Monday, March 2, 2009

The American Media Misdiagnosis

The American Media Misdiagnosis

By Robert Parry

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It’s widely agreed that there are a number of factors dragging down American newspapers, including the economic recession and the impact of the Internet, but a reason rarely mentioned is that the national news media failed in its most important job – to serve as a watchdog for the people.

As Americans look out over the wreckage of the past three decades – and especially the last eight years – there have been too many times when the constitutionally protected U.S. news media didn’t raise the alarm or even joined in spreading misinformation that advanced the disastrous mismanagement of the U.S. economy and government.

Not that anyone should derive pleasure from watching once formidable institutions like the New York Times and the Washington Post fade into pale shadows of their former selves.

But it also must be acknowledged that decisions by senior management of those and other top news organizations contributed to their own decline, especially the failure to stand up to the Right’s increasingly effective propaganda that emerged in the late 1970s in the wake of Richard Nixon’s Watergate debacle and the American defeat in Vietnam.

The Right was determined to prevent “another Watergate” and “another Vietnam.” So, key Republican strategists, such as former Treasury Secretary William Simon, went to work building their own media infrastructure, which included special groups to attack mainstream reporters who got in the way.

Rather than standing up to this pressure and defending the kind of aggressive journalism that exposed Nixon’s criminality and the lies behind the Vietnam War, many major news organizations consciously retreated from that watchdog tradition. [See Robert Parry’s Lost History.]

At the New York Times, neoconservative executive editor Abe Rosenthal talked about moving his newspaper “back to the center,” by which he meant to the right. Washington Post chairwoman Katharine Graham also was uncomfortable with the adversarial position of her newspaper and sidled up to President Ronald Reagan when he came to power in 1981.

When I was hired at Washington Post-owned Newsweek in 1987 – supposedly to pursue the Iran-Contra scandal that I had helped expose while at the Associated Press – I was surprised to find senior Newsweek executives fretting about the possibility that Iran-Contra could become another Watergate.

The very company (the Washington Post), which was credited with blowing the whistle on Nixon’s Watergate crimes, seemed not to want “another Watergate,” in part because it might damage the generally friendly dinner-party relationships that had developed with the Reagan insiders, which in turn might upset Mrs. Graham.

I ran into this corporate reality when I pressed ahead with an investigation showing that the Iran-Contra scandal was not a rogue operation run by White House aide Oliver North and a few men of zeal – but rather was authorized and directed by President Reagan and Vice President George H.W. Bush with the active support of the CIA.

I encountered hostility from Newsweek’s top brass in New York and little support from my immediate superiors in Washington. The message was that the Iran-Contra scandal should be wrapped up quickly, that it should not go any higher, and that additional digging would not be “good for the country.”

It was known inside Newsweek that executive editor Maynard Parker was cozy with key neoconservatives and the CIA, while Washington bureau chief Evan Thomas was a great admirer of the neocon writers at The New Republic. It soon became clear that battling to tell Iran-Contra truths was not a route to career advancement.

Changing Journalism

More broadly, the character of journalism was changing, too.

Instead of the Watergate/Pentagon Papers image of scrappy reporters and hardened editors standing up to the powers-that-be, star journalists and well-paid executives were partaking in the riches and comforts of a then-booming industry with extra money to be made on TV pundit shows – if you stayed safely within the bounds of Washington’s “conventional wisdom.”

In short, many people in the news business stopped being outsiders keeping an eye on the insiders for the American public, but rather they became insiders themselves.

And the fastest way to lose your lucrative insider status was to offend the Right, which was building a vast media infrastructure that could easily pick off the few reporters and editors who resisted this new paradigm.

By the time I left Newsweek in 1990, I was convinced that the mainstream U.S. news media had moved beyond a point where it could be reformed. It was becoming incapable of examining complex cases of wrongdoing either by the government or the private sector.

Yet, when I approached liberal foundations with my first-hand insights – and my recommendation that they must begin investing aggressively in a counter-media infrastructure – the reaction I received was usually one of bemusement. “We don’t do media” went one typical reaction.

So, the downward media spiral continued, accelerated by the emergence of right-wing talk radio (which hammered even mildly center-left politicians like Bill Clinton) and cable news (which obsessed 24/7 on sensational crime stories, such as the O.J. Simpson case).

One of the reasons I founded in 1995 was that the market for well-documented stories about the serious wrongdoing of the Reagan-Bush-41 years had disappeared. That information was considered too historical as well as too risky.

By then, top media commentators also had bought into the insiders’ faith in globalization and deregulation as well as the value of a “tough-guy” foreign policy and a dismissive attitude toward tree-hugging environmentalists.

You could safely protect your future as a big-name media star if you parroted Bob Woodward's view that Federal Reserve Chairman Alan Greenspan was a “maestro,” if you followed the foreign policy lead of neocons like Charles Krauthammer and Fred Hiatt, or if you echoed Gregg Easterbrook’s critique of environmental extremists.

In Campaign 2000, the Washington press corps sank to its junior-high worst when it ganged up on nerd Al Gore and fairly swooned at the feet of big-man-on-campus George W. Bush.

Not only was there no warning about the danger of putting an unqualified dauphin like Bush in charge of the federal government, the major U.S. news media – led by the New York Times and the Washington Post – paved the way by treating Gore as a delusional braggart. [For details, see Neck Deep.]

The Bush-43 Era

Then, with Bush in place, the U.S. news media spent the crucial summer of 2001 obsessed with one of many white-girl-goes-missing stories – about Washington intern Chandra Levy who had had an affair with a Democratic congressman, Gary Condit.

Almost no attention was paid to the growing alarm inside the U.S. intelligence community about the prospects of a terrorist attack from Osama bin Laden’s al-Qaeda organization. And once the attack took place on 9/11, the news media lined up unquestioningly behind Bush, who then mounted a public relations campaign to justify invading Iraq.

Besides failing to ask tough questions of Bush, the major U.S. news media joined in cheerleading for the go-go financial era, offering little or no substantive criticism of the dangers from a deregulated global economy. Indeed, any commentator who dared challenge the conventional wisdom about “free markets” and “free trade” almost surely would get drummed out of the media insider club.

The Washington Post became a prime example of all these trends – and did so in contradiction to the political views of much of its community, one of the most liberal in the country. Though facing competition only from two right-wing newspapers (the Washington Times and the Examiner), the Post charted a neocon editorial direction that often insulted its more liberal readers.

A typical day in the life of the Post’s editorial section offers up the writings of neocons like Krauthammer, William Kristol, Robert Kagan and editorial page editor Hiatt. (Hiatt oversaw an ugly campaign to discredit Iraq War critic Joseph Wilson, whose wife, covert CIA officer Valerie Plame, was exposed by senior officials in the Bush administration.)

Besides the neocons, you might find more traditional conservatives like George Will and Kathleen Parker, plus laissez-faire economic writer Robert Samuelson and pro-Iraq War “insiders” like David Ignatius, Jim Hoagland and Richard Cohen.

Liberals, such as E.J. Dionne and Eugene Robinson, are almost always in a distinct minority.

So, when the Washington Post complains about its 77 percent drop in fourth-quarter earnings, its loss of advertising during the economic downturn, its three rounds of staff buyouts, or its circulation struggles in the face of Internet competition, many Washingtonians may be inclined to say simply, “it’s your own damn fault.”

Liberal Failings

But blame for America’s media mess also must fall on wealthy liberals and progressives who have largely stayed on the sidelines as the right-wing juggernaut rolled over honest reporters during the past three decades and thus made the fabrication of a false national narrative much easier.

The Left’s failure to engage on media also represents possibly the biggest threat to the young Obama presidency and to its ambitious reform agenda, which includes broader availability to health care, stronger environmental protections, more resources for education, help to unions, and investments in the national infrastructure.

George Lakoff, a professor of cognitive science at the University of California-Berkeley, described this problem in a HuffingtonPost article on Feb. 24 entitled The Obama Code. Though the article focuses on how Obama frames his rhetorical arguments, Lakoff adds near the end:

“The conservative message machine is huge and still going. There are dozens of conservative think tanks, many with very large communications budgets. … About 80 percent of the talking heads on TV are conservatives.

“Rush Limbaugh and Fox News are as strong as ever. There are now progressive voices on MSNBC, Comedy Central, and Air America, but they are still overwhelmed by [the] Right's enormous megaphone.

“Republicans in Congress can count on overwhelming message support in their home districts and homes states. That is one reason why they were able to stonewall on the President's stimulus package. They had no serious media competition at home pounding out the Obama vision day after day.

“Such national, day-by-day media competition is necessary. Democrats need to build it. … The President and his administration cannot build such a communication system, nor can the Democrats in Congress. The DNC does not have the resources.

“It will be up to supporters of the Obama values, not just supporters on the issues, to put such a system in place. Despite all the organizing strength of Obama supporters, no such organizing effort is now going on.

“If none is put together, the movement conservatives will face few challenges of fundamental values in their home constituencies and will be able to go on stonewalling with impunity. That will make the President's vision that much harder to carry out.”

So, while it is undeniably true that the mainstream news media has failed the American people – and that the nation is paying a terrible price for that failure – it’s also true that liberals and progressives have contributed to the problem by seeing media as someone else’s responsibility.

Combined with the Right’s disinformation and the cowardice of the mainstream, the Left’s media blindness – the “we-don’t-do-media” syndrome – has enabled the unfolding American political/economic disaster, which has now carried the country and the world to the brink of a global depression.

It is way past time for people of goodwill to respond.

Worst job losses in 60 years expected

Worst job losses in 60 years expected

Reports on ISM, payrolls should show recession intensifying

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The recession tightened its grip on U.S. businesses and consumers in February, according to economists, who are predicting the largest one-month job loss in almost 60 years.

"Pink slips continue to fly," said Meny Grauman, an economist for CIBC World Markets.

With output still falling at a dizzying rate, most companies are shedding unneeded workers and cutting back the hours of those remaining. Strapped by debt and seeing their paper wealth evaporating, many consumers are spending as little as they can.

"The economic patient is still in critical condition, with little medication to relieve the pain," wrote economists Brian Bethune and Nigel Gault of IHS Global Insight. "We will have to bite the bullet."

The first week of the new month brings two of the most important economic indicators: the ISM index and the nonfarm payrolls report. Both are expected to be very grim news.

Little joy in manufacturing data

First, on Monday, the Institute for Supply Management reports back from purchasing managers at manufacturing firms across the nation.

Although few people outside of the financial markets or the economics profession know what it is, the ISM is probably the best single leading indicator marking the end of a recession. The ISM is a diffusion index that measures the breadth of economic distress or success across firms. It asks key executives to judge whether business is getting better or worse.

Once the ISM -- and especially the new-orders component -- turns up decisively, the expansion is typically one to four months away, although in some cases it has turned up as much as a year before the end of a recession.

The ISM plunged to 32.9% in December -- a level only seen at the depths of the very worst recessions -- but it bounced back to 35.6% in January, giving some hope that we'd seen the bottom.

Unfortunately, the ISM is expected to dip back to 34% in February, according to the median forecast of economists surveyed by MarketWatch, as global export markets worsened and U.S. capital spending remained weak.

The key components to watch will be new orders, export orders and inventories. Manufacturers' own inventories are too high, and they judge that their customers' inventories are too high as well. Once customer inventories are worked down, factories can get back to work.

Horrendous payroll numbers

If the ISM is forecast to be awful, the nonfarm payrolls report is expected to be horrendous. The Labor Department is slated to report the figures Friday.

Economists expect payrolls to plunge 630,000 in February, slightly more then the 598,000 lost in January and the 597,000 lost in November. The unemployment rate is expected to climb to 7.9% from 7.6%, breaking through the 7.8% peak in the 1991 recession to the highest level since 1984.

It would mean that a record 4.2 million jobs will have been lost since the recession began in December 2007, with no end in sight.

"Employment losses have deepened considerably in recent months," wrote economists for Wachovia, who expect total losses for the recession to top 6.5 million.

"With total revenue declining at its worst pace since the late 1950s, many businesses and governments are in survival mode and have no choice but to cut jobs," Wachovia economists said

The main evidence for a worsening job market has been the rise in unemployment benefits. First-time claims have risen decisively over 600,000, nearly double the level at the beginning of the recession. Continuing claims are at an all-time high. Consumer surveys also show extreme pessimism about finding a job.

While some forecasters think job losses in February stayed in the ballpark of about 590,000, a few economists think the labor market got much worse in February and are expecting losses of 650,000, 700,000, or in one case, even 800,000.

The report is "likely to be the weakest to date," wrote economists for Barclays Capital, who expect payroll losses of 675,000 and an unemployment rate of 8%.

"February was the worst month yet," said Global Insight's Bethune and Gault, who are predicting payroll losses of 750,000 and an employment rate of 8%.

Others have a slightly less dire view, if a loss of 625,000 could be considered upbeat. "Our sense, admittedly based mostly on anecdotes, is that labor market conditions remain dismal but are not necessarily accelerating to the downside," wrote Stephen Stanley, chief economist for RBS Greenwich Capital.

Economists expect the number of hours worked to continue plunging as more workers are forced into part-time shifts. In January, 7.8 million workers wanted to work full time but could only get part-time work.

Average weekly earnings likely rose 0.3% again, as the lowest-paid occupations took a larger share of job losses.

Worst since '49? Or since '45?

If the economy did shed 630,000 jobs in February as expected, it would be the third largest monthly loss on record, dating back to 1939.

The record was set in September 1945, when nearly 2 million people lost their jobs after the Allies won the most destructive war in history and industry was retooling for peacetime, sending "Rosie the Riveter" back to her knitting.

In October 1949, 834,000 jobs were lost when almost all the nation's steelworkers went on strike in the final month of a brutal but short recession.

Another strike in July 1956 cost 629,000 jobs, but the next month saw 678,000 jobs regained.

Of course, the size of the workforce is much larger today than it was in 1949 or 1956. But as a proportion of the workforce, this recession also is moving up in the record books.

If 630,000 jobs were lost in February, it would bring total losses in this recession to just over 3% of payrolls, close to the 3.1% lost in the recessions of 1982, 1954 and 1949 (excluding the strike). Next on the list: 4% in 1958 and 6.9% in 1945.

If Wachovia economists are right that 6.5 million will lose their jobs by the end, employment will have fallen by 4.7% in this recession.

And remember: These forecasts assume the Federal Reserve will slowly be able to get credit flowing again, and that the recently approved fiscal stimulus will give a significant boost to the economy.

Credit Card Charge-Offs At Record High In January

Moody's: Credit Card Charge-Offs At Record High In January

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Credit card charge-offs reached a new high of 7.74% in January, after 7.73% in December, and the increasing number of borrowers falling behind on payments means charge-off rates are almost certain to increase as the economy worsens, according to Moody's Credit Card Credit Indices.

Charge-offs are credit-card loans deemed uncollectible.

While the Economy Tanks, the President's Team Dawdles

While the Economy Tanks, the President's Team Dawdles

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There is no doubt about it. Barack Obama is an effective and inspiring president. His address to the Joint Session of Congress this week cheered all those who heard it.

His courtesy and respect for colleagues -- regardless of political affiliation or status is refreshing and will no doubt raise the overall standard of political and civic conduct.

His budget is honest, ambitious and fair.

On almost every day of his first 38 days in office he has taken firm, sometimes transformational action.

But in the most critical area, the economy, he is allowing his economic team to dawdle. That could be fatal to his presidency. Geithner, Summers and Bernanke are still lagging behind events. If he is not careful he, and they, will be overtaken by these events, and the U.S. could suffer the fate of Japan.

He needs to demonstrate a much sounder grasp of the colossal urgency of this crisis, and inject that urgency into the dawdling of his economic team. His advisors are schooled in Greenspan-style economics, and they are having to learn about intervention. While they gingerly climb this learning curve, the US economy continues to tank, the banks face systemic failure, companies are being bankrupted and unemployment is rocketing.

The impact on the global economy is incalculable.

America's total income (GDP) in the final three months of 2008 declined by nearly twice that expected -- by 6.2%. This is its worst performance since 1982.

The story of this collapse in output is the big story -- beside it, everything else, even Iraq, can wait.

While confidence in the president rises, consumer confidence has slumped.

Plenty of Americans would have been home, listening to the president's address to Congress. They had the time, because they are jobless. In fact in the third week of February, 36,000 more Americans lost their jobs than in the week before -- a record. Economists are predicting job losses rising to 1 million a month.

For these unemployed men and women, the euphoria of the speech will have quickly evaporated.

Consumer behavior and attitudes show that Americans do not really believe the president has a grip on this recession. They do not see it easing up in 2009, and reported record declines in their personal finances and prospects.

Each day provides evidence that the US economy is spinning downwards into a debt-deflationary abyss, not dissimilar from that experienced by Japan for 19 years now. An abyss into which is dumped rising and costly debts, falling wages, falling investment, and falling prices, including house-prices (still falling in Japan after 19 years!).

US house prices have fallen 19.2% year on year. In Phoenix they fell by 34% and in Las Vegas by 33% over the year. These are dramatic and unprecedented falls -- hurting the whole of the economy. And there seems no end to their declines.

As I have said before in this column, the high cost of borrowing and of servicing existing debts is crippling companies and forcing them into bankruptcy and layoffs. And it's not just risky companies that are facing this threat. Warren Buffet highlights the high borrowing costs that even a AAA company like Berkshire must pay:

"Funders that have access to any sort of government guarantee -- banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal reserve, and others who are using imaginative methods (or lobbying skills) to come under the government's umbrella - have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be. ... Though Berkshire's credit is pristine -- we are one of only seven AAA corporations in the country -- our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing."

At a time of the greatest debt crisis in history, these high borrowing costs are hurting companies like Berkshire and causing business bankruptcies and home foreclosures to balloon upwards. Each day inflicts more damage -- on the economy, on society, on families and on individuals. And each day the stock market shows its lack of patience with an administration prevaricating over the economy.

The Fed is the slouch here -- dragging its feet. Fed Governor Bernanke needs to urgently get all borrowing costs down -- for companies as well as households; for risky as well as safe loans. At this stage of the economic cycle, very few loans are without risk. And if businesses and entrepreneurs are to take the risks needed to pull us out of this crisis, they need affordable finance.

The Fed can get rates down by applying the policy of quantitative easing far more aggressively.

And then there are the banks. Collapsing banks can't wait while Treasury embarks on a painstaking and punctilious "stress test." The stock market knows what Treasury still needs to admit: the banks are bust. Their CEOs lack all credibility. Until they are nationalized the Dow will continue its very rational path downwards.

The point of temporary nationalization will not be to score political points, or embrace so-called European-style socialism. The point of temporary nationalization will be to stabilize the banking system (and the stock market) and bring about a blanket reduction in borrowing costs -- for all borrowers.

The point will be to prevent the United States economy failing like Japan has done for 19 years now.

The economy cannot wait for the president's patient building of bipartisan agreement. Those congressmen and women that cannot grasp the gravity of this crisis need to be sidelined.

Millions of unemployed Americans can't wait while Ben Bernanke, Tim Geithner and Larry Summers learn from the mistakes made by Japan in the 1990s.

Millions of homeowners can't wait till economists unlearn the dogmatic and misguided theories of Ayn Rand, Milton Friedman and Paul A. Samuelson.

The president must not allow himself to be slowed down by the timidity of his current economic team. If they don't stop dawdling, he should take over the reins and get himself a new team.

Scientists' Stem Cell Breakthrough Could End Ethical Dilemma

Scientists' stem cell breakthrough ends ethical dilemma

Experts in Britain and Canada find way to make stem cells without destroying embryos

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Stem cells have the potential to be turned into any tissue, including heart cells, making the growth of 'spare parts' a possibility. Photograph: Science photo library Scientists have found a way to make an almost limitless supply of stem cells that could safely be used in patients while avoiding the ethical dilemma of destroying embryos.

In a breakthrough that could have huge implications, British and Canadian scientists have found a way of reprogramming skin cells taken from adults, effectively winding the clock back on the cells until they were in an embryonic form.

The work has been hailed as a major step forward by scientists and welcomed by pro-life organisations, who called on researchers to halt other experiments which use stem cells collected from embryos made at IVF clinics.

Sir Ian Wilmut, who led the team that cloned Dolly the Sheep and heads the MRC Centre for Regenerative Medicine at Edinburgh University where the work was done, said: "This is a significant step in the right direction. The team has made great progress and combining this work with that of other scientists working on stem cell differentiation, there is hope that the promise of regenerative medicine could soon be met."

Stem cells have the potential to be turned into any tissue in the body, an ability that has led researchers to believe they could be used to make "spare parts" to replace diseased and damaged organs and treat conditions as diverse as Parkinson's disease, diabetes and spinal cord injury.

Because the cells can be made from a patient's own skin, they carry the same DNA and so could be used without a risk of being rejected by the immune system.

Scientists showed they could make stem cells from adult cells more than a year ago, but the cells could never be used in patients because the procedure involved injecting viruses that could cause cancer. Overcoming the problem has been a major stumbling block in efforts to make stem cells fulfil their promise of transforming the future of medicine.

Now, scientists at the universities of Edinburgh and Toronto have found a way to achieve the same feat without using viruses, making so-called induced pluripotent stem (iPS) cell therapies a realistic prospect for the first time.

In 2007, researchers in Japan and America announced they had turned adult skin cells into stem cells by injecting them with a virus carrying four extra genes. Because the virus could accidentally switch on cancer genes, the cells would not be safe enough to use in patients.

In two papers published in the journal Nature, Keisuke Kaji in Edinburgh and Andras Nagy in Toronto, describe how they reprogrammed cells using a safer technique called electroporation. This allowed the scientists to do away with viruses and ferry genes into the cells through pores. Once the genes had done their job, the scientists removed them, leaving the cells healthy and intact.

Tests on stem cells made from human and mouse cells showed they behaved in the same as embryonic stem cells.

"I was very excited when I found stem cell-like cells in my culture dishes. Nobody, including me, thought it was really possible," said Kaji. "It is a step towards the practical use of reprogrammed cells in medicine, perhaps even eliminating the need for human embryos as a source of stem cells."

Nagy said: "We hope that these stem cells will form the basis for treatment for many diseases and conditions that are currently considered incurable. We have found a highly efficient and safe way to create new cells for the human body which avoids the challenge of immune rejection."

Josephine Quintavalle from the lobby group Comment on Reproductive Ethics, which opposes embryonic stem cell research, said: "What we've got here is something that will bring joy to the pro-life movement, a way of obtaining embryonic-type stem cells without having to destroy human embryos.

"There are some scientists who like to hold on to what they've got, but I don't think people are going to waste time on embryonic stem cells any more. Half of Europe is opposed to embryonic stem cell research. Ideally you want something that everybody can use without any problems. This is definitely a very, very promising way forward and a very promising solution to the embryonic stem cell battle."

It would be some time before the cells could be used in patients, Wilmut said, because scientists have yet to find reliable ways of making different tissues from stem cells.

Gates: Iran "Not Close" to Nuclear Weapon

Iran "not close" to nuclear weapon: Gates

By Deborah Zabarenko

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Iran is not close to having a nuclear weapon, which gives the United States and others time to try to persuade Tehran to abandon its suspected atomic arms program, U.S. Defense Secretary Robert Gates said on Sunday.

"They're not close to a stockpile, they're not close to a weapon at this point, and so there is some time," Gates said on NBC television's "Meet The Press."

Gates' comments followed a televised interview with Adm. Mike Mullen, head of the U.S. military Joint Chiefs of Staff, who told CNN's "State of the Union" that he believed Iran has enough fissile material to make a nuclear bomb.

"We think they do, quite frankly," Mullen said.

Mullen had been asked about a watchdog report issued by the International Atomic Energy Agency last month that said Iran had built up a stockpile of low-enriched uranium. The reported stockpile of 1,010 kg would be enough -- if converted into highly-enriched uranium -- to make a bomb, analysts have said.

The United States suspects Iran of trying to use its nuclear program to build an atomic bomb, but Tehran insists it is purely for the peaceful generation of electricity.

Gates said there has been "a continuing focus on how do you get the Iranians to walk away from a nuclear weapons program" in the Obama and Bush administrations.

U.S. President Barack Obama's administration favors diplomatic engagement with Tehran to defuse the dispute over its nuclear intentions, but has called Iran's nuclear program an "urgent problem" the international community must address.

The challenge, Gates said, is finding a balance between sanctions to pressure Iran and incentives for engagement with the United States and Europe. A sharp decline in oil prices since last year increases the chances for a resolution. "There are economic costs to this program; they (the Iranians) do face economic challenges at home."


U.S. spy agencies believe Iran lacks enough weapons-grade uranium to make a bomb, but cannot rule it out, Adm. Dennis Blair, the U.S. director of national intelligence, told Congress last month.

"Iran probably has imported at least some weapons-usable fissile material but (we) still judge it has not obtained enough for a nuclear weapon," he said. "We cannot rule out that Iran has acquired from abroad or will acquire in the future a nuclear weapon or enough fissile material for a weapon."

He reiterated a view that Iran was undertaking two of three activities needed for a nuclear arms program -- developing uranium-enrichment technology and nuclear-capable ballistic missile systems. U.S. intelligence agencies have said Iran suspended developing a nuclear warhead, the third activity.

"Iran having nuclear weapons, I've believed for a long time, is a very very bad outcome -- for the region and for the world," Mullen said.

CIA Director Leon Panetta last week declined to discuss any possible new U.S. policies being considered in this area, saying this is classified.

Senator Hatch's secret ties to drugmakers exposed

GOP senator Orrin Hatch's charity tied to massive pharmaceutical donations

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A charity founded by a senior Republican lawmaker who was a key ally to the pharmaceutical industry received more than $170,000 in 2007 from drugmakers, far in excess of campaign finance rules had the money been donated to him directly, leaked documents show.

The senator, Orrin Hatch (R-UT), founded Utah Families Foundation, the recipient of the gifts, though he doesn't serve on the foundation's board. But his son is now the chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry's lobbying group.

Hatch has received more money from the pharmaceutical industry than any other group, raking in $1.25 million since 1998. The latest sums, however, dwarf that of previous donations from individual corporations. In 2007, the foundation received $25,000 from Eli Lilly, $30,000 from Barr Pharmaceuticals, $25,000 from AstraZeneca and $40,000 from PhRMA.

The figures were part of the foundation's tax returns and accidentally released by the Internal Revenue Service to a nonprofit group. As a tax-exempt 501(c)3 organization, Utah Families Foundation isn't required to disclose a donor list.

The same year Utah Families Foundation received massive gifts, Sen. Hatch voted on a bill relating to Medicare Part D. Hatch voted against a bill requiring that the government negotiate discounted prices from drugmakers, a measure the industry vehemently opposed. In 2005, Hatch also voted against a measure that would have allowed Medicare to negotiate bulk prices for prescription drugs.

"And if that weren't enough political intrigue, the tax-exempt charitable foundation, which the senator from Utah helped start in the 1990s and still vigorously supports, has been delinquent for nearly a decade in filing its required annual reports with Utah state officials," a Washington Times review by Jim McElhatton and Jerry Seper found, the reporters who revealed the documents.

Contacted about the report, Sen. Hatch defended his son's work as a pharmaceutical industry lobbyist.

"My son, Scott, does not lobby me or anyone in my office. He is a very moral and ethical person," Hatch said. "As for the Utah Families Foundations, my limited involvement consists mainly of attending their events. As with most service opportunities, I find even these small gestures are very gratifying ways to volunteer my time and give to those less fortunate in our community.

"Giving charitable contributions of time or money to good causes is something I believe every individual and organization should try to do," Hatch continued. "Organizations choosing to donate to the Utah Families Foundation are giving resources to help Utah's families in need from all corners of our state and that is very admirable."

Melanie Sloan, director of the Washington ethics group Citizens for Responsibility and Ethics and Washington, pointed out that the activity was only discovered because the IRS made a mistake. Due to the way nonprofit law works, and the fact that many members of Congress have personal "pet" charities, such giving can fly far below the radar and still potentially have meaningful impact as a lobbying tool. Citizens for Ethics first spotted the IRS form.

"This could be more common than we know," Sloan said.

"When companies need a member of Congress and they've already donated to their campaigns, they can make very large contributions to members' foundations," Sloan added. "It's another way to curry favor with a member of Congress."

CIA destroyed nearly 100 interrogation tapes

CIA admits it destroyed 92 interrogation tapes

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While it has been known for some time that the CIA had destroyed tapes of interrogations with terrorism suspects, Monday's news that 92 videotapes had been destroyed by the agency was still shocking.

The CIA acknowledged the number of tape erasures in a letter filed by government lawyers in New York. The letter was filed in response to an ongoing lawsuit from the the American Civil Liberties Union that is seeking more details of terror interrogation programs.

The ACLU immediately called for the judge to issue a "prompt finding of contempt" against the CIA.

Amrit Singh, an attorney with the ACLU and counsel on the case said to Raw Story, “The large number of video tapes destroyed confirms that this was a systemic attempt to evade court orders.”

Singh added, "It’s about time, now that the court knows 92 tapes have been destroyed, that it hold the CIA accountable for the destruction of the tapes."

The letter was submitted when the court's stay of consideration of the ACLU's contempt motion expired on Feb. 28. John Durham, the acting United States Attorney for the Eastern District of Virginia, who is conducting the criminal investigation into the destruction of any interrogation tapes, did not request an additional stay.

According to the letter, which can be viewed here, the CIA is now gathering information in response to the Court’s order to provide a list identifying and describing each of the destroyed records, as well as transcripts or summaries from any of the destroyed records and the names of any witnesses who may have viewed the videotapes before their destruction. The CIA requested that it be given until March 6 to provide the court with a timeline for its response to the requested information.

In December 2007, the ACLU filed a motion to hold the CIA in contempt for its destruction of videotapes in violation of a court order requiring the agency to produce or identify all the requested records. That motion is still pending, according to a release from the ACLU.

The ACLU contends that the tapes should have been identified and processed in response to its FOIA request for information on the treatment and interrogation of detainees in U.S. custody.

The tapes became a contentious issue in the trial of Sept. 11 conspirator Zacarias Moussaoui, after prosecutors initially claimed no such recordings existed, then acknowledged two videotapes and one audiotape had been made.

This latest news of CIA tape erasures dovetails into Senate plans to hold a review of the agency's detention and interrogation program. The Senate Intelligence Committee plans to investigate whether the steps taken by the CIA to detain and interrogate terrorism suspects were properly authorized.

Washington in conflict with Afghan president over early poll

Washington in conflict with Afghan president over early poll

By James Cogan

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Afghanistan President Hamid Karzai issued a decree over the weekend ordering that presidential elections take place 30 to 60 days before his term of office expires on May 21. In the midst of a deteriorating security situation and escalating war, the decision has been met with open opposition from the Obama administration and further exposed the rift that exists between the White House and the US client state in Kabul.

Secretary of State Hillary Clinton reportedly called Karzai immediately to condemn his actions. His decree over-ruled the country's electoral commission, which, on US advice, had delayed the vote until August 20. The delay was justified on the grounds that Obama's deployment of thousands of additional American troops over the coming months would enable the ballot to take place in areas currently controlled by the Taliban and other anti-occupation insurgents.

The commission's decision, however, was in breach of the Afghan constitution and called into question Karzai's status during the period from May 21 to August 20. His main opponents in the Afghan parliament have argued in recent weeks that Karzai should step aside and allow a caretaker government to be formed. One name suggested for caretaker president was former US official Zalmay Khalilzad, who was born in Afghanistan. Khalilzad was the Bush administration's ambassador to Afghanistan, then Iraq and the UN.

Karzai has preempted any attempt to sideline him by calling early elections. A participant for over 30 years in the Machiavellian intrigues of US imperialism in the region, Karzai is aware that such a manoeuvre could be used as an excuse to remove him permanently. By retaining the presidency during the election, he calculates on using the resources of the state to promote his re-election.

Karzai is undoubtedly under US pressure to reverse his decree. Whether he does so or not, his political days are numbered. Not only has Karzai provoked the ire of American officials and commanders by condemning US air strikes and other operations that have resulted in the deaths of Afghan civilians, his government is dysfunctional.

The Obama administration has not hidden its desire to dispense with the Bush administration's pretense of establishing "democracy" in Afghanistan. Defense Secretary Robert Gates recently ridiculed the previous propaganda, declaring before Congress that "if we set ourselves the objective of creating some sort of Central Asian Valhalla over there, we will lose".

The stance of the Obama White House is driven by a pragmatic assessment of US strategic interests in Afghanistan and the broader region. Despite more than seven years of US occupation, millions of Afghans do not accept the legitimacy of the Karzai government, which has only been kept in power by the presence of foreign armies. The Taliban and other insurgent groups control large swathes of territory, particularly in the ethnic Pashtun southern provinces, and are waging a continuous guerrilla war.

American and NATO casualties are rising sharply. In January and February, 48 foreign soldiers lost their lives, more than double the number killed in the first two months of 2008. Afghan security forces are suffering far greater losses. Some 1,200 police were killed last year.

Karzai's government and the US-created Afghan security forces are demoralised and riddled with corruption. Bribery, extortion and outright theft are rampant. Senior officials, including Karzai's brother, are accused of taking part in the drug trade. The main priority of current Afghan officials appears to be to accumulate as much wealth as possible before being forced to flee by a resurgent Taliban.

Desperate to prevent a defeat in Afghanistan that would set back US interests in Central Asia, Obama and his officials now speak of "attainable" objectives rather than democracy. While deploying 17,000 additional troops to intensify the war, the administration is also holding out the possibility that it would incorporate elements of the anti-US insurgency into the Afghan government.

General David Petraeus—who directed a series of deals with elements of the Iraqi insurgency during 2007 and is now the commander of US forces in Central Asia—has said that the US will seek negotiations with factions of the Taliban and was prepared to make deals.

Al Jazeera reported last week that US and British officials are already talking with the Hezb-e-Islami movement led by Pashtun warlord, Gulbuddin Hekmatyar. Hekmatyar received US funding to fight against the Soviet occupation of Afghanistan in the 1980s. Following the Soviet withdrawal, he waged a murderous civil war against other factions, seized control of Kabul and established himself as the country's prime minister. The Taliban drove him from power in 1996. In 2002, however, after being denied a place in the US puppet government, he called on his followers to take up arms alongside the Taliban against the occupation.

If Hekmatyar and elements of Taliban could be bought off, it would have a significant impact on the intensity of the armed anti-US resistance, particularly in the eastern provinces of the country and some of the tribal agencies of Pakistan. Such a deal, however, would require a realignment of factional arrangements in Kabul that would almost inevitably be at the expense of Karzai, who has no significant power base of his own and was simply a convenient front man for the US puppet regime.

If Karzai does not go willingly then other methods might be used. An indication of the discussion taking place within the White House was revealed in a Wall Street Journal editorial of February 17. After noting the sharp tension between Washington and Karzai, the newspaper cautioned: "Mr Obama and Vice President Joe Biden—who stormed out of a meeting with Mr Karzai last year—need to avoid JFK's mistake of toppling South Vietnam ally Ngo Dinh Diem."

The meaning is clear. The Kennedy administration had no compunction about authorising the ousting of the loyal US puppet Diem in 1963 when he became a political obstacle to American plans in Vietnam. The Wall Street Journal has no objection to such methods, but is offering some advice that such a move, if it is being contemplated, could easily rebound on the US and the Obama administration.

“Enemy combatant” indicted to block Supreme Court review

“Enemy combatant” indicted to block Supreme Court review

By Bill Van Auken

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In a cynical bid to prevent the US Supreme Court from ruling on the Bush administration's practice of imprisoning US citizens and legal residents of the United States as "enemy combatants," without charges or trials, the Obama Justice Department has brought criminal charges against the last individual held in the US on this basis, Salehn Kahla al-Marri.

In a two-page indictment unsealed on Friday in Peoria, Illinois, federal prosecutors charged al-Marri with providing material resources and support to al Qaeda and with conspiring with others to do so. The brief indictment presented no evidence to support these allegations.

On the same day, Acting Solicitor General Edwin Kneedler filed a motion in the US Supreme Court urging it to drop al-Marri's case on the grounds that the criminal indictment rendered moot the challenge to the constitutionality of his earlier imprisonment without charges.

Al-Marri, a Qatari student, arrived in the US on September 10, 2001—the day before the 9/11 attacks—on a legal student visa to study for a master's degree in computer sciences. He was arrested in December 2001 at his home in Peoria, where he lived with his wife and five children.

He was subsequently held as an alleged material witness to the attacks, and then charged on unrelated counts of credit card fraud and making false statements. He insisted on his innocence and was prepared to confront the charges at trial.

However, in June 2003, on the eve an evidentiary hearing in which his attorneys were going to challenge evidence on the grounds that it had been extracted through torture, the Bush administration suddenly declared him an "enemy combatant" and transported him to a Navy Brig in South Carolina, where he has been held in solitary confinement ever since.

He was held incommunicado for over a year. While imprisoned at the brig, al-Marri was subjected to torture and other abuse and has been prevented from seeing his family for nearly six years. Al-Marri's lawyers have reported that this prolonged cruel and abusive punishment has left their client mentally unstable.

Al-Marri's lawyers have asked the Supreme Court to review a 5-to-4 decision by the US Court of Appeals for the 4th Circuit last July upholding the Bush administration's assertion of near-dictatorial powers of the president to detain anyone, including US citizens, without charges or trials merely by designating them as "enemy combatants."

This narrow decision overturned a ruling by a three-judge appeals court panel in June of last year. The earlier decision rejected the administration's claim to such sweeping powers and compared its position to that of military dictatorships and to the practices of King George III that precipitated the American Revolution.

The Obama administration's action in the al-Marri case is almost identical to that of the Bush administration in the case of Jose Padilla, the US citizen detained at Chicago's O'Hare International Airport in May 2002 upon returning on a flight from Pakistan. Padilla was publicly accused of being part of a "dirty bomb" attack and held, like al-Marri, as a material witness in the September 11 attacks. When his lawyer filed a motion challenging his detention, President Bush signed an executive order declaring him an enemy combatant. He was seized by the military and held without charge in the same Navy brig as al-Marri for three and a half years.

A challenge to Padilla's imprisonment was rejected by the same fourth circuit court of appeals, which held that in time of war, the US president as commander-in-chief has the power to throw anyone in prison without charges on his mere say-so that they are enemy combatants. The court ruled that these prisoners may be held until the end of hostilities without access to lawyers or court review.

In 2005, two days before the government was required to submit its brief to the Supreme Court in response to a challenge to this reactionary ruling, the Bush administration brought criminal charges similar to those now being leveled against al-Marri—conspiracy and providing material support to terrorism—while making no attempt whatsoever to substantiate its previous sensational allegations about a dirty bomb plot.

The Bush administration then—just as the Obama administration now—feared that the Supreme Court might find itself compelled to rule that the President of the United States does not have the power to effectively lock US citizens and legal residents in jail and throw away the key without ever publicly charging them or allowing them to confront their accusers in a court of law.

In both cases—al-Marri and Padilla—the government has bowed to the Constitution in the individual instances by bringing them before a court only in order to preserve the right it has arrogated to itself to carry out the same extra-constitutional imprisonment of others in the future.

In response to the government's action last week, al-Marri's attorney, Jonathan Hafetz of the ACLU National Security Project, welcomed the indictment against his client, declaring, "This case is now finally where it belongs: in a legitimate court." He went on, however, to condemn the Obama Justice Department's attempt to prevent any challenge in the Supreme Court to the extraordinary powers asserted under the Bush administration.

"Despite this indictment, the Obama administration has yet to renounce the government's asserted authority to imprison legal residents and US citizens without charge or trial," Hafetz said. "We will continue to pursue Mr. al-Marri's case before the Supreme Court to make sure that no American citizen or lawful resident will ever again be subjected to such treatment. It is important that the Court hears Mr. al-Marri's case and rejects, once and for all, the notion that any president has the sweeping authority to deprive individuals living in the United States of their most basic constitutional rights by designating them ‘enemy combatants.'"

Hafetz argued that the Supreme Court should rule on the claim of presidential power to detain people without charges "so it will not happen in the future."

Many legal observers expect that the right-wing majority on the Supreme Court will take the same position in relation to al-Marri's case as they did to Padilla's—that the government's filing of criminal charges rendered the challenge to its previous trampling on the most basic constitutional rights a moot point.

Only three justices—Stephen Breyer, Ruth Bader Ginsburg and David Souter—argued that the high court should have heard the Padilla case, despite Padilla's transfer to civilian custody. They insisted that the case "raises a question of profound importance to the nation."

Jonathan Freiman, a lawyer who represented Padilla, condemned the Justice Department's action in the al-Marri case as "a calculated political move to avoid taking a position" in front of the Supreme Court.

"What the Bush administration did with Padilla, the Obama administration is trying to do with al-Marri," Freiman told the Associated Press." Transferring al-Marri out of the brig is the right thing to do. Moving to dismiss the case is not."

The Obama Justice Department's position in the al-Marri case is of a piece with a series of similar actions in which the administration has gone into court to uphold the Bush administration's policies against constitutional challenges.

The administration went into federal court in February to defend the position of the Bush administration in response to a suit filed by four individuals held for six years without charges at the US prison camp at Bagram air base in Afghanistan. Like its predecessor, the Obama administration argued that the detainees had no right to challenge their imprisonment in US courts.

Twice last month, Justice Department lawyers used the same "state secrets" argument as the Bush administration in seeking the dismissal of lawsuits. The use of the state secrets privilege is aimed at killing a case before evidence can even be heard on the grounds that its disclosure would endanger national security. The first case involved the CIA's "extraordinary rendition" program of seizing suspects and transporting them to foreign countries to be tortured. The second concerned the National Security Agency's illegal domestic wiretapping operation.

A federal appeals court in San Francisco Friday rejected this argument in the second case, which involves the illegal bugging of two US attorneys and an Islamic charity in Oregon. The 9th US Circuit Court of Appeals ruled that lawyers in the case could be granted access to secret documents under secure conditions.

In this case, as in others, the invocation of the state secrets privilege is spurious. Evidence of illegal wiretapping was exposed by the government itself with its inadvertent release of a document proving NSA spying on the charity and its lawyers.

The ruling means that the Obama administration may be compelled to defend Bush's criminal domestic spying operation in a court of law. Before that happens, however, the Justice Department will appeal the appellate decision, perhaps all the way to the Supreme Court.

Moreover, the Obama administration appears set to stonewall the court on any release of evidence. As the AP reported, "Government lawyers signaled they would continue fighting to keep the information secret, setting up a new showdown between the courts and the White House over national security."

It is becoming more evident with each passing day that the Obama administration, far from inaugurating some sweeping change from the criminal policies of the previous administration, is determined to retain intact the extra-constitutional and quasi-police-state powers assumed by the Bush White House.

With Iraq plan, Obama embraces US militarism

With Iraq plan, Obama embraces US militarism

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In extending the full-scale US occupation of Iraq for another 18 months, and acceding to the timetable already adopted by the Bush administration for a tentative pullout by the end of 2011, President Barack Obama has done more than betray the hopes of the millions of antiwar voters who supported his candidacy in 2008.

He has fully identified the incoming Democratic Party administration with the fraudulent arguments employed by the Bush White House to justify the ongoing war in Iraq, after its initial claims about "weapons of mass destruction" and ties between Iraq and the 9/11 terrorist attacks had been proven to be lies.

Obama's speech to thousands of Marines at Camp Lejeune was an effort to legitimize the US conquest and occupation of Iraq and present the American military as an instrument of liberation rather than imperialist war and oppression.

While candidate Obama described the Iraq war as one that "should never have been authorized and never been waged," President Obama gave a much different reading. "You have fought against tyranny and disorder," he told the assembled troops. "You have bled for your best friends and for unknown Iraqis. And you have borne an enormous burden for your fellow citizens, while extending a precious opportunity to the people of Iraq."

No one would know from this effusive description that the US intervention's main effect upon "unknown Iraqis" was to kill, maim and displace them. Some 1 million people have died since the US invasion in March 2003, including hundreds of thousands killed by US bombs, missiles and shells fired at civilian neighborhoods. Countless Iraqi civilians have been murdered at US checkpoints for the crime of not slowing down quickly enough.

As for the "precious opportunity" allegedly extended to the people of Iraq, it is the right to vote for parties and politicians sponsored by the US occupation regime to preside over a society that has been virtually destroyed.

Nearly six years after the US conquest, Iraq still does not have running water, electricity, adequate sewage and other necessities of modern life; unemployment is estimated at 50 percent of the adult population; there are some 4 million refugees in internal or external exile; and most Iraqi cities are divided into ethnic and religion-based neighborhoods separated by blast walls and checkpoints.

Obama did not acknowledge, let alone disavow, the real motive for the US military onslaught—Iraq's vast oil wealth and strategic position at the center of the Middle East. That silence only demonstrates that the new president shares the fundamental goal of his predecessor, to strengthen the grip of American imperialism over the Middle East and Central Asia, source of the bulk of the world's oil and gas supplies.

This fact was immediately recognized by the most fervent defenders of the Bush administration's aggression, including Senator John McCain, Obama's Republican opponent in the presidential election, other congressional Republicans, and the right-wing press. The Wall Street Journal, for instance editorialized in praise of Obama's Camp Lejeune speech, calling it "Obama's Bush Vindication."

The Journal gushed: "Mr. Obama delivered a sober speech, offering a policy worthy of the Commander in Chief he now is." It singled out "Mr. Obama's implicit repudiation of his own positions as a candidate" by agreeing to keep a large US military presence in Iraq, as many as 50,000 troops, after the nominal August 2010 withdrawal date, an action that seeks to maintain "the strategic advantage" of a US puppet regime in the Persian Gulf.

As Obama explained in his speech, a major reason for the redeployment of some US forces out of Iraq is to have sufficient military power available to confront both "the challenge of refocusing on Afghanistan and Pakistan," and "comprehensive American engagement across the region."

Millions of Americans voted for Obama, not because they believed that the war in Iraq was a distraction from the pursuit of broader imperialist goals, but because they regarded the unprovoked invasion and conquest of a sovereign nation as a crime, and opposed the predatory character of American foreign policy as a whole.

Their voices have not the slightest impact on the formulation of policy in the Obama White House. As the events of last week demonstrate, it is the military-intelligence apparatus that calls the shots here. Obama did not make an independent decision as commander-in-chief, but rubber-stamped the course backed by one faction of the military establishment against the other.

According to press accounts that followed Obama's speech at Camp Lejeune, the 19-month "withdrawal" plan selected by Obama was the preferred option of Defense Secretary Robert Gates and the Joint Chiefs of Staff. Gates confirmed, in an interview Sunday on NBC's "Meet the Press", that the Iraq field commanders, headed by Gen. Raymond Odierno, preferred a 23-month schedule for withdrawal, while the Pentagon brass, concerned about the need for troops in Afghanistan and being stretched too thin to engage in other potential conflicts, opted for the shorter timeframe.

Obama did not replace any of the Bush administration's principal military decision makers when he took office. Instead, he retained Gates, Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, Odierno and General David Petraeus, head of the US Central Command and architect of the "surge" in Iraq.

His embrace of militarism was demonstrated in the very fact that Obama chose to give the speech at a Marine base to an audience of uniformed troops, not in a civilian setting or through a televised White House address. The effect was to suggest that in the America of 2009, decisions on war and peace are of concern primarily to the military, with the American people relegated to the role of bystanders.

The whole process demonstrates the erosion of American democracy. The American people cannot, through voting in election after election, effect any change in the foreign and military policy of the government. The war in Iraq goes on, and the war in Afghanistan is being escalated, regardless of popular sentiments.

Pension bombs going off

Pension bombs going off

By Paul Merrion

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Exploding pension fund shortfalls are blowing billion-dollar holes in the balance sheets of some of the Chicago area's biggest companies, forcing them to make huge contributions to retirement plans at a time when cash flow and credit are already under stress.

Boeing Co.'s shareholder equity is now $1.2 billion in the hole thanks to an $8.4-billion gap between its pension assets and the projected cost of its obligations for 2008. At the end of 2007, Boeing had a $4.7-billion pension surplus. If its investments don't turn around, the Chicago-based aerospace giant will have to quadruple annual contributions to its plan to about $2 billion by 2011.

Stock market losses also pounded pension funds at Abbott Laboratories Inc., Caterpillar Inc. and Exelon Corp., with others sure to emerge as companies file their annual financial reports with the Securities and Exchange Commission in coming weeks.

The pension gaps underscore a growing conundrum. Unfunded pension liabilities have to be subtracted from shareholder equity, weakening balance sheets at a time when it's already tough to borrow money. Barring a reprieve from Congress, companies may be forced to make more layoffs or curb capital investments to divert cash to shore up pensions.

"There are companies out there faced with paying their pension plan or staying in business," says Mark Ugoretz, president and CEO of the ERISA Industry Committee, a Washington, D.C., lobbying group. ERISA refers to the Employee Retirement Income Security Act of 1974, which sets standards to ensure pension plans are sufficiently funded.

The Chicago companies are symptomatic of nationwide woes. Last year, the 100 largest corporate pension funds in the U.S. saw their net assets decline by 21%, while liabilities increased 1.2%. Applying those averages to any of the region's top funds puts almost all of them into the red by at least $1 billion.


The situation is far worse at companies that entered 2008 with plans already in poor shape. They are now even harder-pressed to come up with huge increases in pension fund contributions to erase the gap in seven years, as federal law requires.

A Boeing spokesman says the pension deficit is "clearly a situation we don't like," but adds that the company's credit rating hasn't been affected.

Stricter federal pension-funding requirements, enacted when the stock market was riding high, threaten to undermine the economy further. Business interests are lobbying for more time to close the gaps, but with lawmakers focused on the housing and banking crises, the issue hasn't gained much traction in Washington.

As a result, "many of the country's largest employers are being forced to make short-term trade-offs between maintaining employment and funding long-term obligations," Sears Holdings Corp. Chairman Edward Lampert wrote in a note to shareholders last week.

Hoffman Estates-based Sears, which announced the closings of 24 stores this year, expects its pension expense to soar as high as $175 million this year from $1 million last year due to the markets' decline.


Underfunded pensions also are forcing borrowing costs higher for some companies.

At Peoria-based Caterpillar, shareholder equity dropped more than 25% from the previous year after the company booked a $5.8-billion pension shortfall and its plan went from 93% funded to 61% funded.

That means Cat has to pay an additional 1.5 percentage points of interest to keep its untapped credit lines intact, according to SEC filings. Its pension assets sank 30% last year, and this year's contribution will more than double to about $1 billion. A Cat spokesman declines to comment.


A decline in interest rates last year also fueled widening pension liabilities, says Lynn Dudley, senior vice-president of policy for the American Benefits Council, another Washington, D.C., group lobbying for more time to fund plans.

Generally, the current value of a future obligation goes up when interest rates come down. In essence, last year's drop in stock prices and interest rates was a double whammy for pension funds, Ms. Dudley says.

"The law kind of slams you. In extreme markets, it's really unpredictable," she says. Absent relief from Congress, she says, "there have been some layoffs, and there are going to be more layoffs" to save cash for pension contributions.

The most notable Chicago-area exception is Moline-based Deere & Co., which began 2008 with a plan that was 17%, or $1.5 billion, overfunded.

Deere may have escaped the worst of the 21% average decline in assets. The company's fiscal year ended Sept. 30, before the worst of the stock downturn hit, and only 27% of its fund — far less than most — was in equities. A Deere spokesman declines to comment.

16 US banks collapse in just two months

16 US banks collapse in just two months

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With the financial meltdown continuing unabated, US has already seen the collapse of 16 banks in the last two months -- which is more than one-fourth the total number of failures in the last nine years.

With ten bank collapses in February, a total of 68 banks have failed since 2000 in the US.

Moreover, 16 bank failures this year is more than half of the total collapses in 2008. Last year, a whopping 25 banks went belly up, mainly after the financial crisis turned severe with the bankruptcy of Lehman Brothers in September.

According to the Federal Deposit Insurance Corporation, which is often appointed as the receiver for failed banks, two more entities were closed down on February 27.

With the collapse of Security Savings Bank, Henderson and Heritage Community Bank, Glenwood, the figure has touched 16 so far this year. In January, just six banks had failed.

In addition, the failure of ten banks in February, is the highest for any month in the last nine years.

As on December 5, 2008, Heritage Community Bank had assets worth 232.9 million dollars and deposits to the tune of 218.6 million dollars. On the other hand, Security Savings Bank had assets of about 238.3 million dollars and deposits of 175.2 million dollars, as on December 31.

In yet another sign of the deteriorating financial conditions, commercial banks and savings institutions insured by the FDIC reported a net loss of 26.2 billion dollars in the fourth quarter of 2008.

It is also the first ever quarterly loss since 1990. Prior to February this year, the largest number of bank failures took place in 2002, when 11 entities went belly up.

Four banks were closed down on February 13 alone. The failed entities on that day were Pinnacle Bank of Oregon, Corn Belt Bank and Trust Company, Riverside Bank of the Gulf Coast and Sherman County Bank.

Other entities that collapsed this year include Silver Falls Bank, Alliance Bank, National Bank of Commerce, 1st Centennial Bank and Magnet Bank.

Despite various initiatives by the Barack Obama administration including the mammoth 787-billion dollar stimulus package, the nation's financial system continues to be on tenterhooks.

Last week, the Federal government stepped into bolster the balance sheet of Citigroup, a third such effort in the last five months.

In the last nine years, there were no bank failures in 2005 and 2006. Among the bank failures in 2008, the most notable was the folding up of Washington Mutual, then the country's largest savings and loan entity.

Buffett: Economy will remain in 'shambles'

Buffett: Economy will remain in 'shambles'

Annual letter to shareholders says crisis has led to 'paralyzing fear'

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Billionaire investor Warren Buffett predicted Saturday that "the nation's economy will be in shambles throughout 2009" and probably "well beyond."

In his annual letter to Berkshire Hathaway Inc. shareholders, Buffett said the credit crisis and falling housing and stock prices have led to "paralyzing fear."

But the famed investor remained optimistic about America's resilience.

"Though the path has not been smooth, our economic system has worked extraordinarily well over time," he said. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."

America has faced bigger economic challenges in the past, Buffett said, including two World Wars and the Great Depression.

Buffett detailed his worst year leading Berkshire, insurance and investment company, in the shareholder letter issued Saturday.

Net worth shrinks
Berkshire barely broke even in the fourth quarter because of losses on derivatives contracts tied to the stock market.

Profit fell 96 percent, the fifth straight quarterly decline, and Berkshire's net worth tumbled $10.9 billion in the year's final three months.

Net worth per share fell 9.6 percent for the whole of 2008, only the second decline since Buffett began running Berkshire in 1965. It fell 6.2 percent in 2001.

Berkshire generates about half its results from insurance, including auto insurer Geico Corp, but operates more than 70 businesses that offer such things as carpeting, ice cream, paint, real estate services and underwear.

Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips stock when oil and gas prices were near their peak.

Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008.

Buffett said he did not anticipate last year's dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.

He said he also spent $244 million on stock in two Irish banks that appeared cheap. But since then, he wrote down the value of those purchases to $27 million.

Berkshire's results were battered by $4.61 billion of pretax losses on about 251 derivative contracts largely tied to the longer-term performance of four stock market indexes and the credit quality of higher-risk "junk" bonds.

A deteriorating economy and tight credit led to steep declines in stock prices and an increase in junk bond defaults, resulting in losses for Berkshire.

While the losses exist on paper, accounting rules require Berkshire to report them with earnings.

Buffett revealed for the first time which stock indexes he has been using: the Standard & Poor's 500, Britain's FTSE 100, Europe's Euro Stoxx 50, and the Nikkei 225 in Japan.

In his letter, Buffett said he believed each contract that Berkshire owns was "mispriced" at the outset, and that the ups and downs "neither cheer nor bother" him.

He said, though, that Berkshire got $8.1 billion of upfront payments from parties on the other side of the contracts, which the company can invest as it wishes. This, he has said, makes the contracts different from the "financial weapons of mass destruction" that he has called other derivatives.

For all of 2008, profit at Berkshire fell 62 percent to a six-year low of $4.99 billion, or $3,224 per share, from $13.21 billion, or $8,548. Revenue fell 9 percent to $107.8 billion. Buffett called full-year results "unsatisfactory."

Berkshire Class A shares closed Friday at $78,600 on the New York Stock Exchange. They have fallen 44 percent since the end of February 2008, while the Standard & Poor's 500 has dropped 45 percent.