Thursday, February 26, 2009

The worst business loss in UK history

The worst business loss in UK history

By Russell Lynch

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Part-nationalised Royal Bank of Scotland today unveiled losses of £24 billion for 2008 - the biggest in UK corporate history.

RBS - nearly 70 per cent owned by the taxpayer after a £20 billion rescue - also announced plans to sell off swathes of the business.

The beleaguered bank plunged to the losses after a catastrophic year when the crisis sparked by the failure of Lehman Brothers brought it to the brink of collapse.

RBS racked up bad debt charges of £7 billion and wrote off £16.2 billion on its disastrous acquisition of Dutch bank ABN Amro in 2007.

Derek Simpson, joint leader of Unite, said: "These historic and humiliating losses bring into sharp focus just how reckless RBS's former management team have behaved.

"The whole country is paying the price through job cuts and repossessions on a massive scale. It is time to take control and fully nationalise this bank.

"You cannot have a state bailout on one hand while allowing the spectre of thousands of job losses to loom over staff on the other.

"The Government has set a precedent for intervention in the day-to-day running of RBS. They must now intervene to protect the workers in call centres, branches and back offices who are the victims of the credit crunch, not the culprits.

"The staff at this bank should not have to pay with their jobs. We will vigorously oppose any compulsory redundancies."

Mr Simpson said the union "was extremely frustrated" about the lack of any firm details about jobs, adding: "The uncertainty hanging over the heads of these workers is unacceptable."

Grim US data show deepening downturn

Grim US data show deepening downturn

By Alan Rappeport

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New US jobless claims unexpectedly spiked last week, reaching the highest level since 1982 as companies continued cutting jobs.

Initial jobless claims grew to 667,000 in the week ending February 21, from a revised 631,000 the previous week, labour department figures showed on Thursday. The results disappointed economists who expected new claims to remain flat. Meanwhile the number of Americans continuing to claim unemployment benefits hit a fresh record in the second week of February, topping the 5m mark for the first time.

Although jobless figures have been shattering records each week, when adjusted for population growth the claims are still well below the peaks reached in the mid-1970s and early 1980, notes Ian Sheperdson, chief US economist at High Frequency Economics. Weekly claims would need to breach 1m to match those low points.

The US economy lost a half million jobs for the third month running in January, bringing the unemployment rate to 7.6 per cent, the highest level since 1992. The accelerating pace of job losses in February have led some economists to predict that payrolls will fall by as much as 750,000 this month, bringing the unemployment rate to 8 per cent.

“Companies are throwing in the towel as they recognise that no sector is safe,” Mr Sheperdson said.

Companies also cut back on orders for durable goods in January, signalling more weakness in the manufacturing sector as the industrial downturn has intensified. Government figures showed on Thursday that orders fell by 5.2 per cent, more than twice as much as analysts expected and worse than the revised 4.6 per cent decline the month before.

Excluding transportation, orders dropped by 2.5 per cent in January and those for non-defence capital goods, excluding aircraft, declined by 5.4 per cent. According to economists at RDQ Economics, total durable goods orders have plunged by an annual rate of 43 per cent during the last three months.

“The recent trend has been quite poor, indicating an ongoing collapse for capital spending,” said Joshua Shapiro, chief US economist at MFR.

A bright note was inventories, as companies succeeded in reducing their stocks of manufactured durable goods last month. Inventories shrank by 0.8 per cent in January after growing by 0.4 per cent in December.

Separately on Thursday the commerce department said that sales of new homes in the US plunged to a record low last month as buyers continued to wait for prices to fall further. New home sales fell by 10.2 per cent in January to an annual rate of 309,000 from a revised 344,000 in December and were off by 48.2 per cent on the year.

The median home price also fell last month, sliding to $201,100, down from a revised $223,200. The median price of a new home fell by 13.5 per cent on the year to January.

“Housing activity remains in freefall,” said Paul Dales, US economist at Capital Economics. “Nonetheless, prices are going to continue falling for some time.”

Existing homes have also been under pressure. On Wednesday the National Association of Realtors said home resales fell by 5.3 per cent to an annual rate of 4.49m in January, a 12-year low.

Britain Admits Complicity in U.S. Rendition

Britain Admits Complicity in U.S. Rendition

By William Fisher

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In a stunning reversal, Britain’s government admitted Wednesday that it participated in the ‘extraordinary rendition’ to Afghanistan of two terror suspects captured in Iraq.

British Defence Secretary John Hutton told Britain's House of Commons that the two individuals were captured by British forces in Iraq, transferred to U.S. detention and later moved to a U.S. detention facility in Afghanistan.

His admission contradicts the British government’s earlier assertions that there were only two cases involving detainee rendition. That statement involved the Indian Ocean island of Diego Garcia, a British territory, which the government admitted had twice been used by the U.S. as a refueling stop for the secret transfer of terrorism suspects.

Apologising to lawmakers for the error, Hutton said, "I regret that it is now clear that inaccurate information on this particular issue has been given to the House by my department," Hutton told lawmakers. "I must stress that this was based on the information available to ministers and those who were briefing them at the time."

At the time, the U.S. denied using the island for extraordinary rendition flights, but later acknowledged that it had misled the British government. British Foreign Secretary David Miliband later released a statement declaring that the U.S. had studied a list of 391 flights compiled by British human rights groups and lawmakers and that no other cases had been found.

Hutton told lawmakers that the two men are still being held in Afghanistan. He said the U.S. has given assurances that they are being held "in a humane, safe and secure environment."

It was unclear if the men were being held along with some 600 others at the U.S. military prison at Bagram Air Force Base, near Kabul. That base has been the target of recent charges from human rights groups that it has become Afghanistan’s Guantanamo Bay, that many prisoners have been locked up there for years without charges or access to lawyers, and that some have been tortured and abused.

Hutton’s disclosure comes on the heels of a firestorm caused by a lawsuit brought in Britain by British resident Binyam Mohamed, who was arrested in Pakistan in 2002, and who charged that British intelligence was complicit with the CIA in rendering him to Morocco, then to Bagram, and finally flying him to Guantanamo Bay, Cuba.

Mohamed was held there since 2004 before his release and return to Britain earlier this week. No charges were ever filed against him. Until shortly before his release, he had been on a hunger strike at the Caribbean military prison.

The lawsuit he filed in Britain - similar to a separate suit brought in the U.S. - has caused a furor there, where officials asked the British High Court not to make public documents that Mohamed’s lawyers say substantiate his treatment. Opposition spokesmen there claimed the U.S. had threatened to stop sharing intelligence with Britain if the documents were made public. Secretary Miliband denied there was any threat.

Mohamed’s U.S. lawyer, Steven Watt, a staff attorney in the Human Rights programme of the American Civil Liberties Union (ACLU), told IPS, "It’s about time the U.K. came clean. News of Britain’s complicity with the CIA has been slowly leaking out for several years. We now know more than enough to conclude that the U.K. has played a role."

"Both countries are still trying to keep this information secret, either to avoid political embarrassment or to cover up some egregious human rights abuses," he said.

Asked by an IPS reporter about the timing of the Defense Minister’s announcement and apology, Watt said, "Maybe they finally want to make a clean breast of it."

In a related development, newly-confirmed CIA Director Leon Panetta said Wednesday that President Barack Obama may limit the countries to which the U.S. sends alleged terrorists to those with good human rights records, and will ensure they are not tortured or abused.

"If it's someone we are interested in, there is no purpose to rendering anyone, particularly if it's a high-value target," Panetta said.

Panetta added that he believes prisoners should only be handed over to countries that have a legitimate legal interest in them, such as their home country or a country where charges are pending against them.

Panetta seemed to be trying to distance himself from statements he made during his congressional confirmation hearing earlier this month. He told lawmakers that the Obama administration intended to continue rendering prisoners captured in the war on terrorism.

Panetta said the administration would rely on a long-standing policy to first secure "diplomatic assurances" from the country that the prisoner would not be tortured or have his human rights violated. But human rights groups point out that such assurances have proved to be virtually worthless in the past, when suspects have been flown to countries with egregious human rights records.

Panetta said the Obama administration would "make very sure" that prisoners are not mistreated after they are rendered. Asked by the Associated Press exactly how that would be done, Panetta said, "Well, I guess, you know, A, make sure, first of all, the kind of countries that we render will tell us an awful lot about that," he said. "No. 2, I think diplomatically we just have to make sure that we have a presence to ensure that that does not happen."

The White House is currently reviewing the extraordinary rendition policy and programme.

Panetta said he does not believe additional prisoners will be sent to Guantanamo this year. In his first week in office, Obama ordered the prison closed within a year, but no decision has yet been made public on what to do with the roughly 250 inmates still there. Only a handful have been charged with a crime, and those trials have been suspended while the Obama administration reviews its legal options.

Obama budget sees $1.75 trillion current fiscal year deficit

'Honest' Obama budget sees huge deficit

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US President Barack Obama has unveiled his budget proposal for 2010, which projects a deficit of $1.75 trillion for the current fiscal year.

While introducing the budget in a Thursday press conference, President Obama slammed what he termed as "dishonest accounting" of the costs of war.

"For too long, our budget has not told the whole truth about how precious tax dollars are spent," he said. "Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan."

"And that kind of dishonest accounting is not how you run your family budgets at home; it's not how your government should run its budgets either," Obama said in an allusion to the presentation of government spending by the former administration.

The proposed budget, which encompasses the Obama White House's efforts to fix an ailing economy, would allow the spending of a whopping 3.606 trillion dollars for the fiscal 2010, ending the year with a 1.75 trillion dollars deficit.

Despite an ambitious agenda -- Obama plans to redirect enormous streams of spending toward programs like health care, education and energy --, the administration seeks to cut that amount sharply by 2013 to $533 billion, the New York Times reported.

A 140-page summary of the budget was presented to Congress Thursday morning. The full details are expected in April.

Obama to spend $200b on war in 2009

Obama to spend $200b on war in 2009

President Barack Obama intends to ask the US Congress for more than USD 200 billion to cover the country's war spending.

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According to the US defense officials, Obama needs USD 75.5 billion for 2009 to cover the cost of the additional troops deployed in to Afghanistan this year and an another USD 130 billion for the rest of fiscal 2009.

Meanwhile, the sources added that the 2010 War spending will be part of the president's overall defense funding request to be announced on Thursday.

The war spending request will be in addition to USD 534 billion for the US Defense Department's other expenditures.

The US Congress had already approved USD 65.9 billion in emergency wartime spending for fiscal 2009.

This is while late December, the Center for Strategic and Budgetary Assessments (CSBA) reported that the direct cost of the wars in Iraq and Afghanistan could reach as high as USD 1.7 trillion by 2018 even with fewer troops in Iraq.

The CSBA report found that the war in Iraq alone has already cost more in inflation-adjusted dollars than every other US war except World War II.

The cost of sending a single soldier to fight for a year in Afghanistan or Iraq is about USD 775,000 - three times more than in other recent wars, the report said.

The report concluded that the nearly USD 1 trillion already spent is only a down payment on the war's long-term costs.

Obama seeks US$663.7b for 2010 defence spending

Obama seeks US$663.7b for 2010 defence spending

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President Barack Obama on Thursday unveiled a 663.7 billion dollar defence budget, up a modest 1.5 percent on 2009, but projected a sharp decline in spending on wars in Iraq and Afghanistan in the coming years.

The new administration has signalled it hopes to make savings through a planned withdrawal of US troops from Iraq and from cuts in expensive weapons programmes - though Obama's budget request did not specify what new weaponry might be scrapped.

The president's proposed budget for the fiscal year 2010 unveiled on Thursday seeks 130 billion dollars for the wars in Iraq and Afghanistan, down from 141.4 billion for operations in the current fiscal year.

The proposed budget offered a rough forecast that the cost of the war efforts would drop to about 50 billion dollars annually in the next several years.

The monthly cost of the war in Iraq has already declined from about 10 billion dollars to eight billion in recent months, officials said.

The budget request includes 533.7 billion dollars for the main defence budget, which marks an increase of four percent over the main budget for fiscal 2009, excluding most of the costs of the conflicts in Iraq and Afghanistan.

Some war costs were shifted to the main defence budget, Pentagon officials said, but did not offer further details.

The proposed military spending will "meet the national security needs of this country," a Pentagon official, speaking on condition of anonymity, told reporters.

The president also requested an additional 75.5 billion dollars to cover war costs for the rest of the current fiscal year, after Congress approved 65.9 billion for fiscal 2009 before Obama took office.

The vast US defence budget represents more than 40 percent of the world's total military spending and US spending will continue to grow under Obama's budget, albeit at a slower pace than under former president George W. Bush.

"It looks like the pattern of overall growth in Pentagon spending will continue in President Obama's first budget," said Travis Sharp, military policy analyst at the Centre for Arms Control and Non-Proliferation.

"The annual growth rate, however, appears to be lower than was typical during the Bush years."

Bush's annual defence budget requests called for increases of about four to five percent in military spending, according to Sharp.

Under Obama, the projected war costs were now being presented at the same time as the rest of the federal budget to show "greater transparency," said the defence official, instead of past practice when proposed war budgets were presented piecemeal over time.

The war costs would also be included when the government calculates the overall budget deficit, in a break with previous policy, the official said.

"What the administration is trying to do is they're trying to bring visibility to the entire war cost estimate at the time of the submission of the budget," the official said.

The president and his Democratic allies have criticised the previous administration's controversial method of accounting for the cost of the wars through a series of "supplemental" funding requests outside of the main defence budget.

In Obama's proposed budget, his administration vowed to impose strict scrutiny over spending on weapons programs but shed no light on which aircraft, ships, vehicles or other sophisticated weaponry might be dumped.

Defence Secretary Robert Gates, placing a top priority on fighting insurgents rather than conventional warfare, has warned that big weapons projects plagued by delays and cost overruns could face cutbacks.

A list of candidates for possible cutbacks drawn up by the Pentagon includes more Navy destroyers built by General Dynamics, fighter jets including Lockheed Martin and Boeing's F-22 Raptors and carrier-based Super Hornets, a digital radio system for all the armed services and missile defence weaponry for Poland and the Czech Republic.

Gates has already singled out the F-22 Raptor fighters, which cost about 350 million dollars each, for potential cutbacks.

Military analysts have also questioned the need for more Navy aircraft carriers and a computer-linked network of Army vehicles, known as Future Combat Systems.

The U.S. Economy: Designed to Fail

The U.S. Economy: Designed to Fail

By Richard C. Cook

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President Barack Obama showed a great deal of gumption in standing before Congress last night delivering his first speech to the joint assembly. All the trappings of power were on display as members of the House and Senate, the Supreme Court, the Joint Chiefs, the Cabinet, and the VIP guests hugged and waved at each other, radiant in their tailored attire only two nights after the Hollywood stars put on their own show on Oscar night.

Too bad neither the president, nor Vice President Joe Biden and Speaker of the House Nancy Pelosi applauding on the podium behind him, nor the jubilant Democrats with their solid majorities, nor the grumpy Republicans slouching in the minority across the aisle, know what they are doing as economic extinction stares the United States of America in the face.

Yes, it’s that bad. The day after the speech the Dow-Jones dropped to 7,271, almost 50 percent off its October 2007 high, with no bottom in sight. According to the Washington Post, the Big Three automakers are now facing a “bottom-up” collapse of their component supply lines if their vast network of suppliers doesn’t receive new federal loans within a week. Worldwide the situation is just as bad. The U.N.’s International Labour Organization reports:

“What began as a crisis in finance markets has rapidly become a global jobs crisis. Unemployment is rising. The number of working poor is increasing. Businesses are going under.”

President Obama’s speech was long on resolve but short on substance. He assured the nation:

“We will rebuild, we will recover, and the United States of America will emerge stronger than before.”

But accomplishing this depends entirely on one thing: more federal deficit spending to serve as the economic engine in an economy where bank lending has dried up because businesses and consumers can no longer repay their loans.

Unfortunately, the deficit is approaching the breaking point.

During fiscal year 2009 the U.S. Treasury is on-track to pay over $500 billion just in interest payments to finance the already-existing debt. New debt this year will likely exceed a trillion dollars. The total debt burden on the economy as a whole could reach $70 trillion by 2010, with annual interest payments for individuals, households, businesses, and all levels of government likely to reach $3 trillion out of a $14 trillion GDP that is now in sharp decline.

Financing the deficit continues to depend on whether China will still purchase Treasury bonds. This is why Secretary of State Hillary Clinton said frankly during last week’s trip to China: “We are relying on the Chinese government to continue to buy our debt.”

But at least President Obama is trying. He knows the economy can only recover if growth is rekindled. So he is focusing on the creation of jobs that translate into real worker income. But can he reverse a generation of job outsourcing and income stagnation? I don’t know of anyone who believes he can. Will the Republican nostrum of tax and spending cuts do anything? You jest. Not when unemployment is approaching Great Depression levels. .

But neither President Obama, nor his Democratic supporters or Republican antagonists, should feel badly about what is happening. This is because the system they have been given to work with was designed to fail. The U.S. was saddled long ago with a debt-based monetary system, whereby the only way money can be introduced into circulation is through bank lending. It was the system that was instituted in 1913 when Congress gave away its constitutional power over money creation to the private banking industry by passing the Federal Reserve Act.

It was then that the catastrophe we are now facing became inevitable. It took nearly a century to get here but it finally happened. We should have known it was coming when Federal Reserve-created bubbles replaced economic growth from our disappearing heavy industry, starting with the recession of 1979-83. We could have seen it coming when the bubble collapsed in 2000-2001, and Fed Chairman Alan Greenspan worked with the George W. Bush administration to substitute the housing bubble for a real recovery.

The day of reckoning is here. So don’t worry, Mr. President. It’s not your fault. When the collapse takes place the international bankers who will take over might even let you keep your job.

Obama administration defends telecom immunity

Obama administration defends telecom immunity in new brief

Rachel Oswald

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The Obama Justice Department continues to stand behind a Bush era law meant to prevent lawsuits against telecommunications companies accused of illegally sharing private customer information with intelligence agencies.

In a brief filed late Wednesday obtained by Raw Story, the Department of Justice provided its views to Chief U.S. District Judge Vaughn Walker, after the San Francisco federal judge questioned the constitutionality of the wide-sweeping law and whether it gives the U.S. Attorney General too much power in deciding whether a company is immune from lawsuits after it has shared information with federal agents.

The law was specifically designed to protect companies who participated in government wiretapping programs from legal claims and is one that President Obama supported as a senator when it was approved by Congress last year.

"Electronic communication service providers play an important role in assisting intelligence officials in national security activities. Indeed, the intelligence community cannot obtain the intelligence it needs without assistance from these companies," the Administration's 18-page brief says.

"The committee was concerned that, without retroactive immunity, the private sector might be unwilling to cooperate with lawful government requests in the future without unnecessary court involvement and protracted litigation," it adds.

It continues: "The possible reduction in intelligence that might result from this delay is simply unacceptable for the safety of our nation," directly citing the 2008 findings of the Senate Select Committee on Intelligence Report.

According to the Justice Department, the law requires a judge to dismiss a wiretapping lawsuit against a telecommunications company if the attorney general explains the firm's role to the judge in a confidential statement.

"The department is compelled to defend the statute as long as it can reasonably do so, and in this case the department was asked by the court to make a defense of the statute passed by Congress," DOJ spokesman Matthew Miller said in a statement accompanying the submission of the brief. "The [Foreign Intelligence Surveillance] Act passed by Congress in 2008 is the law of the land, and as such the Department of Justice defends it in court."

The Justice Department brief was filed in support of the department's motion to Walker to dismiss or to provide summary judgment in the lawsuit against AT&T for sharing customer telephone and e-mail records with federal agencies. The constitutionality of the law is defended on the grounds that the attorney general is only carrying out powers specifically given to him by Congress.

The Department asserts that the "presumption of constitutionality becomes even stronger" when Congress delegates authority to the executive branch in matters of national security or foreign affairs.

"Congress supplied the requisite intelligible principle by specifically and narrowly defining the conditions under which the Attorney General may make a certification, and the statute's legislative history provides further guidance, should any be necessary," the brief reads. "Under well-settled law, Congress may leave the decision whether and when to make a certification to the Attorney General's discretion."

"Congress provided the Attorney General an intelligible principle by enumerating specific and narrow circumstances in Section 802 [of the Patriot Act] that control whether and when he may make a certification," it continues. "The Act permits the Attorney General to certify facts to the court only when there is a pending civil action in which a person is alleged to have 'provid[ed] assistance to an element of the intelligence community.'"

San Francisco Chronicle May Shut Down

San Francisco Chronicle may shut down

By Robert MacMillan and Janet Kornblum

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San Francisco may lose its main newspaper, the San Francisco Chronicle, as owner Hearst Corp cuts a "significant" number of jobs and decides whether to shut or sell the money-losing daily.

The privately held New York-based publisher already is considering shutting a second West Coast paper, the Seattle Post-Intelligencer, in the face of a devastating decline in advertising revenue and big losses.

Founded shortly after Gold Rush fever hit California in the mid-19th century, the Chronicle has long been an essential part of daily life for many Bay Area residents, even as it sometimes disappointed or outraged them.

But the Chronicle lost more than $50 million last year and this year's losses to date are worse, Hearst said on its website on Tuesday. It said the paper has lost "major" amounts of money since 2001, a year after Hearst bought the paper.

"Survival is the outcome we all want to achieve. But without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down," said Hearst Corp Chief Executive Frank Bennack Jr.

More than 100 employees gathered in a conference room to hear the news from Editor Ward Bushee and Publisher Frank Vega after receiving a message about a mandatory staff meeting.

"Some people were crying at the meeting," said Rachel Gordon, 47, a transportation reporter at the paper. "But people are trying to get the newspaper out for tomorrow."

"We knew it was going to be ominous when we got that message," Gordon added. " said Hearst really wants to make this work, that shutting us down is a last resort."

A Hearst spokesman declined to say whether the company has hired an adviser or banker to try to sell the paper.

The paper employs 275 news staff and is the 12th-largest in the United States, according to the U.S. Audit Bureau of Circulations, with average weekday circulation of 339,430. It is the 19th-largest paper by Sunday circulation.

Circulation fell 7 percent as of the six months ended September 30, 2008, compared with the same period a year earlier.

The Pulitzer Prize-winning Chronicle was founded in 1865, about a decade and a half after gold was found in California.

With the help of the local literary crowd, including Mark Twain and Bret Harte, the paper captured the largest circulation west of the Mississippi.

It covered the biggest events in the city's history, from the earthquake and fire of 1906 to the assassination of its mayor, George Moscone, and the state's first openly gay elected official, Harvey Milk, in 1978.

The paper has reflected many changes in U.S. culture first seen in its own often cutting-edge city, including the shift from beatnik -- a word it may have coined -- to hippie in the 1950s and '60s and the shock waves from the AIDS pandemic in the city's sizeable gay population.

"I hate to see a newspaper go," says writer Elizabeth Dietz, 63, of Los Altos, south of San Francisco. "I just hate it. I think we still need our newspapers and there's just nothing like that ancient old Chronicle. Even though it's irritating, it's an institution. I cannot imagine it not being there."

The Chronicle is the latest U.S. paper to face the threat of extinction if its owners cannot find ways to cut costs. Advance Newspapers' Star-Ledger in Newark, New Jersey, cut its newsroom staff by 40 percent last year.

Hearst has said it might take the Seattle Post-Intelligencer online only or close the paper if it cannot find a buyer by mid-March.

Other papers, including EW Scripps Co's Rocky Mountain News, could fold if a buyer is not found.

The Chronicle and its unions are expected to begin discussing the situation later Tuesday and on Wednesday. Doug Cuthbertson, who represents the Northern California Media Workers Guild, declined to comment on the talks.

Hearst owns several other papers throughout the United States including the Times Union in Albany New York, and the Houston Chronicle. It also owns magazines such as Marie Claire and O, The Oprah Magazine.

FDA Ignored Debris in Syringes

FDA ignored debris in syringes

Complaints of filth came in 2005; plant's microbiologist was a teenage dropout

Sarah Avery and Sabine Vollme

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Months before an Angier company shipped deadly bacteria-tainted drugs, the federal Food and Drug Administration received numerous complaints about sediment and debris in the medicine.

The FDA received reports about AM2PAT as early as 2005, but not until December 2007 did the agency issue recall notices to pull the drugs off the market.

AM2PAT, which is now the subject of a criminal investigation, sold tainted syringes of heparin and saline that have been linked to five deaths. At least 100 more people were sickened, often after receiving the medicines during chemotherapy, kidney dialysis and other intravenous procedures.

Two men pleaded guilty in U.S. District Court this week for their roles in the scheme, which involved falsifying documents to make it appear that proper sterility tests had been conducted. The company’s president, Dushyant Patel, faces 10 charges, but he has not been arrested. Authorities believe he fled to his native India.

Conditions at the plant, detailed in court documents and photographs, depict a facility in flagrant violation of proper manufacturing processes. Prosecutor Jason Cowley said the company’s “chief microbiologist” was a teenager who dropped out of high school. A key piece of laboratory equipment designed to catch evidence of contamination was broken, and another gauge was out of commission for a year. The so-called clean room, where air is carefully controlled to reduce the spread of germs, was ventilated with an ordinary room fan.

The U.S. Food and Drug Administration — charged with overseeing more than 10,000 drug-device makers in addition to thousands more pharmaceutical manufacturers, food processing companies and animal-feed plants — received complaints about the company’s saline products the summer before the bacterial infections erupted in December 2007 and January 2008.

Starting in June 2007, doctors and clinics began reporting to the FDA orange specks floating in the syringes. Other complaints noted "wispy debris" or "yellow-orange sediment" that caused the normally clear product to be tan, orange, "muddy" and "dingy brown" in color.

A complaint in 2005 noted food particles inside a heparin syringe.

An FDA spokeswoman. Siobhan DeLancey, said a "non-exhaustive" search of inspection reports indicates the Angier plant was visited six times by FDA inspectors, including May 1999, February 2000, March 2004, June 2005, January 2006 and December 2007. But the company wasn't licensed to do business in North Caroline until 2001, and it's original home was in Raleigh. It didn't get FDA approval to load syringes with heparin until 2003.

Patient advocates said the issues that criminal prosecutors detailed in court documents about the plant were red flags that would have prompted an investigator to shut down the plant.

"If they had done inspections, those people would be alive," said Dr. Ned Feder, a former scientist with the National Institutes of Health who now researches FDA issues at the advocacy group Project On Government Oversight. The plant operators, he said, "were counting on the fact that they were unlikely to be inspected. They were counting on it."

Federal law does not require the FDA to inspect a device plant such as AM2PAT before production starts, said Jeffrey Gibbs, an FDA expert with the Washington law firm of Hyman, Phelps & McNamara, who advises health-care companies.

Although they are supposed to be inspected every two years, plants such as AM2PAT have instead gotten site visits about once every five years, according to a report from the Government Accountability Office. Between 2002 and 2007, FDA inspectors visited only about one-quarter of the 5,616 registered plants per year, the GAO report states.

"The system depends on companies complying with the law," Gibbs said. "If they don’t comply, the FDA is not there double-checking all the time. They can’t. They don’t have the resources."

Patient advocates said the regulatory agency is woefully underfunded and overburdened. Recent scandals involving medicines that cause heart attacks, imported toys full of lead, and contaminated peanut butter have caused a string of embarrassments for the federal agency.

"The FDA is clearly asleep at the switch," said Forest Horne, a medical malpractice lawyer with Martin & Jones in Raleigh.

A few years ago, Horne sued a manufacturer that shipped steroid-filled syringes contaminated with a fungus. Horne’s client died in 2002 after she received an injection from one of the tainted syringes and developed meningitis.

Lacking the funds to prevent harm, the FDA often doesn’t step in until patients start to get sick or doctors complain, Horne said.

In the AM2PAT case, the agency issued recall notices of the heparin and saline in December 2007. Both drugs are used to flush intravenous lines, and people who used the tainted syringes became immediately and dangerously sick. At least five deaths are associated with the drugs, while others suffered irreparable brain damage. Most incurred massive hospital bills.

Many survivors and their families have sued the company, but their prospects for recovering damages may be dim. The company’s insurance carrier has filed court papers indicating it covered liability of only $2 million, and wants AM2PAT to be excluded from paying damages above that amount.

A criminal case was launched last spring after the falsified reports were discovered. The plant manager, Aniruddha Patel, and the quality control director, Ravindra Sharma, were sentenced to 4.5 years in federal prison Monday for their participation. The Indian men, in the United States legally with work visas, said they feared they would lose their jobs and their U.S. residencies if they didn’t go along with Dushyant Patel’s scheme.

The company sold $6.9 million worth of heparin and saline syringes in 2006-07 that did not undergo proper sterility testing.

"This strikes at the fear everyone has when it comes to the medical supplies or medicine," said George Holding, U.S. attorney for the Eastern District of North Carolina, whose office prosecuted the case. "We’re talking about things you need to have confidence in. This raises serious alarms."

Housing Price Decline Accelerates

Housing Price Decline Accelerates

By Dean Baker

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Housing aid should be focused on non-bubble markets.

The data in the December Case-Shiller 20-City index indicate that the rate of housing price decline is continuing to accelerate. The data show that house prices in the 20 cities fell at a rate of 2.0 percent in the month of December and were falling at a 21.3 percent annual rate in the last quarter of 2008.

It is important to remember that these data reflect sale prices in the three month period from October to December. Since there is typically a 6-8 week period between contracts and closing, these data reflect contracts in a period centered on October. This means that the data is already somewhat dated when it is released. If the recent rate of price decline has persisted, prices are already 8 percent lower on average than the data indicate.

For the fourth consecutive month, prices declined in all twenty cities in the index. While prices continue to decline rapidly in former bubble markets, there were also sharp drops in some markets that had been less affected by the bubble. For example, prices in Minneapolis fell 4.1 percent in December and have fallen at a 31.5 percent annual rate over the last quarter. Prices in Atlanta fell 2.0 percent in December and have fallen at a 21.5 percent rate over the quarter.

However, most of the bubble markets continue to deflate rapidly. Prices in Phoenix, San Francisco, and Miami fell by 4.5 percent, 3.2 percent, and 2.7 percent, respectively, in December. The respective annual rate of price declines in these cities over the last quarter is 35.9 percent, 32.6 percent, 28.2 percent.

The implications of this rate of house price decline are striking. The country is losing approximately $400 billion in housing equity every month and would lose more than $4 trillion in housing equity over the course of a year at these rates of decline. Such rapid rates of price decline also make mortgage lending far more risky. A mortgage issued with a 20 percent down payment will be underwater in less than a year with the current rate of price decline shown in the 20-city index. In the cities with the fastest rate of price decline, a mortgage with a 20 percent down payment could be underwater in less than six months.

The rapid disappearance of home equity also means that fewer buyers will be able to put up any substantial down payment. As plunging home prices destroy home equity, even many long-time homeowners will find themselves in the same situation as first-time homebuyers if they try to buy a new home. With little or no equity in their current home, they will also struggle to find sufficient funds for a down payment.

This background must be kept in mind when assessing the Obama administration’s housing proposal. Given the vast oversupply of housing and the sharp downward momentum in the housing market, a $75 billion program is almost certainly too small to have a substantial impact on the rate of price decline in a $20 trillion market. It is also not clear that it will provide substantial assistance to the homeowners who take part in the program.

In the partially deflated bubble markets, homeowners are still likely to be paying more in housing costs even after the payment reductions in the Obama plan than they would pay to rent a comparable unit. Given the continuing decline in house prices and the fact that many are already underwater, most homeowners are likely to still end up with no equity when they leave their home. (The median period of homeownership is just seven years.)
Given these circumstances, it is difficult to see this plan as especially positive.

This sort of plan could have been more effective if it focused on the markets where the bubble had already deflated, as measured by the price-to-rent ratio. In these cases, the mortgage subsidies would actually allow homeowners to make monthly payments that are comparable to rents and leave them in a situation where they may end up with equity in their homes. Also, by focusing its money on markets where prices are not over-valued, the government could possibly provide an effective floor.

Economic slump deepens in Japan as exports collapse

Economic slump deepens in Japan as exports collapse

By Peter Symonds

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The collapse of Japanese exports last month underscores how rapidly economic recession is turning into a full-blown depression—and not just in Japan.

The Japanese trade figures for January, released yesterday, registered a 45.7 percent fall in exports year-on-year and a 31.7 percent drop in imports—the largest declines since 1957. The plunge in exports was the fourth monthly decline in a row and followed a fall of 35 percent in December.

Japan also recorded a trade deficit of 952.6 billion yen ($US9.9 billion)—the worst since records began in 1979. The trade statistics come on top of growth figures released last week, which showed that the Japanese economy shrank by 12.7 percent on an annualised basis in the December quarter.

The trade figures provoked alarm in the international financial press. In a comment entitled "Depression in the east points the way for the rest of the world," Guardian economics editor Larry Elliott said that while Japan had been in and out of recession over the past two decades, "make no mistake, this drop in exports does not mean recession: it means depression".

The London-based Times concluded that Japan had become the "canary in the mine", a highly sensitive barometer of the global recession, adding that "the January figures showed that the crisis has dramatically extended its geographic reach".

The Japanese economy is heavily dependent on exports, not only of sophisticated consumer goods to the US and Europe, but also of capital goods, machine tools and hi-tech materials to Asia, particularly China. The economic slump in the US and Europe has rebounded directly on Japanese exports of cars and electronic goods, and indirectly through the collapse in demand for cheap consumer goods from China and other Asian countries.

Japan's exports to the US fell nearly 53 percent in January, year on year, and to the European Union (EU) by 47 percent. The plunge in car exports, which account for about a fifth of total exports, was the most spectacular. Overall auto shipments crashed by 69 percent with exports to the US down by 81 percent and to Europe by almost 70 percent. Demand for electronics and other consumer goods also slumped.

When the international financial crisis erupted in the US last year, Japan was regarded as well placed to weather the storm. However, as the turmoil began to affect consumer spending in the US and Europe, the export-dependent economies of Asia have been badly hit. In Japan, job losses and unemployment are mounting, along with corporate failures. On Monday, SFCG, a lender to small firms, filed for bankruptcy in what was the largest of 10 listed company collapses so far this year.

Japan's financial and banking system, previously thought to be largely immune to the global financial instability, has been undermined by falling share prices. The Nikkei share index is down by nearly a fifth since the beginning of the year. As a result the major Japanese banks, which are permitted to include share holdings in their capital base, are in an increasingly shaky position. The government is contemplating a plan to spend 25 trillion yen of public money to prop up the Tokyo share market.

Significantly, Japan's exports to Asia shrank by 47 percent. Japanese manufacturers have increasingly used Asian countries as cheap labour assembly platforms for the world market. But as global demand has shrunk for their products, exports from Japan to these countries have also fallen. This was reflected in Japan's export figures, including a 53 percent fall for semi-conductors and a 52 percent drop for car parts.

The plummetting Japanese trade figures are a sign of shrinking exports, declining manufacturing and recession across the region.

The latest economic data from Taiwan showed that the economy shrank by 8.36 percent, year on year, in the last quarter of 2008. The contraction was the second in a row, indicating that Taiwan is also formally in recession. The most recent trade statistics showed a 44 percent plunge in exports, year on year. Officials have revised their 2009 forecast from growth of more than 2 percent to a contraction of nearly 3 percent, with exports expected to fall by one fifth.

Figures released in Thailand on Monday recorded a 4.3 percent economic contraction, year on year, or 6.1 percent seasonally adjusted, in the December quarter of 2008. The country's National Economic and Social Development Board downgraded its growth forecast for 2009 from a 3-4 percent range to between zero and negative 1 percent. Last week the government announced that exports had dropped in January by 25.6 percent, year on year, led by electronics, electrical consumer goods, vehicles and plastic products.

In South Korea, exports fell by 32.8 percent in January, year on year, and factory output plunged by an unprecedented 18.6 percent in December. The economy is in recession and the finance minister is predicting a contraction of 2 percent for 2009. Last month, Samsung Electronics, the world's largest maker of memory chips, liquid-crystal displays and televisions, reported its first-ever quarterly loss. Overall, 103,000 jobs were destroyed in January—the highest monthly toll in five years.

Singapore is already in recession, having recorded two successive quarters of negative growth. Government officials have predicted a contraction this year of between 2-5 percent, its worst since 2001, when the economy contracted 2.4 percent. Non-oil exports shrank by 35 percent in January, year on year, the worst result since records began 30 years ago.

In Malaysia, analysts are forecasting a sharp reversal in economic growth. In the second quarter of 2008, the growth figure was 6.7 percent. Now forecasts point to only marginally positive growth for the December quarter of 2008 and a contraction of 0.5 percent or worse for 2009 as a whole. The latest monthly trade figures showed a 15 percent decline in exports.

In the case of Hong Kong, a Bloomberg survey of eight economists estimated that the economy shrank by a seasonally adjusted 2.1 percent in the final quarter of 2008. This followed negative growth of 0.5 percent in the third quarter. The latest trade figures show a decline of 11 percent in exports. Hong Kong has also been hit by the global financial turmoil, which has sent shares plunging by more than 50 percent since their high point last year.

Not all economies are experiencing negative growth—Indonesia and the Philippines grew by about 4 percent in the December quarter. While its economy is slowing from more than 7 percent, India is still predicted to grow by 5.5 percent this year. But the exceptions only prove the rule. All three economies have significant domestic markets and are less affected by falling exports.

All eyes are on China, which has functioned as a key economic motor for the region over the past decade. Raw materials and parts have increasingly been drawn into the world's preeminent cheap labour platform from across the Asia-Pacific region. Now, however, China's exports and growth rates are falling sharply—from 13 percent in 2007 to 9 percent last year. The figure for the final quarter for 2008 was just 6.8 percent, on an annualised basis, and predictions for 2009 are even lower.

In the case of Japan, the export of capital goods and hi-tech components to China has been a major source of growth since 2000. In another sign of the slowing Chinese economy, Japan's trade deficit with China shot up by 61 percent to 562.7 billion yen last month.

The rapid economic decline across the region has led the International Labour Organisation (ILO) to revise its estimated jobless figures. The ILO predicted that the number of unemployed would rise by as much as 23.3 million in 2009—three times higher than the 7.2 million forecast just one month before. Sachiko Yamamoto, ILO regional director, told a gathering of government, business and union leaders in Manila this month: "Asia-Pacific is not the epicentre of the current crisis. However, the speed and magnitude of the downturn has been astounding in this region."

The political implications are already giving rise to instability, not least in Japan where Prime Minister Taro Aso's approval rating has slipped below 10 percent and the ruling Liberal Democratic Party faces electoral defeat this year. The Financial Times sounded a warning in its Lex Column today about the region-wide consequences. "The last time financial crisis collided with political dissatisfaction was more than a decade ago. Then, economic pain morphed into mass protests. The odds of social unrest staging a reappearance no longer look so remote."

Obama’s Iraq withdrawal plan sets stage for continued war

Obama’s Iraq withdrawal plan sets stage for continued war

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In his first address to a joint session of Congress Tuesday night, President Barack Obama promised that he would "soon announce a way forward in Iraq that leaves Iraq to its people and responsibly ends this war."

The US president offered no details about his plan. Subsequent leaks from within the administration and the Pentagon, however, have made it clear that, as with so much of his high-flown but ambiguous rhetoric, the vagueness was deliberately crafted to mask a lie—or in this case, two lies.

Obama's plan will neither end the war nor "leave Iraq to its people."

Vice President Joseph Biden indicated Wednesday that Obama would issue a formal announcement on Friday. There are reports that he will travel to the Marine Corps' Camp Lejeune or the Army's Fort Bragg, both in North Carolina, to unveil the plan.

According to unnamed administration officials and senior military officers quoted in various media reports Wednesday, the Obama plan calls for withdrawing all US "combat troops" in 19 months, with the last of them out of Iraq in August 2010.

"Combat troops" is for the military a term of art. Citing two unnamed administration officials, the Associated Press reported: "The US military would leave behind a residual force, between 30,000 and 50,000 troops, to continue advising and training Iraqi security forces. Also staying beyond the 19 months would be intelligence and surveillance specialists and their equipment, including unmanned aircraft."

Moreover, it appears that "combat troops" may remain in Iraq with the Pentagon merely changing their designation to support units. The New York Times quoted military officials as saying that "they did not know how many combat troops would stay behind in new missions as trainers, advisers or counterterrorism forces, at least some of whom would still be effectively in combat roles."

The Times continued: "Military planners have said that in order to meet withdrawal deadlines, they would reassign some combat troops to training and support of the Iraqis, even though the troops would still be armed and go on combat patrols with their Iraqi counterparts."

The Los Angeles Times quoted a senior military officer who seemed to suggest that the withdrawal timetable was really of secondary importance.

"The thing I would pay attention to is what will remain," said the officer. "The key decision for the president is: what is that force and what specific duties does it have?"

The officer added, "When President Obama said we were going to get out within 16 months, some people heard ‘get out' and everyone's gone. But that is not going to happen."

The time frame for even the limited withdrawal is three months longer than the 16 months that Obama promised during the 2008 campaign, an apparent concession to opposition from Defense Secretary Robert Gates; Gen. David Petraeus, the Central Command chief; and Gen. Ray Odierno, the senior commander in Iraq, who sought to keep a large force longer in Iraq.

All three of these figures were placed in their positions by the Bush administration and are identified with the military "surge" that saw a US military escalation in Iraq and an increase of troop levels by 30,000, beginning in 2007.

In retaining both Gates and the military commanders, Obama has assured an essential continuity with the overall militarist strategy that was developed under the Bush administration.

In an important tactical change, it has opted for its own surge in Afghanistan, having announced the decision to send an additional 17,000 troops to combat the insurgency in that country. This deployment is seen as only the first installment on what will be a major escalation.

The drawing down of US forces in Iraq is being driven in no small measure by the ratcheting up of the US intervention in Afghanistan. Two of the brigades that are being sent to Afghanistan had previously been slated for deployment in Iraq.

Yet, as the Obama administration escalates the war in Afghanistan, while increasingly extending the intervention in the region across the border into Pakistan, the occupation and the killing in Iraq will go on. That is the real significance of Obama's plan.

Even as the administration prepared to announce its plan, four more US troops died in Iraq, three killed by insurgents in Diyala province Monday and another shot to death by uniformed Iraqi policemen in Mosul on Tuesday. In the second incident, an Iraqi interpreter was also killed, while three US soldiers and a second interpreter were wounded.

The mission of the US military left behind in Iraq will not be confined merely to training, protection of US interests and "anti-terrorism" operations. With a continued monopoly over air power and heavy artillery in the country, it will remain the dominant force, with the Iraqi army functioning essentially as a US puppet force.

The essential mission of the US troops, whether they number 50,000 or more, will remain the one they were given with the invasion of Iraq nearly six years ago—the neo-colonial subjugation of one of the most oil-rich nations on the planet.

The Obama administration continues to pursue this goal—albeit by somewhat altered means. Its aim, like the Bush administration before it, is to secure a strategic advantage over US imperialism's principal economic rivals in Europe and Asia by establishing hegemony over key energy supplies upon which they depend.

Liberal supporters of Obama have sought to comfort themselves and deflect criticism by arguing that the 19-month withdrawal plan about to be announced represents only a three-month deviation from the timetable he advanced during the 2008 election campaign, and that he had always included the proposal for the "residual force" remaining in Iraq.

Such legalistic arguments evade the central issue. In election after election—2002, 2004, 2006 and 2008—the American people have been defrauded, denied the right to cast any real vote on the war in Iraq. Time after time, the Democrats have colluded with the Republicans to assure that the act of military aggression that both parties approved and sustained could not be challenged by the electorate. The millions upon millions of voters who wanted an end to the war have been effectively disenfranchised.

This process culminated in the 2008 election itself, in which Obama's capture of the Democratic nomination was unquestionably driven in large measure by his attempt to identify himself with these broad antiwar sentiments and to pillory his principal Democratic opponent, Hillary Clinton, for her October 2002 vote authorizing the war.

Now Clinton serves as his secretary of state, while Bush's appointee Gates still heads the Pentagon.

The emergence of the Obama administration's policy of continued occupation in Iraq and escalation of the war in Afghanistan and Pakistan only underscores the bankruptcy of the American democratic process. It is impossible under the present two-party system for the voters to exert their influence on war or any other essential question.

Obama's policies are being determined not by the popular hostility to war felt by the millions who voted for him, but by the financial and strategic interests of the America's corporate and financial elite. He has emerged more and more openly as a mouthpiece for finance capital and the military.

The struggle against war cannot be advanced within the confines of the existing political institutions and the two-party monopoly exercised by the banks and big business.

It requires first and foremost an irrevocable break with the Democratic Party and the independent political mobilization of working people against the profit system, which gives rise to militarism and war. This means building the Socialist Equality Party and fighting to win the broadest layers of workers, students and young people to its socialist and internationalist program.

Bailed-Out Bank Blows Millions on LA Parties

Bailed-out bank eliminated 450 jobs and then spent millions on lavish parties in LA.

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Northern Trust received $1.6 billion in bailout funds and announced in December that it was eliminating 450 jobs because “the macroeconomic environment has been extraordinarily difficult.” But as TMZ reports, that hasn’t stopped the bank from spending “a fortune last week in L.A. hosting a series of lavish parties and concerts with famous singers”:

Northern Trust, a Chicago-based bank, sponsored the Northern Trust Open at the Riviera Country Club in L.A. We’re told Northern Trust paid millions to sponsor the PGA event which ended Sunday, but what happened off the golf course is even more shocking.

Northern Trust flew hundreds of clients and employees to L.A. and put many of them up at some of the fanciest and priciest hotels in the city. We’re told more than a hundred people were put up at the Beverly Wilshire in Bev Hills, and another hundred stayed at the Loews Santa Monica Beach Hotel. Still more stayed at the Ritz Carlton in Marina Del Rey and others at Casa Del Mar in Santa Monica.

Northern Trust said in a statement that the parties were funded through “our normal cash flow,” not bailout funds. But lawmakers are having none of it. Sen. John Kerry (D-MA) called it “insulting” and “disgusting.” Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, said that the bank should “pay the government back for the money it spent.”

The Deep Politics of Hollywood

The Deep Politics of Hollywood

In the Parents` Best Interests

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Tom Cruise – “the world’s most powerful celebrity” according to Forbes Magazine – was unceremoniously sacked in 2006. His dismissal was particularly shocking for the fact that it was carried out not by his immediate employer, Paramount Studios, but rather by Paramount’s parent company, Viacom. Viacom’s notoriously irascible CEO Sumner Redstone – who owns a long list of media companies including CBS, Nickelodeon, MTV, and VH1 – said that Cruise had committed “creative suicide” following a spate of manic public activity. It was a sacking worthy of an episode of The Apprentice.[i]

The Cruise case points to the overlooked notion that the internal mechanisms of Hollywood are not determined entirely by audience desires, as one might expect, nor are they geared to respond solely to the decisions of studio creatives, or even those of the studio heads themselves. In 2000, The Hollywood Reporter released a top 100 list of the most powerful figures in the industry over the past 70 years. Rupert Murdoch, chief of News Corporation, which owns Twentieth Century Fox, was the most powerful living figure. With the exception of director Steven Spielberg (no. 3), no artists appeared in the top 10.

Each of the dominant Hollywood studios (“the majors”) is now a subsidiary of a much larger corporation, and therefore is not so much a separate or independent business, but rather just one of a great many sources of revenue in its parent company’s wider financial empire. The majors and their parents are: Twentieth Century Fox (News Corp), Paramount Pictures (Viacom), Universal (General Electric/Vivendi), Disney (The Walt Disney Company), Columbia TriStar (Sony), and Warner Brothers (Time Warner). These parent companies are amongst the largest and most powerful in the world, typically run by lawyers and investment bankers.[ii] Their economic interests are also sometimes closely tied to politicised areas such as the armaments industry, and they are frequently inclined to cozy-up to the government of the day because it decides on financial regulation.

As Pulitzer prize-winning journalist Professor Ben Bagdikian puts it, whereas once the men and women who owned the media could fit in a “modest hotel ballroom,” the same owners (all male) could now fit into a “generous phone booth.” He could have added that, whilst a phone box may not exactly be the chosen venue for the likes of Rupert Murdoch and Sumner Redstone, these individuals do indeed meet at plush venues such as Idaho’s Sun Valley to identify and forge their collective interests.

Of course, the content of a studio’s films is not, as a rule, determined entirely by the political and economic interests of its parent company. Studio CEOs typically have considerable leeway to make the pictures they want to make without direct interference from their ultimate masters. At the very least, however, the content of Hollywood studios broadly reflects their wider corporate interests, and, at times, the parent companies behind the studios take a conscious and deliberate interest in certain movies. There is a battle between “top down” and “bottom up” forces, but mainstream media and academia have traditionally focused on the latter, rather than the former.

Consider last year’s blockbuster Australia, the epic from Baz Luhrmann. Two of the film’s most salient aspects were that, firstly, it glossed-over the history of Aboriginal people, and, secondly, it made Australia look like a fantastic place to go on holiday. This should come as no surprise – Twentieth Century Fox’s parent company (Rupert Murdoch's News Corp) – worked hand-in-hand with the Australian government throughout the film’s production for mutual interests. The government benefited from Luhrmann’s huge tourist campaign, which included not just the feature film itself but also a series of extravagant tie-in advertisements (all in apparent support of its ham-fisted Aborigine “reconciliation” programme). In turn, the government gave its favourite son tens of millions of dollars in tax rebates. The West Australian newspaper even alleged that Murdoch had his "journalistic foot soldiers" ensure that every aspect of his media empire awarded Australia glowing reviews, an assessment nicely illustrated by The Sun, which enjoyed the “rare piece of good old fashioned entertainment" so much that its reviewer was "tempted to nip down to the travel agent."

There are historical precedents for such interference. In 1969 Haskell Wexler –cinematographer on One Flew over the Cuckoo’s Nest – had considerable trouble releasing his classic Medium Cool, which riffed on the anti-war protests at the Democrat Convention the previous year. Wexler claims he has Freedom of Information documents revealing that on the eve of the film’s release, Chicago’s Mayor Richard J. Daley and high sources in the Democratic Party let it be known to Gulf and Western (then the parent company of Paramount) that if Medium Cool was released, certain tax benefits and other perks in Gulf and Western’s favor wouldn’t happen. “A stiff prick has no conscience,” Wexler told us angrily, referring to Hollywood’s business leaders, “and they have no conscience.”

Wexler explained how this corporate plot was enacted so as to minimize attention: “Paramount called me and said I needed releases from all the [protestors] in the park, which was impossible to provide. They said if people went to see that movie and left the theatre and did a violent act, then the offices of Paramount could be prosecuted.” Although Paramount was obliged to release the film they successfully pushed for an X rating, advertised it feebly, and forbade Wexler from taking it to film festivals. Hardly the way to make a profit on a movie, but certainly an effective way to protect the broader interests of the parent.

Then there’s the more famous case of Fahrenheit 9/11 (2004), the Michael Moore blockbuster which the Walt Disney Company tried to scupper despite it “testing through the roof” with sample audiences. Disney’s subsidiary Miramax insisted that its parent had no right to block it from releasing the film since its budget was well below the level requiring Disney’s approval. Disney representatives retorted that they could veto any Miramax film if it appeared that its distribution would be counterproductive to their interests. Moore’s agent Ari Emanuel alleged that Disney’s boss Michael Eisner had told him he wanted to back out of the deal due to concerns about political fallout from conservative politicians, especially regarding tax breaks given to Disney properties in Florida like Walt Disney World (where the governor was the then US President’s brother, Jeb Bush). Disney also had ties to the Saudi Royal family, which was unfavourably represented in the film: a powerful member of the family, Al-Walid bin Talal, owns a major stake in Eurodisney and had been instrumental in bailing out the financially troubled amusement park. Disney denied any such high political ball game, explaining they were worried about being "dragged into a highly charged partisan political battle," which it said would alienate customers.

Disney has consistently spread pro-establishment messages in its films, particularly under subsidiary banners such as Hollywood Pictures and Touchstone Pictures (although Oliver Stone’s 1995 Nixon biopic is a notable exception). Several received generous assistance from the US government: the Pentagon-backed In the Army Now (1994), Crimson Tide (1995), and Armageddon (1998), as well as the CIA-vetted Bad Company (2002) and The Recruit (2003). In 2006, Disney released the TV movie The Path to 9/11, which was heavily skewed to exonerate the Bush administration and blame the Clinton administration for the terrorist attacks, provoking outraged letters of complaint from former Secretary of State Madeline Albright and former Clinton National Security Advisor Sandy Berger.

The nature of Disney’s output makes sense when we consider the interests of the higher echelons of the corporation. Historically, Disney has had close ties with the US defense department, and Walt himself was a virulent anti-communist (though reports about him being a secret FBI informant or even a fascist are rather more speculative). In the 1950s, corporate and government sponsors helped Disney make films promoting President Eisenhower's “Atoms for Peace” policy as well as the infamous Duck and Cover documentary that suggested to schoolchildren that they could survive an atomic attack by hiding under their desks. Even now, a longtime Directors Board member of Disney is John E. Bryson who is also a director of The Boeing Company, one of the world’s largest aerospace and defence contractors. Boeing received $16.6bn in Pentagon contracts in the ­aftermath of the US invasion of Afghanistan[iii]. This would have been no small incentive for Disney to avoid commissioning films critical of Bush’s foreign policy, such as Fahrenheit 9/11.

It is hardly surprising that when Disney released Pearl Harbor (2001) – a simplistic mega-budget movie made with full cooperation from the Pentagon, and which celebrated the American nationalist resurgence following that “day of infamy”– it was widely received with cynicism. Yet, despite lamentable reviews, Disney unexpectedly decided in August 2001 to extend the film’s nationwide release window from the standard two-to-four months to a staggering seven months, meaning that this ‘summer’ blockbuster would now be screening until December. In addition, Disney expanded the number of theatres in which the film was showing, from 116 to 1,036. For the corporations due to profit from the aftermath of 9/11, Pearl Harbor provided grimly convenient mood music.

But whilst movies like Australia and Pearl Harbor receive preferential treatment, challenging and incendiary films are frequently cast into the cinematic memory hole. Oliver Stone’s Salvador (1986) was a graphic expose of the Salvadorian civil war; its narrative was broadly sympathetic towards the left wing peasant revolutionaries and explicitly critical of U.S. foreign policy, condemning the United States’ support of Salvador’s right wing military and infamous death squads. Stone’s film was turned down by every major Hollywood studio – with one describing it as a “hateful piece of work” – though it received excellent reviews from many critics. The film was eventually financed by British and Mexican investors and achieved limited distribution. More recently controversial documentaries such as Loose Change (2006/2007), which argued that 9/11 was an "inside job," and Zeitgeist (2007), which presents a frightening picture of global economics, have been viewed by millions through the Internet when corporate media wouldn't touch them.[iv]

Universal studios’ contemporary output has been less rigidly supportive of US power, as films like Children of Men (2006), Jarhead (2005), and The Good Shepherd (2006) indicate. Still, with movies like U-571 (2000) and Charlie Wilson’s War (2007), it makes sense that Universal’s parent company is General Electric, whose most lucrative interests relate to weapons manufacturing and producing crucial components for high-tech war planes, advanced surveillance technology, and essential hardware for the global oil and gas industries, notably in post Saddam Iraq. GE’s board of directors has strong ties to large liberal organizations such as the Rockefeller Foundation. Whilst ‘liberal’ may sound like a positive term after the unpopularity of Bush’s brand of conservatism, liberal organizations are cemented firmly in the bedrock of US elites and have frequently been architects of American interventionist foreign policy, including against Vietnam. They are prepared to ally themselves with conservatives over certain issues, particularly national security, so it should come as no shock to find that GE was close to the Bush Administration through both its former and current CEOs. Jack Welch (CEO from 1981-2001) openly declares disdain for “protocol, diplomacy and regulators” and was even accused by California Congressman Henry Waxman of pressuring his NBC network to declare Bush the winner prematurely in the 2000 “stolen election” when he turned up unannounced in the newsroom during the poll count. Welch’s successor, the current GE CEO Jeff Immelt, is a neoconservative and was a generous financial contributor to the Bush re-election campaign.

Perhaps GE/Universal’s most eyebrow-raising release was United 93 (2006), billed as the “true account” of how heroic passengers on 9/11 “foiled the terrorist plot” by forcing the plane to crash prematurely in rural Pennsylvania. Although the film made a return on its relatively low investment, it was greeted with a good deal of public apathy and hostility prior to its nation-wide release. At the time, Bush’s official 9/11 story was being seriously interrogated by America’s independent news media: according to the results of a 2004 Zogby poll, half of New Yorkers believed “US leaders had foreknowledge of impending 9/11 attacks and ‘consciously failed’ to act,” and, just one month prior to the release of United 93, 83% of CNN viewers recorded their belief “that the US government covered up the real events of the 9/11 attacks.” With the official narrative under heavy fire, the Bush Administration welcomed the release of United 93 with open arms: the film was a faithful audio-visual translation of the 9/11 Commission Report, with “special thanks” to the Pentagon’s Hollywood liaison Phil Strub tucked away discreetly in the end credits. Soon after the film’s nationwide release date, in what might be interpreted as a cynical PR move and as gesture of official approval, President Bush sat down with some of the victims’ family members for a private screening at the White House. [v]

GE/Universal’s Munich (2005) – Steven Spielberg’s exploration of Israeli vengeance following the Palestinian terrorist attack at the 1972 Olympics – raises similar suspicions. Although the Zionist Organisation of American called for a boycott of the film because they felt it equated Israel with terrorists, such a reading is less than convincing. Indeed, by the time Munich’s credits begin to roll its overriding messages have been stamped indelibly into the brain by the film’s Israeli Special Forces characters: “Every civilization finds it necessary to negotiate compromises with its own values,” “We kill for our future, we kill for peace,” and “Don't f*ck with the Jews.” Predictably, Israel is one of GE’s most loyal customers, buying Hellfire II laser missiles as well as propulsion systems for the F-16 Falcon fighter, the F-4 Phantom fighter, the AH-64 Apache attack helicopter, and the UH-60 Black Hawk helicopter. In Munich’s 167 minute running time the voice of the Palestinian cause is restricted to two and a half minutes of simplistic dialogue. Rather than being an “evenhanded cry for peace,” as the Los Angeles Times hailed it, General Electric’s Munich is more easily interpreted as a subtle corporate endorsement of the policies of a loyal customer.

On the most liberal end of the spectrum for movies in recent years has been Warner Bros. – JFK (1991), The Iron Giant (1999), South Park: Bigger, Longer and Uncut (1999), Good Night and Good Luck (2005), V for Vendetta (2005), A Scanner Darkly (2006), Rendition (2007), and In the Valley of Elah (2007). It is indicative that following complaints about racial stereotyping in Warner Bros.’ Pentagon-sponsored action adventure, Executive Decision (1996), the studio took the unusual step of hiring the services of Jack Shaheen, an on-set adviser on racial politics, resulting in what was critically received as one of the best films of its genre in a generation, Three Kings (1999).[vi] It may be no coincidence that Warner Brothers’ parent company, Time Warner, is less intimately tied to the arms industry or the neoconservative clique.

But to have an idea of what happens to movies when you remove multinational interests from the industry, consider the independent distributor Lions Gate Films, which is still very much a part of the capitalist system (formed in Canada by an investment banker) but not beholden to a multibillion dollar parent corporation with multifarious interests. Although Lions Gate has generated a good deal of politically vague and blood ‘n’ guts products, it has also been behind some of the most daring and original popular political cinema of the past ten years, criticizing corporatism in American Psycho (2000), US foreign policy in Hotel Rwanda (2004), the arms trade in Lord of War (2005), the U.S. healthcare system in Michael Moore’s Sicko (2007), and the U.S. establishment in general in The U.S. vs. John Lennon (2006).

It hardly needs re-stating that Hollywood is driven by the desire for dollars rather than artistic integrity. As such, cinema is open to product placement in a variety of forms, from toys, to cars, to cigarettes, and even state-of-the art weaponry (hence the “special thanks” to Boeing in the credits of Iron Man (2008)). Less obvious though – and less well investigated – is how the interests of the studios’ parent companies themselves impact on cinema – at both systemic and individual levels. We hope to see critical attention shifted onto the ultimate producers of these films to help explain their deradicalised content, and ultimately to assist audiences in making informed decisions about what they consume. As we peer up from our popcorn it is as well to remember that behind the magic of the movies are the wizards of corporate PR.

Matthew Alford is author of the forthcoming book “Projecting Power: American Foreign Policy and the Hollywood Propaganda System.” Robbie Graham is Associate Lecturer in Film at Stafford College. References available on request.


[i] Most memorably, Cruise declared his love for Katie Holmes whilst bouncing up and down on Oprah (the chat show, not the woman).

[ii] The 2008 Fortune Global 500 list placed General Electric at no. 12 with revenue of $176bn. Sony was at 75, Time Warner at no. 150, The Walt Disney Company at no. 207, and News Corp at no. 280. By way of comparison, Coca Cola is at no. 403.

[iii] Interestingly, Disney’s CEO Michael Eisner was personally involved when it pulled Bill Maher's Politically Incorrect show after the host committed the cardinal sin of saying that the US use of cruise missiles was more cowardly than the 9/11 attacks, with Eisner “summoning Maher into his office for a hiding” according to Mark Crispin Miller in the Nation.

[iv] A less convincing but nevertheless intriguing case can be made for high political/economic influence over the distribution of John Carpenter's satirical sci-fi They Live (1988), which depicted the world as being run by an invading force of evil space aliens, allied with the US establishment. The film was well received by critics (with the notable exceptions of the NYT and Washington Post) and opened at number one in the box office. It easily made its $4m investment back over the weekend, and although by the second weekend it had dropped to fourth place, it still made $2.7m. The distributing studio, Universal Pictures, published an advertisement during its run that showed a skeletal alien standing behind a podium in suit and tie, with a mop of hair similar to that of Dan Quayle, the new US Vice-President-elect. The Presidential election had been just a few days previous, on November 8th. Co-star Keith David observed: “Not that anybody’s being paranoid but… suddenly you couldn’t see it [They Live] anywhere – it was, like, snatched”.

[v] We stated elsewhere that representatives from Universal attended the screening. This was erroneous.

[vi] Shaheen also later assisted on Warner Bros.’ Syriana (2005).