Thursday, December 4, 2008

The Threat of Realism

The Threat of Realism

by: Marc Ash

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Still some 50 days out from inauguration, it's far too early to jump to conclusions about how the new administration will handle war on two fronts, but if you think war on two fronts is a bad idea, there's some writing on the wall that doesn't bode well.

Change has indeed come. America has elected its first president of partly African heritage. That alone stands as a quantum leap forward that no force on earth will ever change. It is nothing short of a collective national triumph. And the man is a bona fide intellectual no less. Intellectuals, of course, being as rare as good decisions at 1600 Pennsylvania Avenue.

While there is ample grist for optimism, only a fatal optimist or a militarist could fail to be concerned about the rough sketch emerging for Iraq and Afghanistan.

At central issue in both campaigns is what President-elect Obama referred to in his remarks in Chicago on December 1 introducing the new national security team as "our global leadership." The concept of American global leadership is not new. It really dates back to a pre-American Civil War notion that US technology, specifically military technology, had become so advanced that we could spread our influence far and wide, and come home with the booty. The world had its notice on July 8, 1853, when Commodore Perry navigated an American war armada into Edo Bay harbor in Tokyo, Japan, on a "diplomatic" mission. There were no diplomats on board. At the point of 66 naval guns, Perry opened Japanese ports to US trade.

For US public relations purposes, American global domination is most often wrapped in positive tones. Republican vice-presidential candidate Sarah Palin reminded us continually on the campaign trail that "America should be a force for good in the world." John F. Kennedy established the Peace Corps. But Kennedy, among other things, also quietly fomented counterrevolution in Cuba.

If average Americans were blissfully unaware that US global leadership included domination of global resources, that bliss was shattered in 1962 when Fidel Castro and Che Guevara pointed Russian-supplied atomic missiles at the US mainland from Cuba. Castro and Guevara bluntly accused the US of imperialism and ruthless exploitation of Cuba, and many other nations as well. Castro said, "End the philosophy of plunder and the philosophy of war will be ended as well." What Guevara did in his address to the United Nation's General Assembly on December 11, 1964, was issue a worldwide appeal for resistance to US imperialism. Clearly, Castro and Guevara saw their struggle in defensive terms.

In his remarks in Chicago, President-elect Obama seemed torn between a new realization that "our destiny is shared with the world's," and the old view he articulated speaking on behalf of the new security team he was introducing: "I think all of us here share the belief that we have to maintain the strongest military on the planet." He literally seems to be working through the equation in front of the cameras. Early in his prepared remarks, Obama presented a seemingly newly matured view of America's role in the world saying:

"The common thread linking these challenges is the fundamental reality that in the 21st century our destiny is shared with the world's. From our markets to our security, from our public health to our climate, we must act with that understanding that, now more than ever, we have a stake in what happens across the globe. And as we learned so painfully on 9/11, terror cannot be contained by borders, nor safely provided by oceans alone."

But he went on to say:

"And so, in this uncertain world, the time has come for a new beginning, a new dawn of American leadership to overcome the challenges of the 21st century and to seize the opportunities embedded in those challenges. We will strengthen our capacity to defeat our enemies and support our friends. We will renew old alliances and forge new and enduring partnerships. We will show the world once more that America is relentless in the defense of our people, steady in advancing our interests and committed to the ideals that shine as a beacon to the world - democracy and - (audio break) - because American values are America's greatest export to the world."

So, there may be some things he's working through.


Of all the gifts left to Americans by departing commander in chief Bush, the two wars he started in Iraq and Afghanistan are most troubling. The American presidency is an extraordinarily difficult job under any circumstances, but to inherit the job with two botched wars-turned-quagmires underway sets a whole new standard. Regrettably, the working model for an Iraq plan that Obama and team appear to be navigating off of at this early stage seems to have serious flaws. Again from Chicago:

"The SOFA that has been now passed by the Iraqi legislature points us in the right direction. It indicates we are now on a glide path to reduce our forces in Iraq. I will be meeting with not only Secretary Gates but the Joint Chiefs of Staff and commanders on the ground to make a determination as to how we move that pace - how we proceed in that withdrawal process.

I believe that 16 months is the right time frame, but, as I've said consistently, I will listen to the recommendations of my commanders. And my number-one priority is making sure that our troops remain safe in this transition phase, and that the Iraqi people are well served by a government that is taking on increased responsibility for its own security.

It is a sovereign nation.

What this signals is a transition period in which our mission will be changing. We will have to remain vigilant in making sure that any terrorist elements that remain in Iraq do not become strengthened as a consequence of our drawdown."

The first problem here is that, yes, the occupation of Iraq is about dominating on behalf of large American-based corporations the resources of Iraq, and, yes, the American taxpayer is footing the entire bill. That is not going to last. It is highly unlikely that the US economy can sustain the occupation of Iraq for another 12 months. It might not be sustainable for another six months. A day is rapidly approaching when a critical-mass financial decision in relation to the occupation of Iraq will have to be made.

Next, "reducing our forces" is both vague and potentially fraught with major risk. Ending the war and a full restoration of Iraqi sovereignty is not accomplished by a smaller, kinder, gentler US occupying force it accomplished by ending the US military presence in Iraq. If you read between the lines here, a real withdrawal of US military forces from Iraq doesn't appear to be under consideration.

In addition, any significant "drawdown" of US forces in Iraq would expose the remaining force to an ever-increasing security risk. That leads to dead US soldiers. Obama seems to address this when he refers to "making sure that our troops remain safe in this transition phase." Unfortunately, the core equation remains the same: smaller force, greater security risk. So, in terms of Iraqi sovereignty and US force security, the current plan appears fundamentally flawed.

This leaves aside all of the war crimes committed against the Iraqi people in order to maintain control by force of their country. Including extra-judicial assassination, indefinite imprisonment without due process, displacement of vast segments of the population, and the list goes on.


In Afghanistan, for whatever reason, everyone on a US national security level seems to have forgotten the lessons that the vastly superior Soviet military learned in Afghanistan two decades ago, i.e., do not leave your military there. It is what military experts have always referred to it as the graveyard of foreign armies.

There seems to be a desire on the part of US military planners to do in Afghanistan now what they "should have" or were "not allowed" to do in 2002. But now is now and then was then. Now, a new strategy must be developed. One that doesn't repeat the mistakes of Mikhail Gorbachev or George W. Bush. The plan currently offered won't pass muster.


The debate in Washington right now is defined by what media pundits have taken to labeling as "Realism." As is the case with any "ism" it has man-made borders. The cornerstones of this brand of realism appear to include:

- A notion that it is an American birthright to lead the world, and profit by doing so.

- A notion that the US can maintain over 700 military bases worldwide and not unify the world in opposition.

- A notion that an Iraqi government, or any government orchestrated, protected and funded by US occupiers can someday be sovereign.

- A notion that the occupation of Iraq or Afghanistan can end well.

Those are clearly false, unsustainable and quite dangerous realisms.

Layoffs soar as US plunges deeper into recession

Layoffs soar as US plunges deeper into recession

By Barry Grey

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New economic reports show that the severity of the US recession and the speed with which it is developing are greater than anticipated by economists and business forecasters. Data released Wednesday reveal a sharp rise in layoffs in virtually every sector of the economy, continuing distress in credit markets, financial instability and slumping consumer demand. The indices portend a recession more severe and protracted than any since the Great Depression of the 1930s.

Two separate surveys published Wednesday show that layoffs are mounting at record or near-record rates. The job placement firm Challenger, Gray & Christmas reported that job cuts announced by American employers in November more than doubled from a year earlier, led by a surge in layoffs by financial firms.

Layoff announcements last month rose 148 percent to 181,671, the most since January 2002, as compared to 73,140 job cuts announced in November of 2007. The number of planned job cuts increased 61 percent in November from the 112,884 announced in October, Challenger said.

The November total was the second highest on record, behind the 248,475 planned layoffs announced in January 2002, in the aftermath of 9/11.

Financial companies led industries in announced job cuts with 91,356 last month after Citigroup said it would cut 52,000 workers from its payroll. Retail employers followed with 11,073 firings, while computer and electronics firms combined for 15,350 cuts.

For the year to date, Challenger said the financial industry has slashed 220,506 jobs, compared to 147,395 jobs cut at this time last year.

The Challenger report showed companies have announced a total of 1,057,645 cuts so far this year, up 46 percent from the same period in 2007.

In a separate report, ADP Employer Services, which tracks private sector employment in the US, said companies slashed 250,000 jobs in November, the highest monthly total since November 2001. The figure was larger than forecast and followed an upwardly-revised figure of 179,000 for October.

"The report shows a broad and deep contraction in all nooks and crannies of the economy," said Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis. "We're teetering over the edge of a hill and we're going to be rolling down it for a while." Macroeconomic Advisers produces the report jointly with ADP.

The median forecast of economists for the November ADP report had been 200,000.

Wednesday's survey showed a decline of 118,000 jobs in manufacturing, which has lost jobs in the US for 27 straight months. Employment in construction fell 44,000, the 24th straight month of job cuts in that industry. Construction firms have laid off 521,000 workers since August 2006. Service providers cut 92,000 jobs in November.

Also on Wednesday, the Institute for Supply Management (ISM) said its November index of non-manufacturing businesses dropped to the lowest level in its 11-year history, with a record low in its employment gauge.

The ISM said its non-manufacturing index registered 37.3, below October's already weak 44.4. Anything below 50 signifies a business contraction. The November index was much worse than the median forecast of 42.0 in a Reuters poll of 71 economists.

The ISM employment index fell to another record of 31.3, signaling heavy layoffs, from 41.5 in October. New orders hit a new low at 35.4, from 44 the prior month.

"This is consistent with payrolls falling by about 500,000. Let's hope it is very wrong," said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.

The service sector includes businesses such as banks, airlines, hotels and restaurants. In the US, 80 percent of the economy is driven by the service sector.

"The severe damage to the service industry is another indication of the extraordinary force of this recession," said Pierre Ellis, senior economist at Decision Economics in New York.

The dire situation outlined by these private reports was underscored by the national economic survey released by the Federal Reserve Board on Wednesday in its so-called beige book snap shot of the US economy. Covering the period since the middle of October, the Fed reported that economic activity had weakened substantially in all of the country's twelve Federal Reserve districts.

"Districts generally reported decreases in retail sales, and vehicle sales were down significantly in most districts," said the beige book. The report noted that tourism spending was down and reports on the service sector were "generally negative." The report also found that manufacturing activity had declined in most districts, that nearly all reported weak housing markets, that commercial real estate markets had generally declined and that lending standards had tightened. The Fed added that one positive sector in its mid-October beige book report, energy and mining, had turned downward as a result of sharply falling commodity prices.

The New York Fed said its regional economy "deteriorated substantially" since the last report in mid-October. The San Francisco Fed said business "weakened decidedly," while the Chicago Fed said contacts "expressed concern over the potential length of this downturn."

Among the few "bright spots" noted by the Fed, where businesses were able to profit from the prevailing weakness, was a "growing demand for bankruptcy services" reported by the Minneapolis and Dallas districts.

In the wake of these reports, Goldman Sachs and Morgan Stanley analysts forecast a contraction in the US economy this quarter of about 5 percent.

"We are looking at an economy that is not only in recession, but a recession that is deepening rapidly," former Fed Governor Lyle Gramley, now senior economic adviser at Stanford Group Co., said in an interview on Bloomberg Television.

These calamitous figures come in advance of Friday's Labor Department report on US unemployment for November. It is certain that the report will show a net decline in payrolls for the 11th consecutive month. Payrolls last month fell by 325,000 after declining by 240,000 in October. According to government figures, total job losses in the US have risen to 1.2 million so far this year.

Prior to Wednesday's reports, most economists were forecasting a net job loss of 325,000 to 350,000 for November and a rise in the official jobless rate from 6.5 percent to 6.8 percent. However, in light of the latest economic surveys, some economists are now predicting the Labor Department report will show a net loss of 400,000 to 500,000 jobs.

This week alone major job cuts and downsizing plans have been announced by companies that span virtually all economic sectors.

* United States Steel Corp. said late Tuesday it will temporarily idle its Great Lakes Works plan in Ecorse, Michigan and two other facilities due to falling demand for steel products. The action will affect about 3,500 workers at the three plants. In addition to the Great Lakes plant, the company is idling Keetac, an iron ore mining and palletizing facility in Keewatin, Minnesota and the Granite City Works near St. Louis.

The layoffs affect more than 13 percent of US Steel's North American workforce of 26,000. No date has been set for reopening the facilities. The new layoffs follow the announced layoff in mid-November of 675 workers in the US and Canada.

* Delta Airlines announced Tuesday it will cut its capacity by 6 to 8 percent and offer buyout packages to slash its workforce. Delta acquired Northwest Airlines in October and employs 75,000 workers. This year Delta cut 4,000 jobs, or about 7.3 percent of its total workforce. Northwest eliminated 2,500 jobs, or 8.1 percent of its payroll.

* Sears Holdings said Tuesday it may close more stores after a steeper-than-expected quarterly loss. The company, the product of a merger of Sears and Kmart carried out three years ago, posted a net loss of $146 million, more than twice the loss analysts had predicted. It recently confirmed 22 store closings and now says it may close other Sears and Kmart stores.

* Palm, the US-based maker of PDAs and the Treo smartphone, reported that its sales in the latest quarter had almost halved and said it would cut costs by 20 percent by slashing its workforce and downsizing its European operations.

Fueling the surge in layoffs is a sharp contraction of economic activity not only in the US, but globally. Auto sales in the US plummeted by 37 percent in November to a 26-year monthly low, but they also fell 18 percent in Germany, Europe's biggest car market.

The downward spiral in production and sales, intensified by a continuing near-freeze in credit markets, is reflected in falling commodity prices that portend global deflation. Oil prices on Tuesday sank to their lowest levels in three-and-a-half years, falling to $46.82 a barrel from July's record of $147.27.

The price of key industrial metals has fallen further over the last four months than occurred during the worst years of the Great Depression between 1929 and 1933, according to research by Barclays Capital. Prices for copper, lead and zinc have fallen roughly 60 percent since the peak last July.

The intensifying slump is being utilized by companies to drive down the wages of workers in the US and around the world. In the third quarter, hourly compensation in the US rose 4.1 percent. But real compensation, adjusted for inflation, fell 2.4 percent.

FDA Reluctantly Admits Mercury Fillings Have Neurotoxic Effects on Children

FDA Reluctantly Admits Mercury Fillings Have Neurotoxic Effects on Children

by David Gutierrez

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For the first time, the FDA has issued a warning that the mercury contained in silver dental fillings may pose neurological risks to children and pregnant women.

"Dental amalgams contain mercury, which may have neurotoxic effects on the nervous systems of developing children and fetuses," reads a statement that has been added to the agency's Web site. "Pregnant women and persons who may have a health condition that makes them more sensitive to mercury exposure, including individuals with existing high levels of mercury bioburden, should not avoid seeking dental care, but should discuss options with their health practitioner."

The warning was one of the conditions that the FDA agreed to in settling a lawsuit filed by several consumer health groups.

"Gone, gone, gone are all of FDA's claims that no science exists that amalgam is unsafe," said Charles Brown, a lawyer for Consumers for Dental Choice, one of the plaintiffs.

"It's a watershed moment," said Michael Bender of the Mercury Policy Project, another plaintiff.

Mercury is a well-known neurotoxin that can cause cognitive and developmental problems, especially in fetuses and children. It can also cause brain and kidney damage in adults.

So-called dental amalgams, or fillings made with a mix of mercury and other metals, have been used since the 1800s. Although it is known that small amounts of mercury are vaporized (and can be inhaled) when the fillings are used to chew food, and though Canada, France and Sweden have all placed restrictions on the use of mercury fillings, the FDA has always insisted that amalgams are safe.

Dental amalgams are considered medical devices, regulated by the FDA.

Even the FDA's new warning stops short of admitting that dental amalgams are dangerous for the general population. Instead, it focuses on the same population that has already been warned to limit mercury exposure by consuming less seafood: children and pregnant women. The FDA says it does not recommend that those who already have mercury fillings get them removed.

Millions of people have received amalgam fillings, although their popularity has dropped off in recent years. Currently, only 30 percent of dental fillings contain mercury - the rest are tooth-colored resin composites made from glass, cement and porcelain. These alternative fillings are more expensive and less durable than amalgam, however.

In 2002, the FDA began a regulatory review of amalgam that was expected to be complete within a few years. In 2006, with the review still incomplete, an independent FDA advisory panel of doctors and dentists rejected the agency's position that there is no reason for concern about the use of amalgam. While the panel agreed that the majority of people receiving such fillings would not be harmed, panel members expressed concern for the health of certain sensitive populations, including children under the age of six.

The panel recommended that the FDA conduct further studies on the risks to children from dental amalgam, and that it consider a policy of informed consent for children and pregnant: that is, warning those groups of the risks associated with the fillings before installing them.

Part of the lawsuit centered on the FDA's failure to respond to these recommendations in a timely fashion.

"This is your classic failure to act," federal judge Ellen Segal Huvelle told the agency.

As part of the lawsuit settlement, the FDA must reach a final decision on the regulation of amalgam by July 28, 2009.

"This court settlement signals the death knell for mercury fillings," Brown predicted.
But J.P. Morgan Securities analyst Ipsita Smolinski disagreed, saying that the FDA is unlikely to ban amalgam entirely

"We do believe that the agency will ask for the label to indicate that mercury is an ingredient in the filling, and that special populations should be exempt from such fillings, such as: nursing women, pregnant women, young children, and immunocompromised individuals," Smolinski said.



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This doesn’t make any sense. The U.S. Government authorizes the Fed to create money out of thin air, which it will then use to buy up the debt of the U.S. Government that nobody else wants?

Is anyone who is currently holding U.S. Treasuries even reading the news? The auctions are going to fail, so the debtor is just going to snap his fingers and create the money to buy the debt that nobody else wanted to buy?

How does the dollar not collapse on this?

The Bloomberg piece focuses on similarities between monetary policies in the U.S. and Japan, and highlights a couple, “Bernanke-San,” references, but there’s just one tiny fact that the article doesn’t mention. Japan is the third largest creditor in the world. Where does the U.S. rank, on the current accounts balance list? Scroll down. Keep going. More. Down. Down. Until it stops. That’s right. Out of 164 countries on the list, the U.S. is dead effing last, meaning that it is the largest debtor in the world.

And the U.S. Federal Reserve is going to start buying U.S. Treasuries?

Tell me another one.

Via: Bloomberg:

Federal Reserve Chairman Ben S. Bernanke signaled he’s ready to dig deeper into the central bank’s toolkit after cutting interest rates almost as much as he can, opening the door to a shift by policy makers this month.

Bernanke yesterday said he may use less conventional policies, such as buying Treasury securities, to revive the economy, because his room to lower the main U.S. rate from the current 1 percent level is “obviously limited.” Even so, reducing the rate is “certainly feasible,” he said.

Policy makers may decide at their next meeting Dec. 15-16 on the details of carrying out such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan pursued in 2001-2006 after driving interest rates close to zero. The Fed chief’s readiness to rely more on adding reserves to the banking system prompted JPMorgan Chase & Co. economist Michael Feroli to refer to him as “Bernanke-san” in a note yesterday.

“This sets the stage for the Federal Reserve to be more formal in its adoption of quantitative easing,” said Vincent Reinhart, the Fed’s director of monetary affairs until last year and now a scholar at the American Enterprise Institute in Washington.

The Bank of Japan is the only major central bank in modern times to rely on quantitative easing — the strategy of injecting more reserves into the banking system than needed to keep the target interest rate at zero.

Fed’s Balance Sheet

Steps Bernanke has taken so far have prompted some Fed officials and economists to say the central bank is already pursuing such a policy. With an array of emergency-loan programs aimed at easing the worst credit crisis in seven decades, Bernanke has expanded the Fed’s balance sheet to $2.11 trillion as of last week, more than double the year-earlier level.

Feroli, a former Fed economist, headlined his research note yesterday: “Bernanke-san goes further down the path of Quantitative Easing.”

Bank of Japan Governor Masaaki Shirakawa said in May that while the strategy “was very effective in stabilizing financial markets,” it had “limited impact” in remedying Japan’s economic stagnation because banks wouldn’t lend and companies wouldn’t borrow.

Bernanke himself didn’t use the quantitative easing term in his remarks yesterday to the Austin, Texas, Chamber of Commerce. If he does officially adopt the new approach, it will require a change in the way the policy-making Federal Open Market Committee conducts its business, Reinhart said. The FOMC, which currently votes on the level of interest rates, may now find itself debating the size of the Fed’s balance sheet and struggling to find ways to communicate that decision to financial markets, he said.

Stocks Sink

Investors didn’t immediately take to the prospect of a new strategy yesterday. While Treasuries extended gains after Bernanke’s remarks, stocks slid the most since October, wiping out more than half of last week’s rally. The Standard & Poor’s 500 Index sank 8.9 percent to 816.21, with financial stocks in the index tumbling a record 17 percent as a group.

The Fed chief’s comments coincided with the determination by economic scholars yesterday that the U.S. recession began one year ago this month. That declaration came from a committee of the National Bureau of Economic Research, a private, nonprofit group based in Cambridge, Massachusetts.

The U.S. economy “will probably remain weak for a time,” even if the credit crisis eases, Bernanke said yesterday in his speech. While the Fed can’t push interest rates below zero, “the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” he said.

Buying Treasuries

One option is for the Fed to buy “longer-term Treasury or agency securities on the open market in substantial quantities,” Bernanke said. “This approach might influence the yields on these securities, thus helping to spur aggregate demand.”

Should purchases of Treasuries fail to accomplish the Fed’s goals, “there’s very much a likelihood that they could expand the range of assets that they buy,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors, in an interview with Bloomberg Television.

At the same time, aiming to increase loans when banks still need to rid their balance sheets of bad assets “is a bit myopic,” Eisenbeis said. “They’re not going to expand lending when they’ve got a problem of leverage.”

Last week, the Fed announced two new programs aimed at unfreezing credit for homebuyers, consumers and small businesses. Those include a commitment to buy as much as $600 billion of debt issued or backed by government-chartered housing-finance companies and a $200 billion initiative to support consumer and small-business loans.

The Fed’s balance sheet “will eventually have to be brought back to a more sustainable level,” Bernanke said. “However, that is an issue for the future; for now, the goal of policy must be to support financial markets and the economy.”

Fortress, the Hedge Fund, Is Crumbling

Fortress, the Hedge Fund, Is Crumbling

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When Wesley R. Edens and his partners founded their investment firm a decade ago, they chose a name that evoked unshakeable bastions: Fortress.

But now their stronghold is under siege — and some of its investors are running for cover.

Cracks are spreading throughout the Fortress Investment Group, once a leading player in the worlds of hedge funds and leveraged buyouts. On Wednesday, Fortress’s shares fell 25 percent to $1.87, a new low, after the company temporarily suspended withdrawals from its largest hedge fund. Investors had asked to withdraw $3.51 billion from the money-losing fund, Drawbridge Global Macro.

But Wednesday’s slide was just the latest turn in a long, downward spiral for Fortress. The once-celebrated company has lost 89 percent of its market value over the last year as hedge funds and private equity, once lucrative businesses that helped define an era of unrivaled Wall Street wealth, have crumbled in the credit crisis.

It is a remarkable turnabout for Fortress, which less than two years ago was soaring along with the rest of Wall Street. Its debut as a public company, in February 2007, was heralded as the dawn of a new age of big hedge funds and buyout firms. Mr. Edens, a former executive at Lehman Brothers and BlackRock, and his fellow founders became instant billionaires. Their deal paved the way for even splashier initial public offerings by the likes of the Blackstone Group.

But life as public companies has proved treacherous for Fortress, Blackstone and the other so-called alternative investment firms that sold stock to the public shortly before the credit crisis erupted. They have had to contend with the harsh judgment of stockholders as the credit on which they depend has grown increasingly scarce.

“Frankly, it’s very difficult to say anything other than that I would have no interest as an investor in holding or buying these shares,” Jackson Turner, an analyst at Argus Research, said. Mr. Turner has a sell rating on Fortress shares.

A Fortress spokeswoman declined to comment.

Fortress’s plight reflects the ills plaguing much of high finance. Investors are abandoning hedge funds in growing numbers, and the industry, once so profitable, is now in the midst of a wrenching shakeout.

Even before Fortress lowered the gates on redemptions at its Drawbridge Global Macro fund, other big-name hedge funds had done so. More are expected to follow suit. Some investors fear that a rush of withdrawals could force funds to dump investments en masse, unsettling already shaky financial markets.

Fortress’s biggest fund is withering. In a regulatory filing on Wednesday, Fortress said that Drawbridge Global would have about $3.7 billion in assets under management as of Jan. 1, compared to the $8 billion it reported having as of Sept. 30.

But while Fortress’s earnings will suffer because of the redemptions — hedge funds earn fees based on both the amount of assets they manage and the performance of those funds — the withdrawals alone do not necessarily spell the company’s doom. Less than 30 percent of Fortress’s $34 billion in assets under management are subject to investor redemptions. Most are locked up in private equity funds that do not allow quick withdrawals of capital.

Still, private equity firms have been hurt by the near-freeze in the credit markets, which has limited their ability to strike new deals and dealt a severe blow to many of the debt-laden companies they own.

Fortress dodged a major setback when it managed to refinance IntraWest, the big Canadian ski resort. But investors worry that Fortress has taken damage from its exposure to the commercial real estate market, which is coming under severe stress. Fortress was a major lender to Harry Macklowe, the real estate mogul, who had to sell off trophy properties like the General Motors Building in Manhattan to pay back his creditors.

Just as it was the first major alternative-investment manager to go public, Fortress is now being watched closely as a canary in the coal mine. The Drawbridge fund’s nearly 50 percent redemption rate far outpaces the 20 to 30 percent that the market had expected at hedge funds on average, said Roger Freeman, an analyst at Barclays Capital.

“From my standpoint, I wonder how many other funds are seeing similar redemption rates,” he said. “This is definitely a negative indicator for the industry.”

For months, Fortress has been the subject of gallows humor suggesting that it might simply buy back its shares and take itself private once more. While the company’s executives have asserted their commitment to remaining public, several analysts said that Fortress’s problems were clearly intensified by the brighter light that comes with being a public company.

“It forces their problems to be out in the open,” Mr. Turner said. “It made the issues that they have much more amplified.”

Fed: Economy Darkens Heading Into Holidays

Fed: Economy Darkens Heading Into Holidays

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The country's economic picture has darkened further as Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back on production.

The Federal Reserve's new snapshot of business conditions nationwide, released Wednesday, suggested the economy was sinking deeper into recession.

"Economic activity weakened across all Federal Reserve districts," the report concluded.

The Fed didn't use the word "recession," but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones: that the country had been suffering through one since last December.

To cushion the fallout, Federal Reserve Chairman Ben Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate _ now near a historic low of 1 percent _ at its last scheduled meeting this year on Dec. 16.

With jobs vanishing, shoppers cut back, causing retail sales to be "weak" or "down" in most of the Fed's 12 regions.

"Retailers were preparing for a relatively slow holiday sales season," the Fed report said. New York retailers said the holiday sales season is likely to feature more discounted prices on merchandise than last year. Some retailers in the Fed regions of Boston, Philadelphia, Cleveland and Dallas planned to cut capital spending projects for 2009.

Consumer spending _ which includes retail sales _ is a major shaper of national economic activity. Job cuts, tanking investment portfolios and sinking home values have made American consumers, however, wary of spending.

ShopperTrak RCT Corp., a research company that tracks total retail sales for more than 50,000 outlets, released more data Wednesday showing that the better-than-expected sales boost on Friday, the traditional opening for the holiday shopping season at stores, fizzled quickly during the rest of the weekend _ resulting in a mixed start to the season.

The economy jolted into reverse in the summer as consumers slashed their spending by the most in 28 years.

Many believe the economy will continue to shrink through the rest of this year and into the first quarter of next year. At 12 months and counting, the current recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.

Besides retail sales, auto sales were down sharply in most Fed regions. Car buyers in many areas had difficulty obtaining financing, a direct result of the credit crisis, the report said.

The chiefs of Chrysler LLC, General Motors Corp. and Ford Motor Co. are preparing to return to Capitol Hill on Thursday and Friday to again make their case for as much as $34 billion in emergency aid.

At factories, "manufacturing activity declined noticeably" since the Fed's last report in mid-October. Similarly, activity in the services sector contracted in most Fed regions.

In a separate report Wednesday, the U.S. service sector, which includes hotels, retailers and other industries, saw activity shrink more than expected in November. The Institute for Supply Management, a trade group of purchasing executives, said readings for new orders, employment and prices all hit the lowest levels on records dating back to 1997.

The Fed's survey suggested that businesses have little appetite to hire.

Employers in the Fed regions of Boston, Richmond, Chicago and Dallas reported that demand for temporary workers dropped. Employers in the regions of Boston and Cleveland also reported that seasonal hiring had been scaled back at retail stores. Employers in Atlanta noted that layoffs have accelerated and workers' hours declined. Employers in the San Francisco Fed region reported job cuts and hiring freezing across a wide range of industries.

The nation's unemployment rate jumped in October to 6.5 percent, a 14-year high. So far 1.2 million jobs have vanished this year and the losses will get worse. Many economists are predicting the jobless rate will climb to 6.8 percent for November and employers will chop another 320,000 jobs. The government releases the new employment report on Friday.

The housing picture continued to look bleak, the Fed report showed.

Sales were down and inventories of unsold homes remained high in most Fed regions. Commercial real-estate markets, meanwhile, "weakened broadly" and pushed up vacancy rates in about half of the Fed's regions, the survey said.

Against this backdrop, both consumer and business lending continued to slow, the Fed said. Despite a $700 billion financial bailout and a flurry of radical new programs, the government hasn't been able to bust through a credit clog that's contributed to the worst financial crisis to hit the country since the 1930s.

The Fed report is based on information supplied by the Fed's 12 regional banks. The information was collected before Nov. 24.

Obama Backs Off Promise to Pass Windfall Profits Tax on Big Oil

Obama Backs Off Promise to Pass Windfall Profits Tax on Big Oil

By David Sirota

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Good news and bad news in the last day. The good news: Barack Obama has appointed a NAFTA critic, Rep. Xavier Becerra, as the next U.S. Trade Representative (more on that here). The bad news is this just off the Reuters wire:

CHICAGO/WASHINGTON (Reuters) -- President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday...

Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.

Between this move and the move to wait to repeal the Bush tax cuts for the wealthy, it seems like the Obama team is buying into the right-wing frame that raising any taxes -- even those on the richest citizens and wealthiest corporations -- is bad for the economy. Of course, that frame is debunked by history. And while sure, it's OK to rack up deficits so as to spend our way out of the economic crisis, it's sorta silly to ignore the tax moves that could be implemented to limit those deficits where possible.

Oh, and one last thing -- if oil prices are down and oil industry profits are truly down, what's the harm in passing a windfall profits tax? Even if you buy the right-wing nonsense about a windfall profits tax "hurting the industry" or "hurting the economy" when it is applied, if there really are no windfall profits to tax, then it won't be applied.

That's what a windfall profits tax really is -- a safety valve regulation against profiteering, and one that can raise needed revenues when profiteering occurs. If there is supposedly no profiteering occurring, then what's the supposed harm? There is none even if you ignore history and believe taxing the wealthy/big corporations automatically hurts an economy. That is, unless you are ready to go down another right-wing rathole and argue that a windfall profits tax will somehow prevent energy companies from more energy exploration. But, then, if you are that far out on the fringe, then I guess your not interested in any facts whatsoever...

Broader medical refusal rule may go far beyond abortion

Broader medical refusal rule may go far beyond abortion

The Bush administration plans a new 'right of conscience' rule that would allow more workers to refuse more procedures. Critics say it could apply to artificial insemination and birth control.

By David G. Savage

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The outgoing Bush administration is planning to announce a broad new "right of conscience" rule permitting medical facilities, doctors, nurses, pharmacists and other healthcare workers to refuse to participate in any procedure they find morally objectionable, including abortion and possibly even artificial insemination and birth control.

For more than 30 years, federal law has dictated that doctors and nurses may refuse to perform abortions. The new rule would go further by making clear that healthcare workers also may refuse to provide information or advice to patients who might want an abortion.

It also seeks to cover more employees. For example, in addition to a surgeon and a nurse in an operating room, the rule would extend to "an employee whose task it is to clean the instruments," the draft rule said.

The "conscience" rule could set the stage for an abortion controversy in the early months of Barack Obama's administration.

During the campaign, President-elect Obama sought to find a middle ground on the issue. He said there is a "moral dimension to abortion" that cannot be ignored, but he also promised to protect the rights of women who seek abortion.

While the rule could eventually be overturned by the new administration, the process might open a wound that could take months of wrangling to close again.

Health and Human Services Department officials said the rule would apply to "any entity" that receives federal funds. It estimated 584,000 entities could be covered, including 4,800 hospitals, 234,000 doctor's offices and 58,000 pharmacies.

Proponents, including the Christian Medical Assn. and the U.S. Conference of Catholic Bishops, say the rule is not limited to abortion. It will protect doctors who do not wish to prescribe birth control or to provide artificial insemination, said Dr. David Stevens, president of CMA.

"The real battle line is the morning-after pill," he said. "This prevents the embryo from implanting. This involves moral complicity. Doctors should not be required to dispense a medication they have a moral objection to."

Critics of the rule say it will sacrifice patients' health to the religious beliefs of providers.

The American Medical Assn. and the American Hospital Assn. in October urged HHS to drop the regulation. The Planned Parenthood Foundation and other backers of abortion rights condemned the rule as a last-gasp effort by the Bush administration to please social conservatives.

"It's unconscionable that the Bush administration, while promising a smooth transition, would take a final opportunity to politicize women's health," said Cecile Richards, president of Planned Parenthood.

Despite the controversy, HHS Secretary Mike Leavitt said he intends to issue the rule as a final regulation before the Obama administration takes office, to protect the moral conscience of persons in the healthcare industry. Abortion-rights advocates are just as insistent that the rights of a patient come first.

If the regulation is issued before Dec. 20, it will be final when the new administration takes office, HHS officials say. Overturning it would require publishing a proposed new rule for public comment and then waiting months to accept comments before drafting a final rule.

Abortion-rights advocates think it might be easier to get Congress to reject the rule. Sen. Hillary Rodham Clinton (D-N.Y.), before being nominated Monday for secretary of State, and Sen. Patty Murray (D-Wash.) have said they would move to reverse it.

The HHS proposal has set off a sharp debate about medical ethics and the duties of healthcare workers.

Last year, the American College of Obstetrics and Gynecology said a "patient's well-being must be paramount" when a conflict arises over a medical professional's beliefs.

In calling for limits on "conscientious refusals," ACOG cited four recent examples. In Texas, a pharmacist rejected a rape victim's prescription for emergency contraception. In Virginia, a 42-year-old mother of two became pregnant after being refused emergency contraception. In California, a physician refused to perform artificial insemination for a lesbian couple. (In August, the California Supreme Court ruled that this refusal amounted to illegal discrimination based on sexual orientation.) And in Nebraska, a 19-year-old with a life-threatening embolism was refused an early abortion at a religiously affiliated hospital.

"Although respect for conscience is important, conscientious refusals should be limited if they constitute an imposition of religious or moral beliefs on patients [or] negatively affect a patient's health," ACOG's Committee on Ethics said. It also said physicians have a "duty to refer patients in a timely manner to other providers if they do not feel that they can in conscience provide the standard reproductive services that patients request."

Leavitt said ACOG threatened to brand as "unprofessional" those who do not share its attitudes toward abortion. In August, he criticized "the development of an environment in the healthcare field that is intolerant of individual conscience, certain religious beliefs, ethnic and cultural traditions and moral convictions."

In its announcement, HHS said the proposed rule was needed because of an attitude "that healthcare professionals should be required to provide or assist in the provision of medicine or procedures to which they object, or else risk being subjected to discrimination."

In a media briefing, Leavitt said the rule was focused ..ion, not contraception. But others said its broad language goes beyond abortion.

Since the 1970s, Congress has said no person may be compelled to perform or assist in performing an abortion or sterilization. One law says no person may be required to assist in a "health service program or research activity" that is "contrary to his religious beliefs or moral convictions." The HHS rule says that law should be enforced "broadly" to cover any "activity related in any way to providing medicine, healthcare or any other service related to health or welfare."

Judith Waxman, a lawyer for the National Women's Law Center, said Leavitt's office has extended the law far beyond what was understood. "This goes way beyond abortion," she said. It could reach disputes over contraception, sperm donations and end-of-life care.

"This kind of rule could wreak havoc in a hospital if any employee can declare they are not willing to do certain parts of their job," she said.

Generic Heart Drugs as Good as Brand-Name Counterparts

Generic Heart Drugs as Good as Brand-Name Counterparts

By Amanda Gardner

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Brand-name drugs used to treat cardiovascular disease are no better than generics, a new review of available evidence shows.

Yet a number of editorials in medical journals, written by specialists, have urged against substituting the less expensive generics for their designer counterparts.

"We found no evidence that brand-name drugs are any better in terms of clinical outcomes than generic drugs," said Dr. Aaron S. Kesselheim, lead author of a study appearing in the Dec. 3 issue of the Journal of the American Medical Association and an instructor in medicine at Brigham and Women's Hospital in Boston. "The FDA [U.S. Food and Drug Administration] has approved all generic drugs and certifies that they are bioequivalent, meaning equivalent in all biological and chemical characteristics of the drug."

The challenge then becomes one of perception, Kesselheim said, with this new paper itself representing "hopefully another step in helping combat the misperception that brand-name drugs are clinically superior," he said.

The findings come closely on the heels of another study which found that there is often little evidence that off-label prescribing (prescribing a drug to treat a disease or condition different from the one it was approved for) is effective or safe.

Generic drugs have the same active ingredient as their brand-name counterparts, but may differ in terms of the color or shape of the pill and some of the inert binders (which are not clinically active).

The advantage to generic medications, of course, is that they cost substantially less.

The developers of drugs are permitted to exclusively market the drug for a finite period of time after its approval, at least partly to recoup the costs of developing the medication. After that time, however, other manufacturers may produce the same drug as a generic.

"There are a number of studies out there saying that generic drugs should be an important part of a physicians prescribing treatment, that they're able to reduce costs and improve patient adherence which can lead to better patient outcomes," Kesselheim said. "Generic drugs are available for nearly every condition but generally are underused in the marketplace, and one of the reasons they're underused is that there is a perception out there among physicians and patients that brand-name drugs are better than generic drugs."

Kesselheim and his colleagues decided to investigate the data to see if brand-name drugs really were superior.

They searched for articles comparing the clinical efficacy of brand-name and generic cardiovascular drugs published between January 1984 and August 2008.

All of the studies involving beta blockers, antiplatelet agents, statins, ACE inhibitors and alpha-blockers showed clinical equivalence, while 91 percent of randomized controlled trials showed clinical equivalence for diuretics, and 71 percent showed the same for calcium-channel blockers.

Yet 53 percent of 43 editorials had a negative take on substituting generic drugs.

"We found no evidence that a brand-name drug is clinically superior," Kesselheim said.

Almost half of the trials and nearly all of the editorial and commentaries failed to identify funding sources.

"The key is, are the drugs therapeutically equivalent. In other words, do you get the same result," said Robert Stanberry, an assistant professor of pharmacy practice at Texas A&M Health Science Center Irma Lerma Rangel College of Pharmacy at Kingsville. "I would tend to agree, that's mostly true."

More information

The U.S. Food and Drug Administration has more on generic drugs.

SOURCES: Aaron S. Kesselheim, M.D., J.D., instructor, medicine, division of pharmacoepidemiology, Brigham and Women's Hospital, Boston; Robert Stanberry, J.D., Pharm.D., assistant professor, pharmacy practice, Texas A&M Health Science Center Irma Lerma Rangel College of Pharmacy at Kingsville; Dec. 3, 2008, Journal of the American Medical Association

US private sector shed 250,000 jobs in November: ADP

US private sector shed 250,000 jobs in November: ADP

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The US private sector lost 250,000 jobs in November, the largest decline in six years, in a further indication of a tightening labor market amid recession, according to a private payrolls report Wednesday.

The job loss was again driven by the goods-producing sector, which posted its 24th consecutive monthly decline in November, the ADP National Employment Report said.

It was the "largest decrease in private sector employment since November of 2002," according to the report.

Nonfarm private employment decreased 250,000 from October to November on a seasonally adjusted basis, it said. The decline exceeded analysts' consensus forecast of a 200,000 drop.

ADP revised upward the October jobs loss to 179,000 from a prior estimate of 157,000, following a September decline of 26,000.

The November jobs decline "offers evidence of a labor market that continues to weaken," the report said.

The Labor Department will issue its nonfarm payrolls report on Friday and analysts expect major job losses in November.

This year, the US economy has shed 1.2 million jobs, and president-elect Barack Obama warned millions more could be lost next year without urgent action.

Obama had announced plans to create 2.5 million new jobs as he forged ahead in his bid to shore up the flagging economy before his January 20 inauguration.

The Federal Reserve has warned the jobless rate could climb to 7.6 percent in 2009 as the economy struggles with a recession amid global financial turmoil.

A private panel of US economists charged with the official designation of business cycles, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), said it had determined the world's largest economy has been in recession since December 2007.

Although a recession is generally defined as two consecutive quarters of declining activity, the panel has its own criteria for determining a downturn.

US President George W. Bush's administration acknowledged the NBER conclusion and said it has been working to foster recovery.

Detainees at Gitmo a Power Strategy

Detainees at Gitmo a Power Strategy

By Daphne Eviatar

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Pity the Uighurs. Originally known best in this country for their unusual name (pronounced WEE'-gurz), the group of 17 Chinese Muslims has been locked up at Guantanamo Bay for the past seven years. That has contributed to the Uighurs new-found notoriety as hapless victims of a U.S. detention policy that can't send them home, yet can't send them anywhere else.

The Bush administration has acknowledged that it no longer considers the Uighurs "enemy combatants" subject to detention. Yet on Nov. 24, it vigorously fought a court's order to release them in the United States -- insisting that only the president and his Homeland Security Dept. have the authority to make that call. (Because the 17 Chinese Muslims received weapons training in Afghanistan, the administration claimed they posed a threat and cannot be allowed to live here. Yet the government has never presented any evidence that the men intended to use their training to stage attacks in the United States.)

The case has become such a global embarrassment for the U.S. that a group of 10 distinguished conservatives recently wrote to the administration appealing for the Uighurs' release, saying their continued detention without cause "undermines our standing in the world."

None of this seems to matter. As the administration faces its last days in power, officials, citing strategic reasons, are using even their weakest cases against detainees in the war on terror to hold onto what power they can exert.

In a series of interviews with more than 10 legal experts and law professors, as well as many litigators involved with detainee lawsuits, most said that the administration is intent on leaving a strong legal legacy that will fortify its efforts to strengthen executive power. If it succeeds, Congress will be even more hard-pressed to reclaim the power that the administration has concentrated in the executive branch.

Success could also present the Obama administration with some difficult challenges -- both to its ability to dismantle the Bush detainee policy and to its resolve to resist exercising the greatly enhanced executive powers it will inherit.

"I think it's a matter of principle for the Bush administration," said David Remes, executive director of Appeal for Justice and a lawyer who represents more than a dozen Yemeni detainees at Guantanamo Bay. "They can't control what happens after they leave office. But at least they'll have the satisfaction of knowing that the principle wasn't compromised on their watch."

The reputations of administration officials are also at stake.

"I think they're trying to make their record less damning in terms of not having produced much in the way of convictions or sentences," said Madeline Morris, a law professor at Duke University and former chief counsel to the Office of the Chief Defense Counsel for Military Commissions in the Defense Dept. "They want some high-profile signs that something's happening -- for example, that the 9/11 defendants are being brought to justice. The more that they can get [these cases] even into the pretrial phase … the more the commission process would seem efficacious, at least in its public impression."

In the case of the 17 detained Uighurs, it is a matter of principle: Who gets to decide whether they are released -- a judge or the president?

The answer to the legal question isn't completely clear, said Fordham law professor and criminal defense expert James Cohen. "It presents difficult issues of separation of powers," he said.

But as a political matter, what makes this case worth fighting?

"I think [the administration] would like to establish and preserve favorable precedents, so that a president in the future would be free to pursue the same course," said Remes. "So much of what the White House has been doing in the past seven years has been creating precedents for unilateral exercises of presidential power. I think it sees no reason to capitulate before it has to."

That White House strategy may have long-term consequences.

"This is very similar to the efforts we see in the regulatory arena -- where the outgoing administration is trying to lock in some of its policies and rules," said Sharon Bradford Franklin, senior counsel at the Constitution Project, a bipartisan nonprofit organization that seeks consensus on constitutional issues. "It's trying to get judicial determinations to lock in its views on broad detention authority and broad executive power that it has been claiming in U.S. policy all along."

The new administration could reverse some of those policies. But as George Fletcher, a Columbia University law professor, points out, "people don't give up power very easily."

Many of President-elect Barack Obama's supporters were angry when he supported recent amendments to the Foreign Intelligence Surveillance Act, or FISA, that gave immunity to telecommunications companies that helped the administration conduct warrantless wiretapping of Americans. "Will Obama give up the imperial presidency?" Fletcher asked.

Other detainee cases present a similar conundrum.

Last week, the D.C. District Court ruled that the administration had insufficient evidence to keep holding five Algerians who were picked up in Bosnia in 2001 and have been detained at Guantanamo Bay ever since. The Justice Dept. said it was disappointed by the decision and may appeal.

And in a case that the Supreme Court may decide to review, the administration contends that it has the right to hold indefinitely and without charge a lawful resident of Peoria, Ill., who it deems, based on evidence it won't disclose, an "enemy combatant." Ali Saleh Kahlah Al-Marri isn't at Guantanamo Bay, however; he's being held in a U.S. Navy brig in South Carolina.

The Justice Dept. has also been working hard to keep a group of habeas corpus cases, filed by more than 100 detainees, from moving forward, though the Supreme Court ruled in June that they're entitled to challenge their detention.

On Nov. 18, Justice Dept. lawyers opposed a federal judge's order to turn over the legal and factual basis for holding the men, as well as all exculpatory evidence. The government argued it would "take months to fulfill" the obligations and protested what it called "dramatic" new disclosures of government secrets.

"They think the president is the supreme leader, and no one can question anything," said Candace Gorman, a lawyer representing two Guantanamo detainees who've been imprisoned there without charge for almost seven years.

The government also urged the judge to submit the dispute immediately to the court of appeals, where it hopes to win a favorable ruling that would expand the government's right to withhold evidence.

"The administration is still trying to get some favorable decisions out of the D.C. circuit that it hopes will not reviewed by the Supreme Court," said Remes of Appeal for Justice.

In addition to its legal legacy, the administration is likely considering its political legacy as well. Fighting these cases is a matter of saving face.

Over the past four years, the administration has endured repeated losses at the Supreme Court in the Guantanamo cases. The high court slapped down the first set of military commissions created by the president and affirmed that Guantanamo detainees have a right to challenge their detention through habeas corpus proceedings in federal court.

With respect to the next set of military commissions authorized by Congress in 2006, the administration's record has been dismal. Of roughly 24 cases in which charges were made, only three detainees have been convicted, and only one of those convictions followed a contested trial.

David Hicks, captured by the Northern Alliance in Afghanistan and turned over to U.S. authorities for a bounty, pleaded guilty to supporting terrorism and was returned to Australia last year to complete his 7-year sentence. He spent five years at Guantanamo Bay.

Ali Hamza al Bahlul, allegedly Osama bin Laden's media specialist, boycotted his trial, refusing to put on a defense. He was sentenced to life in prison.

And Salim Hamdan, Osama bin Laden's driver, originally portrayed as a militant Al-Qaeda warrior who conspired to arm his fellow terrorists around the world, was convicted only of assisting terrorism. He was sentenced to just a few months more than time already served. (The government had pressed for 30 years in prison.) Last week, he was returned to Yemen for the last months of his sentence.

Meantime, the "convening authority" of the military commissions -- the official who decides which cases to refer for trial -- has dismissed cases against at least five detainees without explanation. And the authority's former legal adviser, Brig. Gen. Thomas Hartmann, had to be excluded from participating in several cases because he tried to exercise undue influence over the prosecution. At least four prosecutors have resigned in protest of the commissions.

Then there's the case of Mohammed Jawad, a 16-year-old Afghan arrested five years ago for allegedly throwing a hand grenade into a vehicle carrying two U.S. Army officers and their interpreter. The judge recently excluded his confession to the crime, however, because it was extracted through torture.

"What you're seeing in the military-commissions context is that although the administration got Congress to create a system rigged against defendants, the military lawyers involved in these cases refused to allow themselves to be used in this fashion," said Remes. "The whole system is in disarray. The administration counted on the panic and alarm in the immediate aftermath of 9/11 to carry them through. But, in time, a sense of proportion and justice returned."

The administration isn't giving up, though. In the Jawad case, for example, it has appealed the judge's suppression order.

"Right now, the government is engaging in extraordinary tactics to fight that case, including a lot of shifting of decision on exactly what the crime is, and most recently filing an appeal with the court of military commissions review," said Morris of Duke Law School.

Some of those actions are likely to be futile, however. Obama has pledged that his administration will disband the military commissions when he takes over Jan. 20. Lawyers practicing before the military commissions could still be struggling with pre-trial motions then.

Still, the Bush administration seems eager to shield itself from blame for any bad outcomes later on.

"I think the Defense Dept. in particular is rudderless," said Vijay Padmanabhan, the former chief counsel at the State Dept. for detainee litigation, who is now a visiting professor at Benjamin N. Cardozo School of Law. "It has never thought, 'What happens if we lose many of these court cases? What are the long-term strategic consequences?' It just keeps fighting them. And then, if they're [the detainees are] released and something bad happens, it can blame the court."