chartered group, the Federal Home Loan Banks.

Because all deposits up to $100,000 are insured, most savers can be agnostic about where they put their money. They don't have to know -- or care -- whether a bank is making sound or foolish loans.

Unlike buyers of stocks or bonds, people who put their money in banks rarely do research about the soundness of the institution. That makes it easy for banks -- both prudent and reckless ones -- to raise cash.

Brokered Deposits Loophole

Banks have taken the FDIC's protection and run with it, thanks to the phenomenon of brokered deposits -- and a giant loophole in federal regulations.

As of June 30, Whalen says banks held $644 billion from brokers who offer customers a way to gain FDIC insurance for multiple accounts.

Promontory Interfinancial Network LLC, an Arlington, Virginia-based company founded in 2002 by former federal officials --including some from the FDIC itself -- has figured out how to help wealthy clients insure as much as $50 million each by putting their money into separate accounts at 500 different banks.

While the law does limit insurance to $100,000 per account, it places no ceiling on the number of different banks where an individual can hold accounts -- a loophole Congress failed to close even after the savings and loan debacle of 1984-1992.

Missing Discipline

Bair says brokered deposits can provide quick cash but also create potential danger.

‘‘It is quite easy to get brokered deposits, and there's not a lot of market discipline with the brokered deposits,'' she says. ‘‘When there's excessive reliance on them, particularly to fuel rapid growth on the balance sheet, that's definitely a high-risk factor.''

The other big source of money for banks is the FHLB, an under-the-radar network of 12 regional banks created by Congress in 1932 to help lenders finance mortgages. Lenders had borrowed a total of $840.6 billion from the FHLB system as of June 30, up 38 percent from $608 billion in the same period a year earlier.

Treasury Secretary Henry Paulson, in a little-noticed action on Sept. 7, the day after he announced the bailout of Fannie and Freddie, extended a secured credit line to the FHLB to provide an emergency source of funding if needed.

FHLB Advances

Vaughan says credit from the FHLB is keeping some sick banks afloat and postponing the inevitable.

‘What's going to happen,'' he says, ‘‘is that weak banks will use FHLB advances to avoid discipline from funding markets. In some cases, that will keep their doors open longer than they otherwise would, all-the-while offloading more and more potential losses onto the FDIC and taxpayers.''

Normally, the FDIC is no more than four initials customers see when they walk into their banks. In recent years, the agency hasn't had to close many banks, as it collected small amounts of insurance premium payments.

President Franklin D. Roosevelt signed the law creating the FDIC in the middle of the Depression. As part of the New Deal, Congress created a system of federal insurance to end bank runs by reassuring the public that depositing money in banks was safe. All banks paid the same rate for insurance.

Wave of Failures

The FDIC shares regulatory authority with other agencies. The Office of Thrift Supervision oversees federally chartered savings and loans, the Comptroller of the Currency monitors national banks, and state banking regulators review state- chartered banks.

The FDIC is the only one of these agencies that insures deposits.

By and large, the government's insurance system worked until the 1980s, when thrifts went on a commercial real estate lending binge, triggering a wave of failures and consolidation that lasted from 1984 to 1992.

In 1991, Congress changed the way FDIC premiums were assessed, requiring banks to pay rates based on how well capitalized they were for the risks they faced. As bank failures subsided to less than a dozen a year by 1995, the FDIC's reserves began to swell.

As a result, the agency cut to zero the premiums it charged to the 90 percent of the banks deemed safest. That free ride continued for 10 years.

‘No Good Way'

In 2006, Congress increased insurance payments for most banks, averaging $5-$7 per $10,000 of deposits.

The insurance premiums imposed by the FDIC on the riskiest banks -- running as high as $43 per $10,000 -- are still far below the rates private insurers would charge, says Sherrill Shaffer, former chief economist of the Federal Reserve Bank of New York.

At the same time, charging struggling banks a fair price for insurance premiums may drive them into insolvency, he says.

‘‘That can be destabilizing,'' says Shaffer, who's now a professor of banking at the University of Wyoming in Laramie. ‘‘There's really no good way around that. It's an issue that policy makers and analysts have wrestled with for decades.''

Bair says the FDIC is gearing up for the coming wave of bank failures. She says she's developing a plan to raise insurance premiums.

The agency's Division of Resolutions and Receiverships has boosted authorized staffing levels by 48 percent, to 331, this year. It has hired 178 new financial specialists and called up 65 retirees for temporary service under a special program.

Bair vs. Enron

Bair, 54, an attorney who graduated from the University of Kansas School of Law, has challenged financial institutions as a regulator for more than a decade. President George W. Bush nominated her as chairman, and she was sworn in on June 26, 2006.

She replaced Donald Powell, a former Texas banker. In 1992, as a member of the Commodity Futures Trading Commission, Bair cast the lone vote against Enron Corp.'s effort to exempt certain energy contracts from the agency's anti-fraud and anti- market manipulation enforcement powers.

Nine years later, Enron blew up in one of the biggest financial scandals in U.S. history.

As assistant secretary of the Treasury for financial institutions in 2002, Bair criticized abusive subprime mortgage brokers.

‘‘Lenders have made loans with little or no regard for a borrower's ability to repay and have engaged in multiple refinance transactions that result in little or no benefit to a borrower,'' she told the Pittsburgh Community Reinvestment Group on March 18, 2002.

‘Rock and Brock'

Bair has published two children's books. One of them, ‘‘Rock, Brock, and the Savings Shock'' (Albert Whitman, 2006) is a tale of two twins -- Rock the Saver and Brock the Spender

Jobless claims pushed to 7-year high

Jobless claims pushed to 7-year high


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New claims for unemployment benefits jumped last week to their highest level in seven years due to the impact of a slowing economy and Hurricanes Ike and Gustav, the Labor Department reported Thursday.

The department said new requests for jobless benefits for the week ending Sept. 20 increased by 32,000 to a seasonally-adjusted 493,000, much higher than analysts' expectations of 445,000.

Wall Street was more focused on Washington, though, where lawmakers and the administration appeared to be moving closer to a $700 billion bailout package for the financial system. Stocks rose, with the Dow up more than 200 points in early trading.

The two hurricanes added about 50,000 new claims in Louisiana and Texas, the department said. The four-week moving average, which smooths out fluctuations, rose to 462,500. That's the highest it has been since Nov. 3, 2001.

The level of new claims was the highest since shortly after the 9/11 attacks, when it reached 517,000.

David Resler, chief economist at Nomura Securities, said Thursday's figure is the second-highest since July 1992. Claims have topped 500,000 only a handful of times in the past twenty years, he said, and were consistently above that level during the 1991 recession.

Even excluding the effects of the hurricanes, jobless claims remain at elevated levels. Weekly claims have now topped 400,000 for ten straight weeks, a level economists consider a sign of recession. A year ago, claims stood at 309,000.

The report "reflects a marked deterioration in the job market," Resler wrote in a note to clients. "That deterioration may well accelerate as the distress in the financial markets deepens and the effect of credit impairment spreads to other sectors."

The number of people continuing to draw jobless benefits last week was 3.54 million, up 63,000 from the previous week and nearly a five-year high. The four-week average of continuing claims was 3.49 million.

Other economic indicators Thursday were also negative. The Commerce Department said that orders for big-ticket manufactured goods fell by 4.5 percent in August, far more than the 1.6 percent decline economists expected.

And new home sales fell by 11.5 percent in August, the Commerce Department said in a separate report, to a seasonally adjusted annual rate of 460,000, the lowest level in more than 17 years.

Hurricane Gustav first had an impact on jobless claims for the week ending Sept. 13. The department said Thursday that Louisiana reported an increase in claims of 18,409 during that week, mostly due to Gustav.

The financial crisis, falling home prices and slowing consumer spending continue to apply the brakes to the U.S. economy. The unemployment rate jumped unexpectedly to 6.1 percent in August, the highest level in five years.

Last week, drug maker Schering-Plough Corp. said it plans to cut 1,000 sales jobs to reduce costs, part of a 10 percent reduction in staff announced in April. Also, the nation's largest chicken producer, Pilgrim's Pride Corp., announced it would reduce 100 jobs besides the 600 job losses it previously announced.

U.S. Federal Reserve funnels $30B into overseas money markets

U.S. Federal Reserve funnels $30B into overseas money markets

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The Federal Reserve, in co-ordinated action with foreign central banks, plowed $30 billion into money markets overseas Wednesday, part of an ongoing effort to fight a global credit crisis.

The Fed's action — taken at 1 a.m. ET — sets up temporary "swap" arrangements to supply dollars to the central banks of Australia, Denmark, Norway and Sweden in exchange for their currencies.

"These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets," the Fed said in a brief statement.

"Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises," the Fed added.

The new swap arrangements will provide up to $10 billion each to the central banks of Australia and Sweden and $5 billion apiece to the central banks of Denmark and Norway.

Last week, the Fed and other foreign central banks pumped as much as $180 billion US into money markets overseas. The European Central Bank, the Bank of Japan, the Bank of England, the Swiss National Bank and the Bank of Canada participated in that manoeuvre.

The global credit crisis poses a danger not only to the U.S. economy but also the world economy.

Finance officials from the world's major economic powers pledged this week to do all they can to provide relief.

The Group of Seven countries said they welcomed the extraordinary steps by the United States to stem the crisis, including a plan for the Treasury Department to buy $700 billion in bad mortgages and other toxic assets held by banks and other financial institution.

Those dodgy debts are at the heart of the crisis. Besides the United States, the Group of Seven is made up of Japan, Germany, France, Britain, Italy and Canada.

McCain campaign has ads saying he has won before the Debate has even happened!

McCain Wins Debate

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Although the fate of tonight's presidential debate in Mississippi remains very much up in the air, John McCain has apparently already won it -- if you believe an Internet ad an astute reader spotted next to this piece in the online edition of the Wall Street Journal this morning.

"McCain Wins Debate!" declares the ad which features a headshot of a smiling McCain with an American flag background. Another ad spotted by our eagle-eyed observer featured a quote from McCain campaign manager Rick Davis declaring: "McCain won the debate-- hands down."

Here's the screenshot.

This Is How The Bail Out Will Screw You

This Is How The Bail Out Will Screw You

Protesters Take Their Outrage to Wall Street

Protesters Take Their Outrage to Wall Street

By Steven Wishnia

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Enraged by the prospect of $700 billion of their taxes going to reimburse Wall Street speculators for their dubious investments, about 500 protesters paraded through Lower Manhattan's financial district Thursday afternoon, their chants of "You broke it, you bought it" reverberating through the narrow office building canyons and off the flag-draped wall of the New York Stock Exchange.

"I'm outraged," said Linda Greco, a 40-ish Brooklyn woman. "People are losing their homes. There's homeless people all over the city. The schools are falling apart. And they want to bail these pigs out? It's about time the people of this country woke up and took this country back."

Like many others, Greco learned about the protest from an e-mail tree that sprouted like kudzu on methamphetamine. "I must have gotten 10 to 20," she said.

The demonstration originated with an e-mail sent out Monday afternoon by Arun Gupta, an editor at the leftist Indypendent. "They said providing health care for 9 million children, perhaps costing $6 billion a year, was too expensive, but there's evidently no sum of money large enough that will sate the Wall Street pigs," it read. "We need to act now while we can influence the debate. With Bear Stearns, Fannie and Freddie, AIG, the money markets and now this omnibus bailout, well in excess of $1 trillion will be distributed from the poor, workers and middle class to the scum floating on top? Let the bondholders pay, let the banks pay, let those who brought the 'toxic' mortgage-backed securities pay!"

"It tapped into an enormous reservoir of anger," Gupta told the crowd that gathered at the bull statue on Bowling Green. The e-mail inspired similar protests in almost 200 cities and towns, from Greensboro, N.C., to Henderson, Nev. Though phone calls and e-mails to Congress have been running nearly 1,000 to 1 against the bailout, he added, "it's clear that the fix is in."

"It's out-fuckin-rageous. They expect the public to bail them out?" said Rich Haber, 61, a retired Brooklyn bus driver. "I worked for the Transit Authority for 27 years, and I can't afford a house. I knew these mortgages were bogus."

Others offered similar vitriol. "Appalling," said Kate Powers, 39, an Obama supporter from Brooklyn. "Ridiculous," said Laura Skove, an 18-year-old student in an Obama T-shirt. "The government can't spend money on health care, but it can on Wall Street." "Highway robbery," said Annie V., part of a group holding up signs reading "N.Y. to Wall St. and the Bush Adm.: Drop Dead" -- echoing the legendary "FORD TO CITY: DROP DEAD" headline the Daily News ran in 1975 when then-President Gerald Ford refused to bail out debt-ridden New York City.

That fiscal crisis ended when the banks imposed harsh budget austerity on New York, forcing it to raise the subway fare by 43 percent while virtually eliminating maintenance, lay off police and close firehouses during an epidemic of crime and arson, and slash funding for schools and hospitals.

"They've been allowed to totally screw up and then get bailed out. I want to strangle every single politician," said Kevin Condon, a 30-year-old farm-stand worker from Brooklyn carrying a "Jump Without Your Golden Parachute" sign. Though he doesn't want to see the economy collapse, he said the crisis is an opportunity to dream of a different system, of smaller, more locally based commerce.

"Why isn't everyone in the street?" wondered Megan Fulton, 26, a Brooklyn graduate student. She held a sign asking the government to bail her out for the $93,000 she owes in student loans.

Older protesters had a feeling of deja vu. Davida Joyner, 51, of Harlem worked helping tenants administer abandoned buildings during the 1970s, then suffered a brain tumor and was out of commission for 20 years. "I woke up like Rumpelstiltskin," she said. "I saw all of this housing situation become unbelievable again." Sol McCants, 54, recalled the stock-market and savings-and-loan scams of the 1980s.

"These people are thieves and belong in jail," he said. "McCain's trying to make it look like he's doing a great thing, but he's not. That scumbag doesn't want to face the questions because he was behind the savings and loans."

The best thing that might come out of this crisis, he added, is that white voters might learn to "see their pockets" instead of blaming black and brown people for their problems. But if Obama is elected, people will have to nag him "like my wife tells me every other night to put the toilet seat down."

"I don't think the Democrats are much better," said Eva-Lee Baird, 68, of the Granny Peace Brigade -- noting that many of the Depression-era controls on imprudent investments were taken away under Bill Clinton.

"We need something like the New Deal," said James Trimarco, 30, of Brooklyn. "Put people to work doing actual stuff -- transportation and the environment -- instead of trading fictitious capital around the world."

Though Lower Manhattan is one of the most heavily locked down areas in the country -- the Stock Exchange is surrounded by an iron fence, the closest subway exit is barricaded off, and surrounding streets have concrete stanchions and raised metal sheets to block traffic, with guards and dogs in booths watching them -- police presence at the demonstration was surprisingly light, especially by the draconian standards of the Giuliani-Bloomberg era.

Gupta attributed that to the "media feeding frenzy" surrounding the protest. "You think that while those fuckers are debating in D.C., they want pictures of protesters being beaten by cops being beamed around the world?" he asked.

Many Wall Street types greeted the protesters with contempt. "Just look at these people," sneered one broker as the march neared the Stock Exchange. Another group held a "Get a Job" sign in an office window, and one man dropped a few dollar bills out of his. They fluttered down short of the marchers, landing in a construction site.

Such contempt from the upper classes is nothing new to the lowly proles of Gotham. On Broadway near Wall Street is a stone slab commemorating billionaire real estate developer Harry B. Helmsley, "whose richness of spirit and love for New York helped build this great city." New Yorkers of a certain age and level of cynicism are more likely to remember Helmsley's late widow, Leona, a hotel magnate nicknamed the "Queen of Mean."

She achieved notoriety by leaving $12 million to her dogs -- more than she left to any of her grandchildren -- and telling her housekeeper that "We don't pay taxes. Only the little people pay taxes."

Bailout Protesters Send a Strong Message from Wall Street

Bailout Protesters Send a Strong Message from Wall Street

By Jeremy Scahill

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Updated: These photos were sent to us by Jeremy Scahill who attended the protests against Bush's bailout in New York City:

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Protesters confront corporate execs staring out the windows at the streets:

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"Greed Kills" ... "Paulson, Rescue My Two Kids From Their College Loans" ... "Bush & Co., Bailout the Real People, Not Your Rich Pals":

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"4.0 GPA, $90,000 in Debt, No Job ... Where's My Bailout?":

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Click here to learn more about joining the nationwide protest against Bush's bailout.

Jeremy Scahill is the author of Blackwater: The Rise of the World's Most Powerful Mercenary Army.

Bailout Backlash: Five Surprising Things That Happened on Thursday

Bailout Backlash: Five Surprising Things That Happened on Thursday

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Even news junkies had a hard time keeping up with a flurry of events on September 25 on Wall Street, Washington and the presidential campaigns. Here's a round-up of what happened:

1. Outrage over the bailout spreads across the Internet and to Wall Street

The Internet is flooded with angst about Treasury Secretary Paulson's proposed $700 billion bailout:

A lot of the online rage is channeled in the form of signatures on petitions and electronic letters to members of Congress. Senator Bernie Sanders (Independent-Vt.) is circulating a popular one on the left-wing blog Huffington Post. The 1.9-million member Service Employees International Union is also circulating a sign-on letter to Congress that reads in part: "No deal. No blank check." reasons: "A bailout tells responsible Americans that they are suckers."

The anger is coming from right-leaning groups as well. The National Taxpayers Union's "No More Bailouts!" petition reads: "Bailouts that keep mismanaged organizations afloat delay natural corrections to unsound business practices . Enough is enough. No more bailouts. Not with my tax dollars."

The conservative site features a similar petition. Right-wing blogger Patrick Ruffini, meanwhile, urges Republicans to vote against the bailout, since "God Himself couldn't have given rank-and-file Republicans a better opportunity to create political space between themselves and the Administration."

And as Steven Wishnia reports for AlterNet, protesters took to New York's financial district:

Enraged by the prospect of $700 billion of their taxes going to reimburse Wall Street speculators for their dubious investments, about 500 protesters paraded through Lower Manhattan's financial district Thursday afternoon, their chants of "You broke it, you bought it" reverberating through the narrow office building canyons and off the flag-draped wall of the New York Stock Exchange.

2. White House pow-wow flops

The White House summit originally billed as a bipartisan, non-partisan effort to come to a deal on Treasury Secretary Hank Paulson's proposed $700 billion bailout plan ended bitterly. With the entire Senate and House leadership along with Barack Obama and John McCain in attendance, Paulson apparently got down on one knee at the end of the meeting and begged the Democratic congressional leaders not to publicly disclose how poorly the session had gone:

Inside the White House session, House Republican leader John Boehner announced his concerns about the emerging plan and asked that the conservatives' alternative be considered.

Financial Services Chairman Barney Frank, the feisty Democrat who has been leading negotiations with Paulson, reacted angrily, saying Republicans had waited until the last moment to present their proposal.

McCain, who dramatically announced Wednesday that he was suspending his campaign to deal with the economic crisis, stayed silent for most of the session and spoke only briefly to voice general principles for a rescue plan.

"If money isn't loosened up, this sucker could go down," Bush apparently warned as the meeting broke up. Republican Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee summed up the White House meeting, saying there was "obviously no agreement."

3. The entire bailout discussion implodes entirely

As the Washington Post reports, "A renegade bloc of Republicans moved to reshape a massive bailout of the U.S. financial system yesterday, surprising and angering Bush administration and congressional leaders who hours earlier announced agreement on the 'fundamentals' of a deal":

Democrats accused Boehner of acting on behalf of GOP presidential candidate Sen. John McCain (Ariz.) in trying to disrupt a developing consensus

Democrats say they would not approve the legislation without a significant number of Republican votes to share in any political fallout from the controversial proposal, which comes just weeks before the November election. "We are working to try to get this bill ready, but if House Republicans continue to reject the president's approach, then there's no bill," said Rep. Barney Frank (D-Mass.), an architect of the bailout legislation. "We told Paulson the whole thing is at risk if the president can't get his own party to participate."

Marc Ambinder of the Atlantic Monthly reports that there are less than 100 of the 202 GOP house members who would support the Paulson plan.

4. Obama says he'll host a townhall meeting if McCain doesn't show up

Sam Stein of the Huffington Post reported on Thursday, "Barack Obama is committed to hosting a public, televised event Friday night in Mississippi even if John McCain does not show up," according to an Obama official. "In McCain's absence, the Senator is willing to make the scheduled debate a townhall meeting, a one-on-one interview with NewsHour's Jim Lehrer, or the combination of the two, the official said."

Interestingly, Mississippi governor and former chair of the Republican Party Haley Barbour also said Thursday that he believed the debate would continue as planned. And later in the day, McCain spokesman Tucker Bounds implied that the McCain campaign was going into the debate.

5. John McCain's fake campaign suspension

On Wednesday, McCain said he would "suspend" his campaign and return to Washington to work on the bailout proposal. But it was soon clear that this was a gigantic political stunt. As Think Progress reports, "Five hours after McCain said he would suspend his campaign, aides Nancy Pfotenhauer, Tucker Bounds, and Mike Duhaime appeared on Fox News and MSNBC five times, frequently criticizing Obama and Democrats."

The Huffington Post also reported that:

Across the country, McCain campaign offices are up and running, accepting volunteers, conducting phone banking, literature dropping and other GOTV activities. This held true on a local, state, and even regional level. The Huffington Post called up 15 McCain-Palin and McCain Victory Committee headquarters in various battleground states. Not one said that it was temporarily halting operations because of the supposed "suspension" in the campaign. Several, in fact, enthusiastically declared the continuation of their work. Others hadn't even heard that the candidate for whom they were devoting their time had officially stopped campaigning.

Bailout Outrage Races Across the Web

Bailout Outrage Races Across the Web

The Internet is flooded with angst about Treasury Secretary Paulson's proposed $700 billion bailout—and inspiring old-fashioned street protests

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Arun Gupta was enraged as he learned the details of Treasury Secretary Henry Paulson's plan to fix the U.S. banking system with $700 billion in taxpayer funds. The 43-year-old copy editor and freelance journalist, who publishes his own alternative newspaper, The Indypendent, needed to channel his angst but couldn't find a live protest to attend. So on Sept. 22, he sent an e-mail to some politically active friends in New York. Within days, they'd planned a protest against the bailout in New York and at 80 other locations in the U.S. on Sept. 25.

"I couldn't sit back while this plan gets rammed through Congress," says Gupta. "We live in a digital world, but change has to happen in an analog world. We married the two—the Internet helped us organize like wildfire." Gupta, now working with the online organization, says he expects hundreds and possibly a thousand protesters to converge at the protest near Wall Street. Protesters plan to build a pile of "citizen junk" that the government should also purchase in front of the iconic bull sculpture.

Much of the populist outrage against the bailout is building on the Internet, in blog posts, and Web sites. And not all of the posts are created by left-wingers like Gupta. The Internet is now swirling with petitions, debates bordering on rants, and biting satire about Paulson's plan and its potential consequences. The calls to arms come from across the political spectrum—from right-wing enemies of taxes to libertarians and left-wing progressives. They demand that Congress amend, scale back, or scrap the plan altogether.

Online Rage

The anger fueled much of the political theater in Washington this week. Yet Democrat and Republican lawmakers are working behind the scenes to bat out a deal (, 9/24/08) with Paulson and the Bush Administration.

A lot of the online rage is channeled in the form of signatures on petitions and electronic letters to members of Congress. Senator Bernie Sanders (Independent-Vt.) is circulating a popular one on the left-wing blog Huffington Post. The 1.9-million member Service Employees International Union is also circulating a sign-on letter to Congress that reads in part: "No deal. No blank check." reasons: "A bailout tells responsible Americans that they are suckers."

The anger is coming from right-leaning groups as well. The National Taxpayers Union's "No More Bailouts!" petition reads: "Bailouts that keep mismanaged organizations afloat delay natural corrections to unsound business practices.…Enough is enough. No more bailouts. Not with my tax dollars."

The conservative site features a similar petition. Right-wing blogger Patrick Ruffini, meanwhile, urges Republicans to vote against the bailout, since "God Himself couldn't have given rank-and-file Republicans a better opportunity to create political space between themselves and the Administration."

"Other People's Financial Excesses"

Then there are the more humble, makeshift calls to action, like a Web site called Tax Payers Against a Wall Street and Mortgage Bailout Petition, set up by a man named Thomas Roach. Readers can sign on to a letter to President George W. Bush and others politely asking, "Please do not support the efforts to bail out mortgage holders and mortgage lenders with my tax dollars. As a responsible citizen, I do not believe it is right for you to ask me to pay for other peoples' financial excesses."

The Project on Government Oversight and the National Taxpayers Union are criticizing Paulson's proposal to prevent any judicial or legislative review of his bailout moves. An open-government group called the Sunlight Foundation posted the full text of Paulson's proposalcounter-proposal on, where readers can read and comment on each. and Senator Christopher J. Dodd's (D-Conn.)

Other online manifestos are less earnest. A letter fashioned after the iconic Nigerian hoax e-mail is circulating in in-boxes. "I am Ministry of the Treasury of the Republic of America," the letter from "Paulson" reads. "My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.…We need a blank check.…Please reply with all of your bank account, IRA, and college fund account numbers and those of your children and grandchildren to"

Meanwhile, on a site whose name defies publication, if not linking, users are posting pictures of their personal junk next to the tagline, "Hey Washington, can you buy my bad investments, too?" The total asking price of the "pile" submitted by users—which includes reading glasses and a book called The Boys and Their Mama for a combined $12,254.90, and $24,000 in student loans for art school—is approaching $500 billion.

Opposition on Social Networks

Not surprisingly, bailout critics are also having their say on social networking Web sites. There are almost 300 members in the Facebook group "Just Say No to the Government Bailout." The anti-tax group is also "organizing moral opposition" to the bailout through its new Facebook group, "Stop the Bailouts!" The group administrator says the purpose is "to utilize the latest social networking tools" to voice opposition.

Then, of course, there's YouTube. Bailout-related videos include straightforward clips of Paulson and Federal Reserve Chairman Ben Bernanke calling on Congress for the bailout. Others, however, include rants by amateur newspeople, including a group called the Young Turks. The news-style segment, "This Is How The Bail Out Will Screw You," has had more than 24,000 page views.

McCain gets blamed for angry end to Bush's bailout meeting

McCain gets blamed for angry end to Bush's bailout meeting

David Lightman and Margaret Talev

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Congressional negotiators’ carefully-crafted agreement on a $700 billion rescue plan threatened to unravel Thursday as lawmakers at an often tense White House meeting clashed over details.

As Republican presidential nominee John McCain looked on, House Republican Leader John Boehner raised concerns that the plan would be too costly to taxpayers, and offered an alternative plan.

Democrats were mad.

"What this looked like to me was a rescue plan for John McCain," said Senate Banking Committee Chairman Christopher Dodd of the Republican objections.

His reference was to McCain's eleventh-hour intervention in the negotiations, when he declared he was suspending his campaign and postponing Friday night's debate with Democrat Barack Obama to help negotiate a bailout plan.

Democrats think that Republicans were backing away from a compromise many of them agreed to earlier Thursday — without McCain's involvement — in order to give McCain time to play a role and perhaps appear as a rescuer.

Senate Majority Leader Harry Reid, D-Nev., said he believed the breakdown was simply an effort to allow McCain to miss Friday night's scheduled debate with Obama.

Rep. Barney Frank, chairman of the House Financial Services Committee, seconded that belief. "I think McCain was hurting politically," Frank said. "I think this was a campaign ploy."

When McCain arrived in Washington to discover that an agreement was near, Frank said, it became necessary to upset it so that McCain could later be seen to have played a role. "He's making it harder to get things done," Frank said.

Republicans, in contrast, said there reservations on the bailout plan were principled. The plan, they said, had too much government involvement in private industry and too high potential liabilities for taxpayers.

"That agreement is obviously no agreement," said Sen. Richard Shelby, R-Ala., as he emerged from the White House meeting.

The lawmakers spoke after spending an hour in what was supposed to be a somber show of bipartisan unity at the White House. The session, hosted by President Bush and featuring the two presidential candidates as well as House and Senate leaders, came hours after the Democratic and Republican negotiators had issued a one-page "agreement on principles."

After the House Republican rebellion at the White House cast doubt on the agreement's fate, negotiators reconvened Thursday night, hoping once again to find common ground. But they were uncertain how to handle the Republican alternative, whose chief feature would permit the government to provide insurance to firms to buy troubled assets rather than spend taxpayer money on them.

"Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem," a GOP fact sheet said.

Under the plan, firms would pay insurance premiums to the government in return for coverage.

"We feel it is best to resort to private capital first,” said Rep. Eric Cantor, R-Va., who led the effort, which is backed by Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee _ and who helped negotiate the bipartisan agreement.

McCain, who has slipped well behind Democratic nominee Barack Obama in most recent presidential polls, spoke briefly at the White House meeting, where Obama outlined a series of principles that he wants addressed in any legislation.

Obama told CNN he still thought a deal could be reached, though he acknowledged that “I still think there’s still some work that needs to be done.” McCain tried to paint himself as a consensus-maker, telling ABC News “I believe we’ll reach a successful conclusion. Members are aware of the crisis situation that we’re in.

“They do have concerns … about $700 billion or a trillion dollars, that need to be addressed so that this is a genuine, bipartisan, bicameral agreement.”

The Arizona senator is not a member of the Senate Banking Committee, has never been influential in setting congressional financial policy, and was not involved in the negotiated agreement in principle.

Said Sen. Reid: “Anyone who tried to understand what John McCain said (at the White House) couldn’t.”

Among the main points reached in the bipartisan agreement in principle:

Earlier, negotiators had produced a one-page "agreement on principles" that includes:

  • Funding. Treasury would be authorized to spend $700 billion, but would get only $250 billion immediately, with another $100 billion to be released once the Treasury secretary certifies the money is needed. The other $350 billion could be canceled if Congress passed a joint resolution of disapproval.
  • Executive pay. The Treasury Department would "set standards to prevent excessive or inappropriate executive compensation for participating companies."
  • Taxpayer equity. Taxpayers could share in the profits of firms that benefit from the bailout as they return to financial health.
  • Oversight. The legislation would establish a "strong oversight board with cease and desist authority," as well as an independent inspector general who would monitor "the use of the Treasury Secretary's authority." The Government Accountability Office, Congress' investigative arm, also would audit the use of bailout funds. Regular detailed reports to Congress on the program would be required.
  • Homeowners. The agreement mandates maximum coordinated efforts to modify mortgages for homeowners at risk of foreclosure; requires loan modifications for mortgages owned by the federal government; and directs that a percentage of future profits go to federal housing funds.
  • Judicial review. The government would be barred from "acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law," which ensures the possibility of legal challenges in court. The original administration plan would have prohibited judicial review.

To help push the package, lawmakers from both parties, including Sens. John McCain and Barack Obama, the Republican and Democratic presidential candidates, respectively, were meeting with President Bush at the White House later Thursday afternoon. McCain and Obama were not present in the congressional negotiations that produced the agreement in principle.

One sign of potential trouble came from conservative House Republicans, who were offering their own plan, one that would require less government intervention. It would permit Washington to provide insurance to firms that buy troubled assets. Firms would pay insurance premiums to the government in return for coverage.

"We feel it is best to resort to private capital first," said Rep. Eric Cantor, R-Va., who led the effort. Taxpayers "should not have to pay to bail out Wall Street."

Rep. Spencer Bachus of Alabama, the top Republican on the House Banking Committee, sat in on the negotiations Thursday and said he was not sure that House GOP members would embrace the package, though, "I think we're closer."

Also complicating final agreement was the presidential campaign. McCain said that he's suspending his campaign to help draft bipartisan legislation, and Obama's camp boasted that he'd played an important role in the executive pay negotiation.

But Banking Committee staff said that while Obama's staff stayed in touch with negotiators, the senator had no apparent role in brokering any deal.

Democrats warned McCain, who is not a member of the Senate Banking Committee, not to try to take credit for all the work the negotiators have done in recent days in his absence.

"I'm delighted that John is expressing himself on this issue," Dodd said. "I have heard from Obama on numerous occasions these last couple days. I have never heard from John McCain on the issue . . . I'm just worried a little bit that sort of politicizing this problem, sort of flying in here, I'm beginning to think this is more of a rescue plan for John McCain and not a rescue plan for the economy."

Pre-election Militarization of the North American Homeland

Pre-election Militarization of the North American Homeland. US Combat Troops in Iraq repatriated to " help with civil unrest"

By Michel Chossudovsky

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The Army Times reports that the 3rd Infantry’s 1st Brigade Combat Team is returning from Iraq to defend the Homeland, as "an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks." The BCT unit has been attached to US Army North, the Army's component of US Northern Command (USNORTHCOM). (See Gina Cavallaro, Brigade homeland tours start Oct. 1, Army Times, September 8, 2008).

"Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

It is not the first time an active-duty unit has been tapped to help at home. ...

But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.

After 1st BCT finishes its dwell-time mission, expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one.

The command is at Peterson Air Force Base in Colorado Springs, Colo., but the soldiers with 1st BCT, who returned in April after 15 months in Iraq, will operate out of their home post at Fort Stewart, Ga.,


The 1st of the 3rd is still scheduled to deploy to either Iraq or Afghanistan in early 2010, which means the soldiers will have been home a minimum of 20 months by the time they ship out.

In the meantime, they’ll learn new skills, use some of the ones they acquired in the war zone and more than likely will not be shot at while doing any of it. (ibid)

The BCT is an army combat unit designed to confront an enemy within a war theater.

With US forces overstretched in Iraq, why would the Pentagon decide to undertake this redeployment within the USA, barely one month before the presidential elections?

The new mission of the 1st Brigade on US soil is to participate in "defense" efforts as well as provide "support to civilian authorities".

What is significant in this redeployment of a US infantry unit is the presumption that North America could, in the case of a natgional emergency, constitute a "war theater" thereby justifying the deployment of combat units..

The new skills to be imparted consists in training 1st BCT in repressing civil unrest, a task normally assumed by civilian law enforcement.

What we are dealing with is a militarization of civilian police activities in derogation of the Posse Comitatus Act.

The prevailing FISA emergency procedures envisage the enactment of martial law in the case of a terrorist attack. The 1st BCT and other combat units would be called upon to perform specific military functions:

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.

Training for homeland scenarios has already begun at Fort Stewart and includes specialty tasks such as knowing how to use the “jaws of life” to extract a person from a mangled vehicle; extra medical training for a CBRNE incident; and working with U.S. Forestry Service experts on how to go in with chainsaws and cut and clear trees to clear a road or area.

The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.

“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”

The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.

Civil unrest resulting from from the financial meltdown is a distinct possibility, given the broad impacts of financial collapse on lifelong savings, pension funds, homeownership, etc.

The timing of this planned militarization is crucial: how will it affect the presidential elections scheduled for Tuesday November 4.

The brigade in its domestic homeland activities will be designated as the Consequence Management Response Force ( CCMRF) (pronounced “sea-smurf”).

What " Consequences" are being envisaged?

In a conference held under NorthCom last February, the mission of CCMRFF was defined as follows;

"How to protect communities from terrorist and biological attacks topped the agenda last week for more than 100 service members and civilians gathered at Joint Task Force Civil Support headquarters at Fort Monroe, Va.

The U.S. Northern Command Chemical, Biological, Radiological, Nuclear, and High-Yield Explosive Commanders’ Conference, held Feb. 21-23, brought JTF-CS subordinate task force and unit commanders here to discuss common concerns regarding operational requirements of the CBRNE Consequence Management mission and to begin preparations for Exercise Ardent Sentry 2007.

“We’re giving operationally focused briefs to our CCMRF ( CBRNE Consequence Management Response Force) units to help them prepare and successfully deploy for a CBRNE mission in the continental United States, its territories and possessions,” said JTF-CS Current Operations Specialist Hawley Waterman, who helped organized the conference. “This is also an opportunity to get acquainted and establish better relationships with (subordinate commanders).”(NorthCom, March 2007)

What is envisaged is the possibility of a (false flag) terrorist attack on America, which could be used as a justification for retaliatory or preemptive military action overseas (e.g. Iran) as well actions on the domestic front. The ultimate objective of this deployment of 1st BCT is to apply combat experience in the Homeland:

“I can’t think of a more noble mission than this,” said Cloutier, who took command in July. “We’ve been all over the world during this time of conflict, but now our mission is to take care of citizens at home ... and depending on where an event occurred, you’re going home to take care of your home town, your loved ones.”

While soldiers’ combat training is applicable, he said, some nuances don’t apply.

The operation officially has an emergency mandate to "help American citizens on American soil, to save lives, provide critical life support, help clear debris", but it also implies the running of military style operations. :in fact it would appear that the emergency tasks helping civilians is a cover-up. This is a combat unit, which is trained and equipped to kill people:

Some brigade elements will be on call around the clock, during which time they’ll do their regular marksmanship, gunnery and other deployment training. That’s because the unit will continue to train and reset for the next deployment, even as it serves in its CCMRF mission.

Should personnel be needed at an earthquake in California, for example, all or part of the brigade could be scrambled there, depending on the extent of the need and the specialties involved.

Other branches included The active Army’s new dwell-time mission is part of a NorthCom and DOD response package.

Active-duty soldiers will be part of a force that includes elements from other military branches and dedicated National Guard Weapons of Mass Destruction-Civil Support Teams.

A final mission rehearsal exercise is scheduled for mid-September at Fort Stewart and will be run by Joint Task Force Civil Support, a unit based out of Fort Monroe, Va., that will coordinate and evaluate the interservice event.

In addition to 1st BCT, other Army units will take part in the two-week training exercise, including elements of the 1st Medical Brigade out of Fort Hood, Texas, and the 82nd Combat Aviation Brigade from Fort Bragg, N.C.

There also will be Air Force engineer and medical units, the Marine Corps Chemical, Biological Initial Reaction Force, a Navy weather team and members of the Defense Logistics Agency and the Defense Threat Reduction Agency.

One of the things Vogler said they’ll be looking at is communications capabilities between the services.

“It is a concern, and we’re trying to check that and one of the ways we do that is by having these sorts of exercises. Leading up to this, we are going to rehearse and set up some of the communications systems to make sure we have interoperability,” he said.

A national emergency could be triggered. "[H]orrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive [attack]" or a so-called CBRNE type scenario. One assumes that this is some form of domestic attack, allegedly by terrorists.

But at the same time, the Bush administration may be seeking a justification to establish martial law and intervene militarily within the USA.

“I don’t know what America’s overall plan is — I just know that 24 hours a day, seven days a week, there are soldiers, sailors, airmen and Marines that are standing by to come and help if they’re called,” Cloutier said. “It makes me feel good as an American to know that my country has dedicated a force to come in and help the people at home.” (Army Times, op cit , emphasis added)

"This type of planning and coordination and training is a priority both in our headquarters and at NORTHCOM, as we understand our responsibilities to be ready should the requirement arise, God forbid," (Army News Service Sept 15m 2008)

Gas Shortage In the South Creates Panic, Long Lines

Gas Shortage In the South Creates Panic, Long Lines

If Drivers Can Fill Up, They Get Sticker Shock

By Steven Mufson

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Gasoline shortages hit towns across the southeastern United States this week, sparking panic buying, long lines and high prices at stations from the small towns of northeast Alabama to Charlotte in the wake of Hurricanes Gustav and Ike.

In Atlanta, half of the gasoline stations were closed, according to AAA, which said the supply disruptions had taken place along two major petroleum product pipelines that have operated well below capacity since the hurricanes knocked offshore oil production and several refineries out of service along the Gulf of Mexico.

Drivers in Charlotte reported lines with as many as 60 cars waiting to fill up late Wednesday night, and a community college in Asheville, N.C., where most of the 25,000 students commute, canceled classes and closed down Wednesday afternoon for the rest of the week. Shortages also hit Nashville, Knoxville and Spartanburg, S.C., AAA said.

Terrance Bragg, a chef in Charlotte, made it to work only because his grandfather drove from a town an hour away with a 5-gallon plastic container of fuel for him. Three of his co-workers called and said they couldn't make it.

"I drove past nine or ten gasoline stations that were out of gas," Bragg said. "I had my GPS up looking for any gas in the area, from the mom-and-pop places to the corporate gas stations. Nothing. They were all taped off."

Liz Clasen-Kelly, associate director of a homeless assistance center in Charlotte, took the bus to work yesterday. On Wednesday night, she and her husband checked five stations that had no gas, passed a long line backed up onto the interstate highway and chose not to wait at an open gas station with 50 to 60 cars still lined up after 11 p.m.

"If we had waited in that line, our car wouldn't have made it," she said, adding that the gauge was pointing to empty. The bus yesterday took her 45 minutes longer than usual. "It makes you realize how addicted you are to convenience," she said.

In Atlanta, Jonathan Tyson, a Douglasville, Ga., resident who works for a company that does training for auto and RV franchise dealerships, ran out of fuel while waiting an hour in a line about 60 cars long to fill up his Land Rover. A man from the car behind helped push Tyson's vehicle down the road.

"It was crazy," Tyson said. "People were standing on side of road with gas cans saying they'd pay the person to run a [credit] card through just to get gas so they didn't run out before they got up to the pump themselves."

The city government, which uses 10,000 gallons a day, barred the public from two stations to make sure it could keep municipal vehicles running. On Wednesday night with his fuel gauge at empty, Al T. Nottage, a senior communications specialist in the Atlanta mayor's office, looked for fuel at six stations, all closed, then called AAA and said he had run out of gasoline. It brought him two gallons, enough to get to work yesterday.

AAA spokesman John Townsend said that Colonial Pipeline, a leading supplier in the region, and the smaller Plantation Pipeline, which belongs to Kinder Morgan, were functioning below capacity because of lingering refinery problems along the Gulf coast. A spokesman for Colonial, whose Web site displays a news release from Sept. 10 before Hurricane Ike hit, did not return calls for comment.

The Energy Department said that as of Wednesday 63 percent, or 800,000 barrels a day, of production in the Gulf of Mexico was still shut down as were five refineries with a combined capacity of 1.2 million barrels a day. The refineries produce a half-million barrels of gasoline a day, or about 5 percent of the nation's total supplies. Other refineries are still working at less than full capacity. Hurricane Gustav landed Sept. 1, and Ike hit Sept. 13.

"The production loss is similar to what was lost after Hurricanes Rita and Katrina," said Anne Peebles, a Shell Oil spokeswoman. "This time the physical damage [to oil facilities] was not as great, but the down time with the storms hitting back to back is similar." She said that "more fuel is coming" as facilities gradually ramp up again, but "we do think that production availability will normalize in the next several weeks."

Townsend said that the Colonial pipeline normally carries 100 million gallons a day, traveling about 2,500 miles from Texas, Louisiana and Alabama to 267 marketing terminals across the East and Southeast. Although nearly 15 percent of the gas stations in Virginia were reporting outages last week, the Washington region has been able to tap into supplies from areas such as New Jersey and Pennsylvania, which can more readily obtain supplies from tanker and other pipelines. Earlier supply problems in Chattanooga, Tenn., and Tallahassee also had eased, he said.

Other areas of the country were not so fortunate. An Atlanta Exxon dealer said that his station's allocation was only 40 percent of normal.

Mike Thornburgh, a spokesperson at QuikTrip, said that half of the gasoline retailer's 111 Atlanta area stations were open, up from a quarter last weekend. He said that QuikTrip was trying to keep stores open near commuters and schools. He said he didn't know when things would return to normal.

"I can't give a concrete answer because I don't believe anybody knows," he said.

Public officials appealed for calm as it appeared that panic buying might exacerbate supply problems if motorists try to keep more fuel than usual in their tanks. The Environmental Protection Agency suspended regulations for antipollution additives to help ease the supply situation.

Georgia Gov. Sonny Perdue provoked some angry comments on the Atlanta Journal Constitution Web site, which quoted him as saying that "there is ample fuel in the city" and that some of the panic was "self-induced."

"Perdue says we got ample gas supplies," wrote one reader. "Then why is it that every gas station in my area is out of gas. Some have been out for over 4 days."

Prices were high in cities hurt by shortages, though not as high as they were immediately after the hurricanes. In Charlotte, price ranged from $3.84 to a high of $4.31 a gallon for regular gasoline. AAA's Townsend said that travelers to the affected areas should "be prepared for sticker shock, Southern style."