Friday, February 6, 2009

The American ruling class

The American ruling class

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On Wednesday President Barack Obama announced measures that purport to restrict executive compensation to $500,000 at financial institutions receiving billions in government assistance. The figure does not include stock options, which could be redeemed after financial firms pay back loans from the federal government. Nor does it apply to the original recipients of tens of billions in TARP (Troubled Asset Relief Program) money.

The measures are essentially a public relations exercise. Their aim is to provide political cover for a new and even larger Wall Street bailout, which Treasury Secretary Timothy Geithner will unveil next week.

Yet the discussion that has emerged in the wake of Obama’s announcement sheds light on the domination of government by a tiny financial elite and the increasingly threadbare pretense of democracy in the US. This financial aristocracy, the episode reveals, is a power to be approached on bended knee.

The media have responded to Obama’s proposal of a $500,000 limit on executive compensation, which would affect only a handful of firms, as though this were a severe and astonishing punishment. Yet the figure represents approximately 12 times the annual salary of the typical worker. To the majority of the population, a salary of a half million dollars is a staggering amount of money.

Obama’s servility before the financial aristocracy was summed up by the reassurances he gave it in announcing his limits on executive pay. “This is America,” Obama said. “We don't disparage wealth. We don't begrudge anybody for achieving success.”

Such a vision of America is at odds with both its present circumstances and its history, which has been characterized by deep democratic and egalitarian traditions that date back to before the Jeffersonian democracy of the early Republic. And while liberals are busy attempting to equate Obama to Franklin Roosevelt, the latter, in the midst of the Great Depression, attempted to capitalize on the tremendous contempt for the rich in the population at large by regularly issuing bromides against the “money changers.”

Indeed, Obama’s obsequiousness stands in sharp contrast to the anger of the working masses, who find it incomprehensible that the same executives who are responsible for ruining the economy and squandering trillions in taxpayer money are now presented with pay “limits” of a half million dollars. Workers are wondering why there haven’t been criminal indictments and television scenes of handcuffed executives frog-marched from their offices.

But on Wall Street, $500,000 is considered a pittance. The New York Times reports that executives felt cheated by taking home “only” $18 billion in collective bonuses in 2009. “I feel like I got a doorman’s tip, compared to what I got in previous years,” an investment banker with Citigroup told the Times.

The Financial Times reported on Wall Street’s opposition to the largely token measures. “Senior bankers were quick to warn the plans would cause a ‘brain drain’ from the profession as top executives seek more rewarding jobs out of the public eye,” it wrote. “Unlike other careers where job satisfaction and other considerations play a part, finance tends to attract people whose main motivation is money.”

“‘The cap is a lousy idea,’ complained one top Wall Street executive. ‘If there is no monetary upside, who would want to do these jobs?’”

Andrew Ward, a University of Georgia professor and specialist on corporate boards and management, told the Financial Times that executives could respond to Obama’s measure by calling his bluff—refusing to allow their firms to accept a bailout that would in any way limit their personal enrichment. “One of the potentially unintended consequences is that executives might try and hold off asking for government assistance until it is too late,” Ward said.

Media and academic figures who have tried to argue that the massive pay packages of the Wall Street executives are somehow legitimate, or even rational, succeed only in revealing the rot that characterizes intellectual life in the US. Their central argument—that the same CEOs who have driven their companies and the economy as whole into the ground are worthy of remuneration in the tens of millions—is so absurd it is almost an embarrassment to answer.

The immense power of the financial elite is revealed by the case of Bernard Madoff, the investor who squandered more than $50 billion in wealth in a giant Ponzi scheme. While working class Americans are arrested and spend years in prison for far lesser offenses, Madoff remains ensconced in his Manhattan penthouse.

For nearly a decade, a whistleblower named Harry Markopolos, who had uncovered Madoff’s scheme, attempted to draw the attention of the Securities and Exchange Commission (SEC), the federal regulatory agency ostensibly tasked with policing the securities and stock industries. Instead, the SEC ran interference for Madoff. Rather than being applauded for his efforts, Markopolos feared for his safety. “We knew that he was one of the most powerful men on Wall Street and in a position to easily end our careers or worse,” he said.

The social psychology and physiognomy of the financial elite—with its wealth, special privileges and its control over the organs of public opinion—resembles nothing so much as a modern aristocracy.

Any discussion of a rational attempt to find a solution to the economic crisis runs immediately into the ferocious opposition of this elite. Similarly, in the 18th century the aristocracy of the French ancient regime precipitated a financial crisis through its avarice and wars. When the aristocracy convened the Estates General in 1789, it was to demand that the Third Estate, the commoners, bail the aristocracy out of the crisis of its own making. But the monarchy and nobility refused to cede a bit of its power and privileges. This set the stage for the great French Revolution.

The odious subjective characteristics of the US financial aristocracy—its greed, arrogance, stupidity and decadence—are themselves deeply rooted in objective historical developments, the social expression of an underlying economic process. The rise of this narrow social layer with its obscene levels of accumulation is inextricably bound up with the decline of American capitalism in the world market and the gutting of its domestic industrial base. Indeed, what makes the whole process so filthy, what imparts to it such a decadent and repulsive character, is the degree to which this wealth is unconnected to any progressive economic process. It is in every sense destructive and reactionary.

In an earlier period of history the US had its “robber barons,” such as Cornelius Vanderbilt, Andrew Carnegie and John D. Rockefeller. As brutal and greedy as these men were, their wealth was bound up with the creation of enormous industrial empires. The latter-day robber barons of Wall Street, on the other hand, have made their billions from the destruction of the industry and productive capacity built up over decades.

The staggering wealth accumulated in the top one percent of American society over last 25 years is directly bound up with the deterioration of the economy, the decline of industry and the impoverishment of the working class. The enormous personal fortunes of the elite have been built up on hedge funds, the leveraging of debt and other forms of financial speculation. This has entailed an enormous transfer of resources out of manufacturing and into finance, and out of the working class and into the pockets of those who have played the critical role not only in destroying living standards, but in setting the stage for the present disaster.

The fortunes that grew on this basis at a certain point assumed a dynamic of their own. Their sheer scale assumes a malignant character that becomes an insurmountable obstacle to any rational policy coming from within the confines of bourgeois politics.

It follows that there is no solution to the crisis without a direct and massive assault on social inequality, and thus the wealth and privileges of the financial and business aristocracy. This cannot be carried out by pressuring the Democratic Party. The Obama administration’s meager rules on executive pay shows that it will not consider any policies that even hint at the redistribution of wealth.

The American political elite, Obama included, is tied by a thousand strings to the financial aristocracy. The Obama administration is populated by individuals who have parlayed their political positions into lucrative positions in finance. Virtually the entire cabinet fits this billing—not only Tom Daschle, the former senator who withdrew his nomination for the Secretary of Health and Human Services amidst revelations that he had withheld tens of thousands in taxes owed on payments he received from his corporate sponsors.

Yesterday it came to light that Leon Panetta, Obama’s chief of the Central Intelligence Agency, took home more than $1 million last year through payments from corporations for consulting, speaking appearances and through his membership on corporate boards. He was paid handsomely for speeches by financial firms that have since collapsed, including $56,000 by Merrill Lynch and $28,000 by Wachovia. Chief of Staff Rahm Emanuel and Secretary of State Hillary Clinton have also used their political connections to make millions from the same financial elite that would ostensibly be targeted by Obama’s rules on executive pay.

Obama knows very well that when he leaves office he will be able to make millions of dollars, as Bill Clinton, the last Democratic president, and countless other leading politicians have done. Nor would this be a departure for Obama, whose career was taken into hand early on by leading financial and political figures in Chicago.

The subordination of the whole of society to the financial aristocracy is most clearly expressed in the massive bailout of Wall Street. Its political representatives, Democrats and Republican alike, hand over trillions to the biggest banks, while providing no provisions for the masses of people who have lost their jobs and homes.

Millions of workers who voted for Obama are now coming face to face with the fact that his administration will defend the interests of the financial elite every bit as ruthlessly, if with a slightly different presentation, as the Bush administration.

The solution to the economic crisis is not a technical question but a social, political and revolutionary settling of accounts, and a historical necessity. At a certain point in the late 18th century, it became necessary for the oppressed classes of France to rise up and destroy the power and privileges of the nobility. In the America of the 1860s, the only resolution to the “irrepressible conflict” was the destruction of the “slave power” in the South.

At this point it is necessary to destroy the political and economic power of the financial aristocracy. A resolution to the economic crisis can only begin with an independent mass movement of the working class that aims to break the political stranglehold of the financial elite over society; the development, to be blunt, of a revolutionary movement.

Happy Birthday Ronald Reagan (Thanks for Ruining America)

Happy Birthday Ronald Reagan (Thanks for Ruining America)

By William Kleinknecht

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Ronald Reagan's 98th birthday is being celebrated today at a time that should be a cause for soul searching among his admirers. The conservative revolution that Reagan unleashed upon the nation and much of the world lay in ashes, and Washington is embarking on a new epoch of government intervention to eradicate the excesses of free-market purism. One would expect liberals to be out in the streets looking for statues of the Gipper to topple from their pedestals.

But nothing of the kind is happening. While George W. Bush is now the bane even of many conservatives, a Marine Corps contingent will lay a wreath at Reagan's gravesite safe in the knowledge that much of the nation holds his memory in a warm embrace.

Historians may one day view this as an odd historical conundrum, since Reagan's legacy is so clearly imprinted on the myriad of forces that have vitiated the American dream for millions of working people and brought wreckage to the world economy.

The continuing fallout from Reagan's policies – the meltdown of the financial sector, widening income inequality, the emergence of lockdown America, the obscene inflation of CEO compensation, the end of locally owned media, market crashes, blackouts, drug-company scandals, rampant greed and materialism -- is all around us. As D.H. Lawrence once wrote in another context, "The cataclysm has happened, we are among the ruins."

The subprime mortgage crisis, the root of the chaos in the financial sector, is a case in point. Its antecedents clearly lay within the Reagan administration, beginning with an appearance by Donald T. Reagan, Reagan's first treasury secretary, before the Senate banking committee in early 1981, when he laid out a detailed vision for near-complete deregulation of the financial industry.

On Regan's behalf, Richard Pratt, Reagan's first chairman of the Federal Home Loan Bank Board, drafted the Garn-St. Germain Depository Institutions Act of 1982, which included a provision, Title VIII, that enabled lenders for the first time to issue adjustable-rate mortgages and other exotic loans, such as those requiring interest-only payments. The provision was aimed at helping rescue the savings and loan industry by allowing thrifts to respond to the volatility in interest rates that prevailed in the early 1980s, but it would be precisely these types of loans that brought about foreclosures on hundreds of thousands of home mortgages in 2007 and 2008.

Even more significant for the future of the American economy was the decision by Reagan's appointees at the Federal Reserve in 1987 to allow large bank holding companies to handle the underwriting of mortgage-backed securities. This measure was one of several aspects of financial deregulation in the 1980s and afterward that promoted banks' headlong rush into the securitization of mortgages, with the dire results that now engulf our nation.

But it wasn't just Reagan's championing of deregulation that weakened the American dream. While Reaganism has often been portrayed as the antithesis of the New Deal, it was more profoundly a repudiation of a long epoch of reform that, with some brief but notable interruptions, extended from the Populist era through the early 1970s. At the turn of the century, Progressivism brought about a political and cultural awakening whose reform impulses reached into every sector of American life: law, philosophy, economics, art, literature, education, the social sciences. The period brought about the creation of the Federal Trade Commission to protect the public from the most avaricious tendencies of big business, the enactment of important laws like the Pure Food and Drug Act of 1906, and the establishment of new rights like woman suffrage. Through an explosion of good government groups, the average citizen began playing a greater role in public policy. Progressivism also spawned the concepts of business ethics and labor relations, the recognition that tending to the morale and working conditions of employees was smart management.

Reagan stood against everything that had been achieved in this age of reform. His constant attacks on the inefficiency of government, a rallying cry taken up by legions of conservative politicians across the country, became a self-fulfilling prophecy. The more money taken away from government programs, the more ineffective they became, and the more ineffective they became, the more ridiculous government bureaucrats came to be seen in the public eye. Gradually government, and the broader realm of public service, came to seem disreputable, disdained by the best and brightest college students planning their careers. And the image of government was dragged down even further by the behavior of politicians, who, imbued with the same exaltation of self-interest that is the essence of Reaganism, increasingly treat public office as a vehicle toward their own enrichment.

Reagan's brand of conservatism rippled across our society as thoroughly as did Progressivism. He disenfranchised the average citizen by inventing the soft-money machine that made large corporations the real power in Washington. He empowered corporate executives to abandon the concept of loyalty to employees, shareholders and communities, and weakened the bargaining power of labor. He presided over the slow creep of commercial values into virtually every sphere of American life. Commercialism has invaded realms where it was once verboten -- the non-profit sector, law, health care, politics, public schools, public radio and public television. Instead of public policy influencing the corporation to fit the needs of society, society is shaped to fit the needs of the corporation.

President Barack Obama was elected on a platform that envisioned nothing less than a repudiation of Reaganism. In his first weeks in office, Obama has proposed major government intervention in the economy, including new regulation of the financial sector. And yet he dare not utter criticism of Ronald Reagan. In his campaign, he expressed admiration for Reagan's leadership and the way in which he inspired Americans. Indeed, it is treated as received wisdom in Washington that the Republican party desperately needs to regain the type of leadership that Reagan brought to their party.

But leadership alone was hardly what was necessary to end the economic torpor bedeviling America at the end of the 1970s. History is replete with examples of populist leaders who filled the public squares with screaming throngs while leading their nations to ruin. In public policy, as in science, there are truths and there are untruths, and the wrong actions can have dire consequences The evil of stagflation and the decline of our manufacturing sector in the 1970s did require forceful leadership and renewed investment in the productive capacity of our nation, but not the corporate welfare and abandonment of working people that was the essence of Reaganism.

If America is serious about regaining its economic standing in the world, it is essential that we have a full public debate of what and who led us down the wrong path. Reagan should no longer be exempt from the scrutiny that his legacy so richly deserves.

This essay is adapted from William Kleinknecht's new book, "The Man Who Sold the World: Ronald Reagan and the Betrayal of Main Street America," to be published next month by Nation Books.

Public Revolt Builds Against Rip-off Rescue Plans for the Economy

All of Them Must Go

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Watching the crowds in Iceland banging pots and pans until their government fell reminded me of a chant popular in anti-capitalist circles in 2002: "You are Enron. We are Argentina."

Its message was simple enough. You--politicians and CEOs huddled at some trade summit--are like the reckless scamming execs at Enron (of course, we didn't know the half of it). We--the rabble outside--are like the people of Argentina, who, in the midst of an economic crisis eerily similar to our own, took to the street banging pots and pans. They shouted, "¡Que se vayan todos!" ("All of them must go!") and forced out a procession of four presidents in less than three weeks. What made Argentina's 2001-02 uprising unique was that it wasn't directed at a particular political party or even at corruption in the abstract. The target was the dominant economic model--this was the first national revolt against contemporary deregulated capitalism.

It's taken a while, but from Iceland to Latvia, South Korea to Greece, the rest of the world is finally having its ¡Que se vayan todos! moment.

The stoic Icelandic matriarchs beating their pots flat even as their kids ransack the fridge for projectiles (eggs, sure, but yogurt?) echo the tactics made famous in Buenos Aires. So does the collective rage at elites who trashed a once thriving country and thought they could get away with it. As Gudrun Jonsdottir, a 36-year-old Icelandic office worker, put it: "I've just had enough of this whole thing. I don't trust the government, I don't trust the banks, I don't trust the political parties and I don't trust the IMF. We had a good country, and they ruined it."

Another echo: in Reykjavik, the protesters clearly won't be bought off by a mere change of face at the top (even if the new PM is a lesbian). They want aid for people, not just banks; criminal investigations into the debacle; and deep electoral reform.

Similar demands can be heard these days in Latvia, whose economy has contracted more sharply than any country in the EU, and where the government is teetering on the brink. For weeks the capital has been rocked by protests, including a full-blown, cobblestone-hurling riot on January 13. As in Iceland, Latvians are appalled by their leaders' refusal to take any responsibility for the mess. Asked by Bloomberg TV what caused the crisis, Latvia's finance minister shrugged: "Nothing special."

But Latvia's troubles are indeed special: the very policies that allowed the "Baltic Tiger" to grow at a rate of 12 percent in 2006 are also causing it to contract violently by a projected 10 percent this year: money, freed of all barriers, flows out as quickly as it flows in, with plenty being diverted to political pockets. (It is no coincidence that many of today's basket cases are yesterday's "miracles": Ireland, Estonia, Iceland, Latvia.)

Something else Argentina-esque is in the air. In 2001 Argentina's leaders responded to the crisis with a brutal International Monetary Fund-prescribed austerity package: $9 billion in spending cuts, much of it hitting health and education. This proved to be a fatal mistake. Unions staged a general strike, teachers moved their classes to the streets and the protests never stopped.

This same bottom-up refusal to bear the brunt of the crisis unites many of today's protests. In Latvia, much of the popular rage has focused on government austerity measures--mass layoffs, reduced social services and slashed public sector salaries--all to qualify for an IMF emergency loan (no, nothing has changed). In Greece, December's riots followed a police shooting of a 15-year-old. But what's kept them going, with farmers taking the lead from students, is widespread rage at the government's crisis response: banks got a $36 billion bailout while workers got their pensions cut and farmers received next to nothing. Despite the inconvenience caused by tractors blocking roads, 78 percent of Greeks say the farmers' demands are reasonable. Similarly, in France the recent general strike--triggered in part by President Sarkozy's plans to reduce the number of teachers dramatically--inspired the support of 70 percent of the population.

Perhaps the sturdiest thread connecting this global backlash is a rejection of the logic of "extraordinary politics"--the phrase coined by Polish politician Leszek Balcerowicz to describe how, in a crisis, politicians can ignore legislative rules and rush through unpopular "reforms." That trick is getting tired, as South Korea's government recently discovered. In December, the ruling party tried to use the crisis to ram through a highly controversial free trade agreement with the United States. Taking closed-door politics to new extremes, legislators locked themselves in the chamber so they could vote in private, barricading the door with desks, chairs and couches.

Opposition politicians were having none of it: with sledgehammers and an electric saw, they broke in and staged a twelve-day sit-in of Parliament. The vote was delayed, allowing for more debate--a victory for a new kind of "extraordinary politics."

Here in Canada, politics is markedly less YouTube-friendly--but it has still been surprisingly eventful. In October the Conservative Party won national elections on an unambitious platform. Six weeks later, our Tory prime minister found his inner ideologue, presenting a budget bill that stripped public sector workers of the right to strike, canceled public funding for political parties and contained no economic stimulus. Opposition parties responded by forming a historic coalition that was only prevented from taking power by an abrupt suspension of Parliament. The Tories have just come back with a revised budget: the pet right-wing policies have disappeared, and it is packed with economic stimulus.

The pattern is clear: governments that respond to a crisis created by free-market ideology with an acceleration of that same discredited agenda will not survive to tell the tale. As Italy's students have taken to shouting in the streets: "We won't pay for your crisis!"

Insurers Hike Medicare Advantage Prices

Medicare Advantage prices rise as overhaul plan nears

As President Obama prepares to push for an overhaul of the medical system, providers of U.S.-backed health plans for the elderly are raising prices.

Humana Inc., Health Net Inc., and nearly 200 other providers increased 2009 premiums by 13 percent on average, or more than five times as much as last year, for people who use Medicare Advantage, according to Avalere Health, a consulting company in Washington.

Advantage plans add features such as drug coverage to Medicare and are run by commercial insurers.

Obama has vowed to control health-care spending while extending coverage to more people, and, during his campaign, criticized the costs of Advantage plans. The premium increases, charged directly to the elderly rather than the government, are further evidence that insurers' need for profits is ballooning patients' expenses and reducing the efficiency of care, said Arnold Relman, former editor of the New England Journal of Medicine.

"Medicare Advantage is a rip-off," said Relman, 85, also a professor emeritus at Harvard Medical School in Boston. "I cannot see that they do anything better than public insurance does, and they do a lot of things worse."

Medicare will spend 14 percent more this year, on average, for Advantage enrollees than for beneficiaries with basic coverage, concluded a staff report in December by the Medicare Payment Advisory Commission, an independent agency that advises Congress.

Obama considers the government payments "excessive," Jen Psaki, a spokeswoman now on the White House staff, said in a Jan. 5 e-mail. During his campaign Obama promised to cut subsidies to Advantage by as much as $15 billion a year, or about 15 percent from last year's total of $100 billion.

Insurers also collected about $5 billion in Advantage premiums from consumers last year, said Thomas Scully, the former top administrator of the U.S. Centers for Medicare & Medicaid Services.

Scully, who helped design the Advantage program, said that he did not consider the premiums excessive and that Advantage was less expensive than alternatives.

Medicare is the U.S. health plan for the disabled and those over 65. Basic Medicare, with a monthly fee of $96, lets patients use nearly all U.S. doctors or hospitals. Beneficiaries can also buy separate private policies to cover prescription drugs and expenses exempted from standard benefits. Advantage, which covers 10.5 million people, bundles those options.

"There are almost 11 million people who have chosen to participate in Medicare Advantage because they feel they're good plans," said Richard Barasch, chief executive officer of Universal American Corp., an insurer in Rye Brook, N.Y.

The Advantage premiums paid by Blair Law and his wife, Mary, rose to $50 a month this year, up from zero initially. "These guys have you by the short hairs," said Blair Law, 77, a retired construction-company executive in Fort Myers, Fla. "They know you're disinclined to shift to another plan, so they keep ratcheting the cost up."

In 2007, the Laws joined an Advantage plan provided by Universal Health Care Corp. of St. Petersburg, Fla. Initially, the plan charged no monthly premium, and the insurer rebated the couple's basic-Medicare premiums, the Laws said. The rebate ended last year, and this year the company began charging the couple an additional $50 a month. Universal Health Care chief executive officer Akshay Desai did not respond to a request for comment.

TARP Recipients Paid $114 Million to Lobby Lawmakers

TARP recipients paid $114M to lobby lawmakers

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Recipients of the $700 billion federal bailout package in the finance and auto sectors may view their contributions and lobbying as the smartest investments made in years, according to the Center for Responsive Politics.

More than half of the 300 companies helped by the federal government’s Troubled Asset Relief Program (TARP) have dished out $114.2 million for politicking, with $77 million spent on lobbying last year and $37 million spent on federal campaign contributions for the 2008 election.

Those political activities have, in part, yielded the companies $305.2 billion from TARP, or a massive return of 267,208 percent.

“Even in the best economic times, you won’t find an investment with a greater payoff than what these companies have been getting,” said Sheila Krumholz, the center’s executive director, in a statement.

McLean-based Capital One Financial Corp., which got the fourteenth-highest bailout share of $3.6 billion and the most out of all local recipients, spent about $700,000 on campaign contributions and $1.1 million on lobbying.

The top three bailout recipients also spent big on campaigns and lobbying, according to the D.C.-based nonprofit.

Bank of America, combined with Merrill Lynch, spent $14.5 million and got $45 billion from the bailout. General Motors spent $15 million and got $10.4 billion, and American International Group spent $10.6 million and was paid out $40 billion.

Of all companies that have been helped by TARP, 25 paid lobbyists $76.7 million to represent them on Capitol Hill last year.

They spent the most during the third quarter of last year, dishing out $20.4 million on lobbying.

“Taxpayers hope their money is being allocated entirely on the merits, but with Congress controlling how much money the Treasury gets to hand out, it will be impossible to completely exclude politics from this process,” said Krumholz, in a statement.

Some of the top recipients of contributions from TARP beneficiaries are members of Congress who chair committees that regulate the financial sector and oversee how well the bailout program works.

In total, members of the Senate Committee on Banking, Housing and Urban Affairs, Senate Finance Committee and House Financial Services Committee received $5.2 million from TARP recipients in the 2007 to 2008 election cycle. President Obama collected at least $4.3 million from employees at those companies for his campaign, said the center.

IBM Offers to Move Laid Off Workers to India

IBM Offers To Move Laid Off Workers To India

Big Blue wants to help redundant U.S. employees relocate to developing markets, according to an internal document

By Paul McDougall

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The climate is warm, there's no shortage of exotic food, and the cost of living is rock bottom. That's IBM's pitch to the laid-off American workers it's offering to place in India. The catch: Wages in the country are pennies-on-the-dollar compared to U.S. salaries.

Under a program called Project Match, IBM will help workers laid off from domestic sites obtain travel and visa assistance for countries in which Big Blue has openings. Mostly that's developing markets like India, China, and Brazil.

"IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand," IBM says in an internal notice on the initiative. "Should you accept a position in one of these countries, IBM offers financial assistance to offset moving costs, provides immigration support, such as visa assistance, and other support to help ease the transition of an international move."

The document states that the program is limited to "satisfactory performers who have been notified of separation from IBM U.S. or Canada and are willing to work on local terms and conditions." The latter indicates that workers will be paid according to prevailing norms in the countries to which they relocate. In many cases, that could be substantially less than what they earned in North America.

IBM has laid off more than 4,000 workers in the United States since the beginning of January, according to an employee group. The company has confirmed layoffs but won't comment on specific numbers.

A spokesman for Alliance@IBM, a workers' group that's affiliated with the Communications Workers of America but which does not have official union status at IBM, slammed the program. "IBM is not only offshoring IBM U.S. jobs but they want employees to offshore themselves through Project Match," said the spokesman.

An IBM spokesman said the program shouldn't be seen in that light. "It's more of a vehicle for people who want to expand their life experience by working somewhere else," said the spokesman. "A lot of people want to work in India."

In addition to India, China, and Brazil, IBM is offering to relocate redundant U.S. workers to a number of other developing markets, including Mexico, the Czech Republic, Russia, South Africa, Nigeria, and the United Arab Emirates, according to the notice, which was obtained Monday by InformationWeek.

Pentagon Spending Billions on PR to Sway Domestic, World Opinion

Pentagon Spending Billions on PR to Sway World Opinion

Associated Press finds that over the past five years, the money the military spends on winning hearts and minds at home and abroad has grown by 63 percent, to at least $4.7 billion this year

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As it fights two wars, the Pentagon is steadily and dramatically increasing the money it spends to win what it calls "the human terrain" of world public opinion. In the process, it is raising concerns of spreading propaganda at home in violation of federal law.

An Associated Press investigation found that over the past five years, the money the military spends on winning hearts and minds at home and abroad has grown by 63 percent, to at least $4.7 billion this year, according to Department of Defense budgets and other documents. That's almost as much as it spent on body armor for troops in Iraq and Afghanistan between 2004 and 2006.

This year, the Pentagon will employ 27,000 people just for recruitment, advertising and public relations -- almost as many as the total 30,000-person work force in the State Department.

"We have such a massive apparatus selling the military to us, it has become hard to ask questions about whether this is too much money or if it's bloated," says Sheldon Rampton, research director for the Committee on Media and Democracy, which tracks the military's media operations. "As the war has become less popular, they have felt they need to respond to that more."

Yet the money spent on media and outreach still comes to only 1 percent of the Pentagon budget, and the military argues it is well-spent on recruitment and the education of foreign and American audiences. Military leaders say that at a time when extremist groups run Web sites and distribute video, information is as important a weapon as tanks and guns.

"We have got to be involved in getting our case out there, telling our side of the story, because believe me, al-Qaida and all of those folks ... that's what they are doing on the Internet and everywhere else," says Rep. Adam Smith, D-Wash., who chairs the Terrorism, Unconventional Threats and Capabilities Subcommittee. "Every time a bomb goes off, they have a story out almost before it explodes, saying that it killed 15 innocent civilians."

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On an abandoned Air Force base in San Antonio, Texas, editors for the Joint Hometown News Service point proudly to a dozen clippings on a table as examples of success in getting stories into newspapers.

What readers are not told: Each of these glowing stories was written by Pentagon staff. Under the free service, stories go out with authors' names but not their titles, and do not mention Hometown News anywhere. In 2009, Hometown News plans to put out 5,400 press releases, 3,000 television releases and 1,600 radio interviews, among other work -- 50 percent more than in 2007.

The service is just a tiny piece of the Pentagon's rapidly expanding media empire, which is now bigger in size, money and power than many media companies.

In a yearlong investigation, The Associated Press interviewed more than 100 people and scoured more than 100,000 pages of documents in several budgets to tally the money spent to inform, educate and influence the public in the U.S. and abroad. The AP included contracts found through the private FedSources database and requests made under the Freedom of Information Act. Actual spending figures are higher because of money in classified budgets.

The biggest chunk of funds -- about $1.6 billion -- goes into recruitment and advertising. Another $547 million goes into public affairs, which reaches American audiences. And about $489 million more goes into what is known as psychological operations, which targets foreign audiences.

Staffing across all these areas costs about $2.1 billion, as calculated by the number of full-time employees and the military's average cost per service member. That's double the staffing costs for 2003.

Recruitment and advertising are the only two areas where Congress has authorized the military to influence the American public. Far more controversial is public affairs, because of the prohibition on propaganda to the American public.

"It's not up to the Pentagon to sell policy to the American people," says Rep. Paul Hodes, D-N.H., who sponsored legislation in Congress last year reinforcing the ban.

Spending on public affairs has more than doubled since 2003. Robert Hastings, acting director of Pentagon public affairs, says the growth reflects changes in the information market, along with the fact that the U.S. is now fighting two wars.

"The role of public affairs is to provide you the information so that you can make an informed decision yourself," Hastings says. "There is no place for spin at the Department of Defense."

But on Dec. 12, the Pentagon's inspector general released an audit finding that the public affairs office may have crossed the line into propaganda. The audit found the Department of Defense "may appear to merge inappropriately" its public affairs with operations that try to influence audiences abroad. It also found that while only 89 positions were authorized for public affairs, 126 government employees and 31 contractors worked there.

In a written response, Hastings concurred and, without acknowledging wrongdoing, ordered a reorganization of the department by early 2009.

Another audit, also in December, concluded that a public affairs program called "America Supports You" was conducted "in a questionable and unregulated manner" with funds meant for the military's Stars and Stripes newspaper.

The program was set up to keep U.S. troops informed about volunteer donations to the military. But the military awarded $11.8 million in contracts to a public relations firm to raise donations for the troops and then advertise those donations to the public. So the program became a way to drum up support for the military at a time when public opinion was turning against the Iraq war.

The audit also found that the offer to place corporate logos on the Pentagon Web site in return for donations was against regulations. A military spokesman said the program has been completely overhauled to meet Pentagon regulations.

"They very explicitly identify American public opinion as an important battlefield," says Marc Lynch, a professor at George Washington University. "In today's information environment, even if they were well-intentioned and didn't want to influence American public opinion, they couldn't help it."

In 2003, for example, initial accounts from the military about the rescue of Pvt. Jessica Lynch from Iraqi forces were faked to rally public support. And in 2005, a Marine Corps spokesman during the siege of the Iraqi city of Fallujah told the U.S. news media that U.S. troops were attacking. In fact, the information was a ruse by U.S. commanders to fool insurgents into revealing their positions.

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The fastest-growing part of the military media is "psychological operations," where spending has doubled since 2003.
Psychological operations aim at foreign audiences, and spin is welcome. The only caveats are that messages must be truthful and must never try to influence an American audience.

In Afghanistan, for example, a video of a soldier joining the national army shown on Afghan television is not attributed to the U.S. And in Iraq, American teams built and equipped media outlets and trained Iraqis to staff them without making public the connection to the military.

Rear Adm. Gregory Smith, director of strategic communications for the U.S. Central Command, says psychological operations must be secret to be effective. He says that in the 21st century, it is probably not possible to win the information battle with insurgents without exposing American citizens to secret U.S. propaganda.

"We have to be pragmatic and realistic about the game that we play in terms of information, and that game is very complex," he says.

The danger of psychological operations reaching a U.S. audience became clear when an American TV anchor asked Gen. David Petraeus about the mood in Iraq. The general held up a glossy photo of the Iraqi national soccer team to show the country united in victory.

Behind the camera, his staff was cringing. It was U.S. psychological operations that had quietly distributed tens of thousands of the soccer posters in July 2007 to encourage Iraqi nationalism.

With a new administration in power, it is not clear what changes may be made. Obama administration officials have said they intend to go through the Department of Defense budget closely to trim bloated spending.

The emphasis on influence operations started with former Defense Secretary Donald Rumsfeld. In 2002, Rumsfeld established an Office of Strategic Influence that brought together public affairs and psychological operations. Critics accused him of setting up a propaganda arm, and Congress demanded that the office be shut down.

Rumsfeld has declined to speak to the press since leaving office, but while defense secretary he spoke bluntly about his desire to revamp the Pentagon's media operations.

"I went down that next day and said, 'Fine, if you want to savage this thing, fine, I'll give you the corpse,"' Rumsfeld said on Nov. 18, 2002, according to Defense Department transcripts of a speech he delivered. "'There's the name. You can have the name, but I'm gonna keep doing every single thing that needs to be done and I have."'

In 2003, Rumsfeld issued a secret Information Operations Roadmap setting out a plan for public affairs and psychological operations to work together. It noted that with a global media, the military should expect and accept that psychological operations will reach the U.S. public.

"I can tell you there wouldn't be a single American disappointed with anything that we've done that might be out there, that they don't know about," says Col. Curtis Boyd, commander of the 4th PSYOP Group, the largest unit of its kind. "Frankly, they probably wouldn't care because maybe they are safer as a result of it."

In January 2008, a new report by the Defense Science Board recommended resurrecting the Office of Strategic Influence as the Office of Strategic Communications. But Congress refused to fund the program.

In February, the Army released a new eight-chapter field manual that puts information warfare on par with traditional warfare.

Last Guantanamo Trial Is Halted

Judge halts last Guantanamo trial

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The judge overseeing Guantanamo Bay hearings, Susan Crawford, has dropped the charges in the last trial there, the Pentagon says.

President Barack Obama had ordered a delay to conduct a review of all cases.

But the request was refused by Judge James Pohl, who was trying Abd al-Rahim al-Nashiri, a suspect in the bombing of the USS Cole in 2000.

Analysts said the row could have damaged Mr Obama's plan to close the detention centre.

Pentagon officials said Judge Crawford had dismissed the charges against Mr Nashiri without prejudice - meaning that new charges can still be made against him at a later date.

He is expected to remain in custody for the time being.

Pentagon spokesman Geoff Morrell said: "It was [Judge Crawford's] decision, but it reflects the fact that the president has issued an executive order which mandates that the military commissions be halted, pending the outcome of several reviews of our operations down at Guantanamo."

The BBC's Jonathan Beale in Washington says the Obama administration ordered a halt to the trials to give it time to review the cases against all the detainees, and to consider who should be tried and how.

Last week, Judge Pohl said the request to halt Mr Nashiri's trial was "unpersuasive" and ruled that the hearing would go ahead.

His ruling appeared to contradict one of the Obama administration's first actions - to instruct prosecutors to ask for the trials of 21 detainees who had been charged to be delayed by 120 days.

All of the proceedings were stopped, with the exception of Mr Nashiri's trial. He was due to appear at the tribunal next Monday.

Mr Obama is expected to meet members of the families of those killed in the USS Cole attack later on Friday at the White House.

The captain of the USS Cole at the time of the attack, Commander Kirk Lippold, said he was disappointed at the decision to drop the charges.

"Justice delayed is justice denied," he told the BBC, pointing out that families of those killed had already waited eight years for a trial.

'Values and ideals'

The attack on the USS Cole while it was moored off Yemen left 17 US service personnel dead and 50 injured.

Mr Nashiri was arrested in the United Arab Emirates in 2002 and eventually transferred to Guantanamo.

He is accused of conspiring to help two Islamic militants who steered an explosives-laden barge alongside the ship.

Mr Obama ordered the review of military trials for terrorism suspects last week. He also ordered the closure, within one year, of the Guantanamo detention centre.

He said the US would continue to fight terrorism but would maintain its "values and ideals" as well.

Some 250 inmates accused of having links to terrorism remain in the facility.

The legal process for these prisoners has been widely criticised on the grounds the US military acts as jailer, judge and jury.

Farewell, Monroe Doctrine

Farewell, Monroe Doctrine

Philip Brenner and Saul Landau

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President Barack Obama could swiftly improve U.S. relations with Latin America by announcing the death of the Monroe Doctrine and then presiding over its funeral. Such a statement would cost him little domestically, and win him praise and appreciation throughout Latin America and much of the world.

Most Americans don't know the details of this 185-year-old policy and could care less about it. Latin Americans, in contrast, not only can describe the Monroe Doctrine, but they revile it. In effect, it has become nothing more than hollow rhetoric that offends the very people it purports to defend.

In 1823, Secretary of State John Quincy Adams wrote, and President James Monroe proclaimed, a doctrine that asserted U.S. political character is different from Europe's. The United States, President Monroe declared, would consider the extension of Europe's monarchical political influence into the New World "as dangerous to our peace and safety." European powers should leave the Americas for the Americans, he warned, and he strongly implied that there existed a U.S. sphere of influence south of the border.

At the time, Europe shrugged. After all, the United States possessed neither a formidable army nor navy. But three serious problems fundamentally vitiated this apparently noble gesture to protect newly independent republics in South America from European re-colonization.

First, Washington proclaimed it unilaterally. Latin Americans didn't ask us for protection. U.S. diplomats didn't even consult their counterparts. That was ironic, since the Doctrine's "protection" involved placing the United States between Latin American countries and supposedly malevolent European states.

Second, its paternalism — the claim that "our southern brethren" lack the ability to defend themselves — raises hackles in Latin America. Even if the implication had some validity at one time, it no longer corresponds to the region's reality.

The third and most problematic issue Obama faces from the outmoded doctrine relates to its legacy. For more than a century, the United States has periodically intervened in the domestic affairs of Latin American countries. Typically the United States invoked the Monroe Doctrine — without threats from Europe — to justify self-serving intrusions that have inflicted heavy damage on Latin American dignity and sovereignty.

Roosevelt Corollary

Under President Theodore Roosevelt, the doctrine stood for the informal colonization of most "independent" Caribbean Basin countries. The so-called Roosevelt Corollary to the Monroe Doctrine claimed Washington's right to preemptively intervene and occupy a Latin American nation, even if no European power had yet threatened to impose its power there. Roosevelt asserted that by virtue of going into debt to a European bank, a Latin American country weakened itself sufficiently to be vulnerable to re-colonization. Ergo, anticipatory military intervention became a necessity from 1900 to 1933.

U.S. troops invaded Colombia in 1901 and 1902; Honduras in 1903, 1907, and 1911; and the Dominican Republic in 1903, 1904, 1914, and 1916, occupying the island nation until 1924. U.S. troops landed in Nicaragua on multiple occasions, occupying it for some 20 years, and occupied Cuba for three years (1906-1909) and Haiti for 20 years. U.S. forces also made incursions into Mexico, Panama, Guatemala, and Costa Rica.

President Dwight D. Eisenhower used the doctrine in 1954 to justify the overthrow of a democratically elected government in Guatemala. President John F. Kennedy embraced it from 1961 to 1963 in attacking Cuba, and President Lyndon B. Johnson raised its banner in 1965 when he sent 23,000 Marines into the Dominican Republic in support of generals who tyrannically governed the country over the next 13 years. President Ronald Reagan said it was the basis for the CIA wars he pursued in Nicaragua, El Salvador, and Guatemala during which more than 200,000 Central Americans died, as well as the U.S. attack on Grenada.

For these historic reasons, "Monroeism" carries a deeply negative meaning in Latin America and the Caribbean. Throughout the region, the mere mention of the Monroe Doctrine hints at impending U.S. aggression.

Nearly two decades after the Cold War's demise, U.S. policy elites still cling to this doctrine as an axiom of U.S. policy. In recent years they added as the latest corollary a demand that Latin American governments adopt neoliberal economics. No wonder Latin Americans have elected leaders — in Argentina, Brazil, Bolivia, Chile, Ecuador, Nicaragua, Paraguay, Guatemala, Honduras, Uruguay, and Venezuela — who repudiated not only the doctrine's implied hegemony, but the economic rules that accompany it today. Notably, not one Western hemispheric country supported the United States in October, when the UN General Assembly voted 185-3 to end the U.S. embargo against Cuba.

The Ballots Did It

Over the last decade, citizens in Venezuela, Brazil, Argentina, Bolivia, Ecuador, Nicaragua, and other Central American nations have declared their opposition to U.S.-backed neoliberal economic policies and voted for candidates who eschew the notion of perpetual U.S. hegemony. Ballots, ultimately, killed the doctrine. This new wave of leaders is challenging U.S. supremacy. Last year, Bolivian President Evo MoralesEcuador has kicked out a U.S. military base. did what would have been unthinkable two decades ago: He evicted the U.S. Drug Enforcement Agency.

Most Latin American nations now defy the United States on some major policy. Chile and Mexico, both Security Council Members, voted against Washington when the key UN resolution arose that would have sanctioned Bush's invasion of Iraq. And U.S. influence has been further eroded by the stronger diplomatic, economic, and military ties with China, Russia, and Iran that several countries in the region are developing.

Given the facts, President Obama should announce as soon as possible — and no later than the mid-April Summit of the Americas in Trinidad that he's slated to attend — that the Monroe Doctrine is dead and buried. This move could serve as a rhetorical catalyst for developing real partnerships that acknowledge Latin America's new status. Only the funeral of this 19th-century canon will enable the United States to birth a healthy policy.

Philip Brenner is a professor of international relations at American University. His most recent book is A Contemporary Cuba Reader (Rowman and Littlefield, 2008). Saul Landau is vice chair of the Institute for Policy Studies board of trustees. His most recent film is "We Don't Play Golf Here — and Other Stories of Globalization." They are Foreign Policy In Focus contributors.

Army official: Suicides in January 'terrifying'

Army official: Suicides in January 'terrifying'

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One week after the U.S. Army announced record suicide rates among its soldiers last year, the service is worried about a spike in possible suicides in the new year.

The Army said 24 soldiers are believed to have committed suicide in January alone -- six times as many as killed themselves in January 2008, according to statistics released Thursday.

The Army said it already has confirmed seven suicides, with 17 additional cases pending that it believes investigators will confirm as suicides for January.

If those prove true, more soldiers will have killed themselves than died in combat last month. According to Pentagon statistics, there were 16 U.S. combat deaths in Afghanistan and Iraq in January.

"This is terrifying," an Army official said. "We do not know what is going on."

Col. Kathy Platoni, chief clinical psychologist for the Army Reserve and National Guard, said that the long, cold months of winter could be a major contributor to the January spike.

"There is more hopelessness and helplessness because everything is so dreary and cold," she said.

But Platoni said she sees the multiple deployments, stigma associated with seeking treatment and the excessive use of anti-depressants as ongoing concerns for mental-health professionals who work with soldiers.

Those who are seeking mental-health care often have their treatment disrupted by deployments. Deployed soldiers also have to deal with the stress of separations from families.

"When people are apart you have infidelity, financial problems, substance abuse and child behavioral problems," Platoni said. "The more deployments, the more it is exacerbated."

Platoni also said that while the military has made a lot of headway in training leaders on how to deal with soldiers who may be suffering from depression or post-traumatic stress disorder, "there is still a huge problem with leadership who shame them when they seek treatment."

The anti-depressants prescribed to soldiers can have side effects that include suicidal thoughts. Those side effects reportedly are more common in people 18 to 24.

Concern about last month's suicide rate was so high, Congress and the Army leadership were briefed. In addition, the Army took the rare step of releasing data for the month rather than waiting to issue it as part of annual statistics at the end of the year.

In January 2008, the Army recorded two confirmed cases of suicides and two other cases it was investigating.

Last week, in releasing the report that showed a record number of suicides in 2008, the Army said it soon will conduct servicewide training to help identify soldiers at risk of suicide.

The program, which will run February 15 through March 15, will include training to recognize behaviors that may lead to suicide and instruction on how to intervene. The Army will follow the training with another teaching program, from March 15 to June 15, focused on suicide prevention at all unit levels.

The 2008 numbers were the highest annual level of suicides among soldiers since the Pentagon began tracking the rate 28 years ago. The Army said 128 soldiers were confirmed to have committed suicide in 2008, and an additional 15 were suspected of having killed themselves. The statistics cover active-duty soldiers and activated National Guard and reserves.

The Army's confirmed rate of suicides in 2008 was 20.2 per 100,000 soldiers. The nation's suicide rate was 19.5 per 100,000 people in 2005, the most recent figure available, Army officials said last month.

Suicides for Marines were also up in 2008. There were 41 in 2008, up from 33 in 2007 and 25 in 2006, according to a Marines report.

In addition to the new training, the service has a program called Battlemind, intended to prepare soldiers and their families to cope with the stresses of war before, during and after deployment. It also is intended to help detect mental-health issues before and after deployments.

The Army and the National Institute of Mental Health signed an agreement in October to conduct research to identify factors affecting the mental and behavioral health of soldiers and to share strategies to lower the suicide rate. The five-year study will examine active-duty, National Guard and reserve soldiers and their families.

Army Reports Alarming Spike in Suicides Last Month

Army reports alarming spike in suicides last month

By PAULINE JELINEK

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The Army is investigating an unexplained and stunning spike in suicides in January. The count is likely to surpass the number of combat deaths reported last month by all branches of the armed forces in Iraq, Afghanistan and elsewhere in the fight against terrorism.

"In January, we lost more soldiers to suicide than to al-Qaida," said Paul Rieckhoff, director of the Iraq and Afghanistan Veterans of America. He urged "bold and immediate action" by the departments of Defense and Veterans Affairs.

According to figures obtained by The Associated Press, there were seven confirmed suicides last month, compared with five a year earlier. An additional 17 cases from January are under investigation.

There was no detailed breakdown available for January, such as the percentage of suicides that occurred in Iraq and Afghanistan or information about the dead. But just one base — Fort Campbell in Kentucky — reported that four soldiers killed themselves near the installation, where 14,000 soldiers from the two war have returned from duty since October.

Some Fort Campbell soldiers have done three or four tours of duty in the wars. "They come back and they really need to be in a supportive environment," said Dr. Bret Logan, a commander at the base's Blanchfield Army Community Hospital. "They really need to be nourished back to normalcy because they have been in a very extreme experience that makes them vulnerable to all kinds of problems."

Officials said they did not know what caused the rise in suicides last month and that it often takes time to fully investigate a number of the deaths. "There is no way to know — we have not identified any particular problem," said Lt. Col. Mike Moose, a spokesman for Army personnel issues.

Yearly suicides have risen steadily since 2004 amid increasing stress on the force from long and repeated tours of duty in Iraq and Afghanistan.

The service has rarely, if ever, released a month-by-month update on suicides. But officials said Thursday they wanted to re-emphasize "the urgency and seriousness necessary for preventive action at all levels" of the force.

The seven confirmed suicides and 17 other suspected suicides in January were far above the toll for most months. Self-inflicted deaths were at 12 or fewer for each of nine months in 2008, Army data showed. The highest monthly number last year was 14 in August.

Usually the vast majority of suspected suicides are eventually confirmed. If that holds true, it would mean that self-inflicted deaths in January surpassed the 16 combat deaths reported last month in all branches of the armed forces in Iraq, Afghanistan and other nations considered part of the global fight against terrorism.

Army leaders took the unusual step of briefing congressional leaders on the information Thursday.

An annual report last week showed that soldiers killed themselves at the highest rate on record in 2008. The toll for all of last year — 128 confirmed and 15 pending investigation — was an increase for the fourth straight year. It even surpassed the civilian rate adjusted to reflect the age and gender differences in the military.

"The trend and trajectory seen in January further heightens the seriousness and urgency that all of us must have in preventing suicides," Gen. Peter Chiarelli, the Army's vice chief of staff, said Thursday.

The other services did not immediately provide information on their suicide figures for January. But the Army in the past few years has posted a consistently higher rate of suicides than the Navy, Air Force and Marines as it has carried the largest burden of the two largely ground wars.

In announcing the 2008 figures last week, the Army said it would hold special training from Feb. 15 to March 15 to help troops recognize suicidal behaviors and to intervene if they see such behavior in a buddy. After that, the Army also plans a suicide prevention program for all soldiers from the top of the chain of command down.

Yearly increases in suicides have been recorded since 2004, when there were 64 all year. Officials have said over the years that they found that the most common factors were soldiers suffering problems with their personal relationships, legal or financial issues and problems on the job.

But Army Secretary Pete Geren acknowledged last week that officials have been stumped by the spiraling number of cases.

The relentless rise in suicides has frustrated the service, which has tried to address the issue through additional suicide prevention training, the hiring of more psychiatrists and other mental health staff, and other programs both at home and at the battlefront for troops and their families.

In October, the Army and the National Institute of Mental Health signed an agreement to do a five-year study to identify factors affecting the mental and behavioral health of soldiers and come up with intervention strategies at intervals along the way.

On the Net:

Army suicide prevention http://www.armyg1.army.mil/HR/suicide/default.asp

Treasury to unveil 'comprehensive' bank rescue plan Monday

Treasury to unveil 'comprehensive' bank rescue plan Monday

By Ronald D. Orol

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Treasury Secretary Timothy Geithner on Monday will release his "comprehensive plan" to revitalize the financial markets, a Treasury spokesman said Thursday. Geithner is expected to explain how Treasury will employ the second half of a $700 billion bank bailout package as well as other program to shock the financial markets out of the recession. The plan is expected to include a variation of a mortgage mitigation proposal introduced by Federal Deposit Insurance Corp. Chairwoman Sheila Bair, according to Senate Banking Committee Chairman Christopher Dodd, D-Conn. Treasury officials are considering a variety of options for use of the funds, including capital injections and the creation of a bad bank that could be used to buy illiquid mortgage securities from struggling financial institutions.

List of Banks Receiving Funds From $700B TARP

List of Banks Receiving Funds From $700B TARP

This list includes all the banks receiving funds from the Treasury's $700B Troubled Assets Relief Program (TARP).

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The following is a list of TARP recipients as of January 31, 2009:

Bank of America Corporation
Bank of New York Mellon Corporation
Citigroup Inc.
The Goldman Sachs Group
JPMorgan Chase & Co.
Morgan Stanley
State Street Corporation
Wells Fargo & Company
Bank of Commerce Holdings
1st FS Corporation
UCBH Holdings, Inc.
Northern Trust Corporation
SunTrust Banks, Inc.
Broadway Financial Corporation
Washington Federal Inc.
BB&T Corp.
Provident Bancshares Corp.
Umpqua Holdings Corp.
Comerica Inc.
Regions Financial Corp.
Capital One Financial Corporation
First Horizon National Corporation
Huntington Bancshares
KeyCorp
Valley National Bancorp
Zions Bancorporation
Marshall & Ilsley
U.S. Bancorp
TCF Financial Corporation
First Niagara Financial Group
HF Financial Corp.
Centerstate Banks of Florida Inc.
City National Corporation
First Community Bankshares Inc.
Western Alliance Bancorporation
Webster Financial Corporation
Pacific Capital Bancorp
Heritage Commerce Corp.
Ameris Bancorp
Porter Bancorp Inc.
Banner Corporation
Cascade Financial Corporation
Columbia Banking System, Inc.
Heritage Financial Corporation
First PacTrust Bancorp, Inc.
Severn Bancorp, Inc.
Boston Private Financial Holdings, Inc.
Associated Banc-Corp
Trustmark Corporation
First Community Corporation
Taylor Capital Group
Nara Bancorp, Inc.
Midwest Banc Holdings, Inc.
MB Financial Inc.
First Midwest Bancorp, Inc.
United Community Banks, Inc.
Wesbanco Bank Inc.
Encore Bancshares Inc.
Manhattan Bancorp
Iberiabank Corporation
Eagle Bancorp, Inc.
Sandy Spring Bancorp, Inc.
Coastal Banking Company, Inc.
East West Bancorp
South Financial Group, Inc.
Great Southern Bancorp
Cathay General Bancorp
Southern Community Financial Corp.
CVB Financial Corp
First Defiance Financial Corp.
First Financial Holdings Inc.
Superior Bancorp Inc.
Southwest Bancorp, Inc.
Popular, Inc.
Blue Valley Ban Corp
Central Federal Corporation
Bank of Marin Bancorp
Bank of North Carolina
Central Bancorp, Inc.
Southern Missouri Bancorp, Inc.
State Bancorp, Inc.
TIB Financial Corp
Unity Bancorp, Inc.
Old Line Bancshares, Inc.
FPB Bancorp, Inc.
Sterling Financial Corporation
Oak Valley Bancorp
Old National Bancorp
Capital Bank Corporation
Pacific International Bancorp
SVB Financial Group
LNB Bancorp Inc.
Wilmington Trust Corporation
Susquehanna Bancshares, Inc
Signature Bank
HopFed Bancorp
Citizens Republic Bancorp, Inc.
Indiana Community Bancorp
Bank of the Ozarks, Inc.
Center Financial Corporation
NewBridge Bancorp
Sterling Bancshares, Inc.
The Bancorp, Inc.
TowneBank
Wilshire Bancorp, Inc.
Valley Financial Corporation
Independent Bank Corporation
Pinnacle Financial Partners, Inc.
First Litchfield Financial Corporation
National Penn Bancshares, Inc.
Northeast Bancorp
Citizens South Banking Corporation
Virginia Commerce Bancorp
Fidelity Bancorp, Inc.
LSB Corporation
Intermountain Community Bancorp
Community West Bancshares
Synovus Financial Corp.
Tennessee Commerce Bancorp, Inc.
Community Bankers Trust Corporation
BancTrust Financial Group, Inc.
Enterprise Financial Services Corp.
Mid Penn Bancorp, Inc.
Summit State Bank
VIST Financial Corp.
Wainwright Bank & Trust Company
Whitney Holding Corporation
The Connecticut Bank and Trust Company
CoBiz Financial Inc.
Santa Lucia Bancorp
Seacoast Banking Corporation of Florida
Horizon Bancorp
Fidelity Southern Corporation
Community Financial Corporation
Berkshire Hills Bancorp, Inc.
First California Financial Group, Inc
AmeriServ Financial, Inc
Security Federal Corporation
Wintrust Financial Corporation
Flushing Financial Corporation
Monarch Financial Holdings, Inc.
StellarOne Corporation
Union Bankshares Corporation
Tidelands Bancshares, Inc
Bancorp Rhode Island, Inc.
Hawthorn Bancshares, Inc.
The Elmira Savings Bank, FSB
Alliance Financial Corporation
Heartland Financial USA, Inc.
Citizens First Corporation
FFW Corporation
Plains Capital Corporation
Tri-County Financial Corporation
OneUnited Bank
Patriot Bancshares, Inc.
Pacific City Financial Corporation
Marquette National Corporation
Exchange Bank
Monadnock Bancorp, Inc.
Bridgeview Bancorp, Inc.
Fidelity Financial Corporation
Patapsco Bancorp, Inc.
NCAL Bancorp
FCB Bancorp, Inc.
First Financial Bancorp
Bridge Capital Holdings
International Bancshares Corporation
First Sound Bank
M&T Bank Corporation
Emclaire Financial Corp.
Park National Corporation
Green Bankshares, Inc.
Cecil Bancorp, Inc.
Financial Institutions, Inc.
Fulton Financial Corporation
United Bancorporation of Alabama, Inc.
MutualFirst Financial, Inc.
BCSB Bancorp, Inc.
HMN Financial, Inc.
First Community Bank Corporation of America
Sterling Bancorp
Intervest Bancshares Corporation
Peoples Bancorp of North Carolina, Inc.
Parkvale Financial Corporation
Timberland Bancorp, Inc.
1st Constitution Bancorp
Central Jersey Bancorp
Western Illinois Bancshares Inc.
Saigon National Bank
Capital Pacific Bancorp
Uwharrie Capital Corp
Mission Valley Bancorp
The Little Bank, Incorporated
Pacific Commerce Bank
Citizens Community Bank
Seacoast Commerce Bank
TCNB Financial Corp.
Leader Bancorp, Inc.
Nicolet Bankshares, Inc.
Magna Bank
Western Community Bancshares, Inc.
Community Investors Bancorp, Inc.
Capital Bancorp, Inc.
Cache Valley Banking Company
Citizens Bancorp
Tennessee Valley Financial Holdings, Inc.
Pacific Coast Bankers' Bancshares
SunTrust Banks, Inc.
The PNC Financial Services Group Inc.
Fifth Third Bancorp
Hampton Roads Bankshares, Inc.
CIT Group Inc.
West Bancorporation, Inc.
First Banks, Inc.
FirstMerit Corporation
Farmers Capital Bank Corporation
Peapack-Gladstone Financial Corporation
Commerce National Bank
The First Bancorp, Inc.
Sun Bancorp, Inc.
Crescent Financial Corporation
American Express Company
Central Pacific Financial Corp.
Centrue Financial Corporation
Eastern Virginia Bankshares, Inc.
Colony Bankcorp, Inc.
Independent Bank Corp.
Cadence Financial Corporation
LCNB Corp.
Center Bancorp, Inc.
F.N.B. Corporation
C&F Financial Corporation
North Central Bancshares, Inc.
Carolina Bank Holdings, Inc.
First Bancorp
First Financial Service Corporation
Codorus Valley Bancorp, Inc.
MidSouth Bancorp, Inc.
First Security Group, Inc.
Shore Bancshares, Inc.
The Queensborough Company
American State Bancshares, Inc.
Security California Bancorp
Security Business Bancorp
Sound Banking Company
Mission Community Bancorp
Redwood Financial Inc.
Surrey Bancorp
Independence Bank
Valley Community Bank
Rising Sun Bancorp
Community Trust Financial Corporation
GrandSouth Bancorporation
Texas National Bancorporation
Congaree Bancshares, Inc.
New York Private Bank & Trust Corporation
Home Bancshares, Inc.
Washington Banking Company/ Whidbey Island Bank
New Hampshire Thrift Bancshares, Inc.
Bar Harbor Bankshares/Bar Harbor Bank & Trust
Somerset Hills Bancorp
SCBT Financial Corporation
S&T Bancorp
ECB Bancorp, Inc./East Carolina Bank
First BanCorp
Texas Capital Bancshares, Inc.
Yadkin Valley Financial Corporation
Carver Bancorp, Inc
Citizens & Northern Corporation
MainSource Financial Group, Inc.
MetroCorp Bancshares, Inc.
United Bancorp, Inc.
Old Second Bancorp, Inc.
Pulaski Financial Corp
OceanFirst Financial Corp.
Community 1st Bank
TCB Holding Company
Centra Financial Holdings, Inc./Centra Bank, Inc.
First Bankers Trustshares, Inc.
Pacific Coast National Bancorp
Community Bank of the Bay
Redwood Capital Bancorp
Syringa Bancorp
Idaho Bancorp
Puget Sound Bank
United Financial Banking Companies, Inc.
Dickinson Financial Corporation
The Baraboo Bancorporation
Bank of Commerce
State Bankshares, Inc.
BNCCORP, Inc.
First Manitowoc Bancorp, Inc.
Southern Bancorp, Inc.
Morrill Bancshares, Inc.
Treaty Oak Bancorp, Inc.
1st Source Corporation
Princeton National Bancorp, Inc.
AB&T Financial Corporation
First Citizens Banc Corp
WSFS Financial Corporation
Commonwealth Business Bank
Seaside National Bank & Trust
CalWest Bancorp
Fresno First Bank
First ULB Corp.
Alarion Financial Services, Inc.
Midland States Bancorp, Inc.
Moscow Bancshares, Inc.
Farmers Bank
California Oaks State Bank
Pierce County Bancorp
Calvert Financial Corporation
Liberty Bancshares, Inc.
Crosstown Holding Company
BankFirst Capital Corporation
Southern Illinois Bancorp, Inc.
FPB Financial Corp.
Stonebridge Financial Corp.
Peoples Bancorp Inc.
Anchor BanCorp
Parke Bancorp, Inc.
Central Virginia Bankshares, Inc.
Flagstar Bancorp, Inc.
Middleburg Financial Corporation
Peninsula Bank Holding Co.
PrivateBancorp, Inc.
Central Valley Community Bancorp
Plumas Bancorp
Stewardship Financial Corporation
Oak Ridge Financial Services, Inc.
First United Corporation
Community Partners Bancorp
Guaranty Federal Bancshares, Inc.
Annapolis Bancorp, Inc.
DNB Financial Corporation
Firstbank Corporation
Valley Commerce Bancorp
Greer Bancshares Incorporated
Ojai Community Bank
Adbanc, Inc
Beach Business Bank
Legacy Bancorp, Inc.
First Southern Bancorp, Inc.
Country Bank Shares, Inc.
Katahdin Bankshares Corp.
Rogers Bancshares, Inc.
UBT Bancshares, Inc.
Bankers' Bank of the West Bancorp, Inc.
W.T.B. Financial Corporation
AMB Financial Corp.
Goldwater Bank, N.A.
Equity Bancshares, Inc.
WashingtonFirst Bank
Central Bancshares, Inc.
Hilltop Community Bancorp, Inc.
Northway Financial, Inc.
Monument Bank
Metro City Bank
F & M Bancshares, Inc.
First Resource Bank

Government Overpaid for Wall Street Assets

Government overpaid for Wall Street assets

Kevin G. Hall and Greg Gordon

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The federal government overpaid by about $78 billion for stock and other troubled assets when it bailed out big banks last year, and it lacks sufficient internal controls to police and protect taxpayers' investment in the institutions, government watchdogs said Thursday.

The new special inspector general for the bailout effort, formally called the Troubled Asset Relief Program, issued his first report Thursday and said that the Treasury Department needs to put more safeguards in place to protect taxpayers.

Neil Barofsky said that the Treasury Department, under the Bush administration, focused on purchasing assets from troubled banks and failed to put a plan in place for managing more than $279 billion in preferred stock that was acquired during the bailouts.

Now he's asking 319 financial institutions for detailed accountings of how $300 billion in taxpayers' bailout money has been spent. He said his office also would examine whether any bank had misrepresented the value of securities exchanged for the cash.

"If any entity lied to get our money, we will investigate that. We will find it out and we will . . . make sure those people are brought to justice,'' Barofsky told McClatchy in a telephone interview. "It is a fundamental part of our mission to root out those types of fraud."

The inspector general's office is working with the FBI and other federal law-enforcement agencies, he said. It's hired veteran prosecutors and investigators with a broad range of experience, including securities law. Using about a half-dozen investigators detailed from the FBI and IRS, Barofsky said, his office is conducting several criminal investigations related to the relief program. He declined to discuss details.

The relief program is sure to be a hot topic in Washington on Friday morning, when Elizabeth Warren, the chairman of the program's congressional oversight panel, releases a report on the overpayment of $78 billion for bank stocks and other assets.

Testifying before the Senate Banking Committee on Thursday, she said that the Treasury paid $254 billion when it purchased stocks and other bank assets last year. It received assets worth only about $176 billion, however. Her numbers are close but don't correspond exactly with the inspector general's.

"Because Treasury has failed to delineate a clear reason for such an overpayment, however, the panel is unable to determine whether these objectives have been met or whether they justified the large subsidy that was created," Warren said in prepared remarks. "Once again, Treasury needs clear goals, methods and measurements."

Warren challenged Bush administration assurances that all purchases of Wall Street bank warrants and stocks were at "par," meaning that for every $100 injected into the banks, taxpayers got securities worth $100.

A valuation study of 10 transactions — part of the oversight panel's report due to Congress on Friday — suggests that the government overpaid by $78 billion, she told lawmakers.

While Warren looked backward, Barofsky looked forward and said that much greater internal controls were needed.

"Treasury needs, in the near term, to begin developing a more complete strategy on what to do with the very substantial portfolio that it now manages on behalf of the American people," his report says. "In particular, Treasury needs to develop effective valuation methodologies to value the preferred shares and warrants that it holds and an overall investment strategy to manage the equity portfolio it holds."

The Treasury, according to the report, has invested almost $300 billion in 319 financial institutions and received $279.2 billion worth of preferred shares in these lenders. It's received common stock from 230 institutions.

Yet there's no asset manager who's overseeing these shares, and no strategy in place for government stewardship.

"How long these securities should be held and when, and under what circumstances, they should be sold into the market are vitally important questions that implicate not only the taxpayers' return on investment but also the stability of the markets," the report says.

In the interview, Barofsky said that months had passed since the relief program had been established and that a management strategy was sorely needed.

"It would be unfair for us to say on Nov. 10, you have (to have) a full asset-management plan in place. That time is now, or in the very near term," he said.

Treasury Secretary Timothy Geithner already has announced new executive compensation restrictions and other measures designed to improve transparency in the program. He's expected to outline his plans for new finance-sector rescue efforts Monday.

Barofsky's report also says that insufficient safeguards are in place for a $600 billion program that the Federal Reserve is about to unveil. The Fed and Treasury Department are set this month to start buying top-rated asset-backed securities. These are pools of car loans, student loans and credit card debt that are bundled together and sold to investors in a secondary market.

Private investors won't touch these securities, so the Fed is stepping in to unfreeze this vital credit market. However, the Fed is relying too much on rating agencies and investor due diligence to evaluate the health of these assets, Barofsky warned, and needs better risk-screening procedures to protect taxpayer investments.

A Fed spokesman said efforts were under way to create "a robust compliance program" and that the central bank would "carefully consider" Barofsky's recommendations. The spokesman spoke on condition of anonymity because the Fed's response plan hasn't been completed.

FOR MORE INFORMATION
Barofsky report

Warren testimony
TARP Initial Report: excerpt on warrants
TARP Initial Report: excerpt

TARP Initial Report: excerpt on vendors

TARP Initial Report: excerpt on expenditures