Sunday, July 19, 2009

CIT crisis threatens wave of business failures and layoffs

CIT crisis threatens wave of business failures and layoffs

By Barry Grey

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The Obama administration has refused to provide government backing for outstanding debt or other emergency aid to CIT, a New York-based bank that finances nearly one million small and midsize companies in the US.

The collapse of CIT’s efforts to secure government relief on Wednesday has left the 101-year-old bank teetering on the edge of bankruptcy and threatens a cut-off of funding to retailers and suppliers. That could result in a wave of bankruptcies and closures, leading to tens of thousands of layoffs.

The administration’s decision to deny aid to CIT stands in sharp contrast to its policy of providing unlimited bailouts to major banks that cater to large corporations and big investors. It is of a piece with its decision to drive General Motors and Chrysler into bankruptcy in order to impose tens of thousands of layoffs and slash the wages and benefits of auto workers, its opposition to bailing out auto dealerships slated for closure, and its rejection of any federal aid to California or other states facing fiscal insolvency.

It is also in line with the administration’s policy of allowing weaker and smaller financial institutions to fail in order to effect a further consolidation of the banking system in the hands of a few giant Wall Street firms.

CIT is the 26th largest bank in the US. Its bankruptcy would represent the fourth largest bank failure, by assets, in US history. As of Friday, the bank was seeking to stave off filing for Chapter 11 bankruptcy protection, a development that could rapidly lead to its liquidation.

It was reportedly in talks Friday with Goldman Sachs, JPMorgan Chase and Morgan Stanley on securing credit either to avert a bankruptcy filing, or secure sufficient financing to survive in bankruptcy court. The New York Post reported that JPMorgan, the biggest US bank, by assets, was interested in acquiring CIT’s factoring unit, the bank’s biggest and most lucrative business.

As the country’s largest factor, CIT buys the receivables of thousands of manufacturers and suppliers, mainly to retail businesses. For a fee, it pays its clients cash up front, so they do not have to wait 30 to 90 days for retailers to pay for their supplies and inventory. It also guarantees suppliers that they will be paid even if retailers whom they supply go bankrupt.

CIT controls 60 percent of the US market for factors. It is a factor for some 2,000 manufacturers and suppliers whose goods are sold at 300,000 retailers across the country.

Both suppliers and retailers fear that a CIT bankruptcy will disrupt the flow of cash and credit, disrupting supply chains and leaving businesses unable to pay their bills.

Gail Dudack, chief investment strategist at Dudack Research Group, told clients, “The company’s collapse would certainly ripple through thousands of small and medium business that rely on CIT for trade financing and lending. This raises the risk of more bankruptcies and more unemployment and would be a significant negative for an already fragile economy.”

Roy Calcagne, CEO of Craftsmaster Furniture, said CIT’s crisis could disrupt the entire supply chain of the furniture industry. “There could be a huge ripple effect that I’m not sure the government is fully aware of,” he said, “especially if you look at all the ways this impacts supply chains. It could be devastating for our industry.”

Jerry Reisman, a bankruptcy attorney at the law firm Reisman, Peirez and Reisman, told Reuters that he was “deluged” with desperate calls from apparel companies concerned about losing access to credit. “The government’s decision will,” he said, “result in many companies being unable to make payroll on Friday and inability to pay suppliers. Many of these companies and their suppliers will be forced to file bankruptcy themselves, causing a further decline in the economy.”

CIT, which has an $80 billion balance sheet, has had eight straight quarters of losses, totaling $3 billion. Beginning in 2004, when its current CEO, Jeffrey Peek, took control, the bank plunged into subprime mortgages and student loans. The impact of the subprime collapse and resulting credit crunch has had a particularly crippling effect on CIT, which does not take deposits but rather relies on short-term commercial credit to finance its long-term debt.

For the past two years it has been cut off from wholesale credit markets. Last December, it obtained permission from the government to register as a bank holding company in order to receive $2.3 billion in cash under the Troubled Asset Relief Program (TARP).

CIT has $1.1 billion in debt coming due in August followed by $2.5 billion due by year’s end. The Federal Reserve Board reportedly carried out a “stress test” on the bank earlier this week and concluded it needed at least $4 billion in capital to stay afloat.

Its speculation-driven problems are not essentially different from those of giant banks and financial firms such as Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and American International Group which have received tens of billions in taxpayer handouts and are deemed by the Obama administration “too big to fail.”

An administration spokesman said the decision to deny CIT emergency support demonstrated that Obama has “a very high standard” as to which firms can receive government assistance. More to the point, it demonstrates the degree to which the administration’s economic policies are dictated by the biggest Wall Street players.

Since the financial crisis erupted last year, the government has engineered the disappearance of Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia and Washington Mutual, immensely increasing the economic power of the strongest mega-banks, particularly Goldman Sachs and JPMorgan Chase.

There are a host of smaller regional banks that are sliding toward bankruptcy, further increasing the dominance of the biggest Wall Street firms. At a Senate Banking Committee hearing on Thursday, Senator Jim Bunning, Republican from Kentucky, said Federal Deposit Insurance Corporation Chairman Sheila Bair had told him another 500 banks could fail “unless something dramatic happens.”

The decision to deny aid to CIT came amidst spectacular second-quarter earnings reports by Goldman Sachs and JPMorgan Chase. Goldman reported record earnings of $3.44 billion and JPMorgan reported a sharp rise in profits to $2.7 billion for the quarter. Both banks reaped the vast bulk of their profits from their investment banking and trading divisions.

They are benefiting from the demise of competitors and the ongoing troubles at Bank of America and Citigroup, which gives them greater access to fees generated by underwriting stocks and bonds, while they take advantage of market volatility to place their own bets on stock and bond price fluctuations. Neither these, nor other major banks, are using the lifeline provided by government cash and other subsidies to significantly increase lending to businesses or consumers.

They continue to hide an estimated $2 trillion in toxic assets on their balance sheets, refusing to sell the nearly worthless assets at market prices or write down their value. JPMorgan, even as it reported higher profits, noted large losses in consumer loans and commercial real estate. Citigroup and Bank of America, in their earnings reports released on Friday, similarly reported growing losses in these sectors. These assets will continue to deteriorate as the impact of mass unemployment leads to more defaults on consumer loans and prime mortgages, and the recession further depresses commercial real estate values.

Goldman set aside nearly half of its quarterly revenues of $13.8 billion for salaries and bonuses, setting the stage for record compensation packages for executives and senior employees. This is in line with a general resumption by the banks of seven-and-eight-digit windfalls for top executives.

White House Chief of Staff Rahm Emanuel implicitly alluded to the bumper earnings reports by Goldman and JPMorgan in justifying the decision to cut off CIT. “Given the sense of calm,” he said, “it is a symbol of a different phase” in the government’s rescue of the banking system.

Similarly, Obama’s top economic adviser Lawrence Summers in a speech in Washington DC declared that the US financial system was “back from the abyss,” and Treasury Secretary Timothy Geithner said the financial markets were sending “important signs of recovery.”

TARP Watchdog Says Treasury Lacking Bank Data

TARP watchdog says Treasury lacking bank data

By Silla Brush

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The top watchdog over the financial bailout package said the Treasury Department is rejecting "common sense" by not requiring banks receiving billions of dollars in government money to say how they are using the money.

In a report to be released on Monday, Neil Barofsky said banks that have received money from the $700 billion bailout package passed last year are able to indicate how they are using taxpayer money and that Treasury should require banks to be more transparent.

"The fact that there may be some limitations on the precision of the data that could be collected," Barofsky said in the report, "does not mean that such reporting could not generate meaningful information."

Barofsky is the Special Inspector General over the Troubled Asset Relief Program (SIGTARP) that was passed by Congress in October. The report is based on a survey of 360 banks receiving government aid and is meant to bolster Barofsky's recommendation that the Obama administration should mandate that banks supply more information about how they are using the money, whether for lending, additional capital or other purposes.

The report indicates that banks can give "at least a general indication" about how the money is used and what they were able to do had it not been for the government help.

"Treasury's decision to reject this information just because the bank may not be able to trace the exact dollars ignores this common sense view," Barofksy said.

The Treasury Department currently requires that banks provide monthly data on their lending rates, but does not request any information about how banks are using government money for other purposes. Barofsky made a similar recommendation several months ago and continues to believe it is "essential".

In a letter in response to the report, Herbert Allison, the assistant secretary for financial stability at Treasury, urged caution and said that "money is fungible, and paying an expense from one source frees up cash to be used for other purposes."

Banks under the TARP program were not required to separate the government aid on their balance sheets from other resources and capital on their books.

"In accordance with typical banking industry practices, they commingled the TARP funds with their other capital and leverage the funds to increase lending and/or make investments," Barofksy's report said. Forty-four banks did, however, separate the money, according to the report.

The report is based on a survey the office did of 360 financial institutions that had received money through the end of January. The responses -- representing all the banks receiving money at that time -- indicate how banks used the money, but not on a dollar-by-dollar basis.

More than 80 percent of the banks said they used the money to increase lending, 40 percent said they used it to help build up capital cushions, and a third said they used it to invest in mortgage-backed securities guaranteed by the government. Fifty-two banks said they used the money to repay outstanding loans and 15 said they used the money to support acquisitions of other banks.

The inspector general's office is evaluating the actual responses from banks and plans to post them online with possible redactions over the next month.

US Strategy of Total Energy Control over the European Union and Eurasia

US Strategy of Total Energy Control over the European Union and Eurasia

Nabucco Turkey EU and Obama Geopolitics

by F. William Engdahl

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One of his first foreign visits as new President took Barack Obama to Ankara for a high-profile meeting with Prime Minister Recep Erdogan and other leading Turkish officials. Obama engaged in classical “horse trading” wheeling and dealing. “I give you support for Turkey’s EU membership; you open the diplomatic door to Armenia,” appears to have been the core of the deal. What other inducements the US President gave in the case of Turkish influence within NATO and such is secondary. Obama’s goal was to break a political deadlock in Turkey to construction of a major gas pipeline to Germany and other EU countries in direct opposition to Russian Gazprom’s South Stream pipeline.

Nabucco is an integral part of a US strategy of total energy control over both the EU and all Eurasia. On July 13 with a Nabucco signing ceremony in Ankara the first fruits of the Obama soft diplomacy appeared to be bearing fruit. The question remains if it will be bitter fruit.

Leading Republican Party foreign policy figure, Senator Richard Lugar, went as the Obama Administration’s representative to Ankara on July 13 for the signing ceremony approving the controversial Nabucco project. EU Commission President Barosso was also present along with heads of government of Turkey, Bulgaria, Hungary and Austria.

The Nabucco project when and if finished would take gas from the Caspian region, Middle East via Turkey, Bulgaria, Romania, Hungary with Austria and further on with the Central and Western European gas markets. It would run some 3,300 km, starting at the Georgian/Turkish and/or Iranian/Turkish border respectively, leading to Baumgarten in Austria, costing at least $8 billion. The project is parallel to the existing Baku-Tbilisi-Erzurum pipeline and could transport 20 billion cubic meters of gas a year. Two-thirds of the pipeline will pass through Turkish territory.

Azerbaijan, Uzbekistan, Turkmenistan, Iran and Iraq are being touted as potential suppliers.

Until the Obama-Erdogan talks Nabucco had been stalled largely by Turkish lack of interest. Now that all appears to be changing and Washington has scored a minor coup over Moscow in the new Great Game over Eurasian energy control. At least on the surface. The reality is far more complex.

Sensitive geopolitics

The importance of Nabucco to Washington ranks high on the list. The US Senate just held hearings on how the control of energy supplies influences global affairs, something that has been at the heart of US foreign policy since at least the time Woodrow Wilson ordered the US Fleet into VeraCruz Mexico to defend the interests of Rockefeller’s Standard Oil in 1913.

At their hearing in Washington, the august Senators were especially interested in the planned Nabucco gas pipeline. Senator John Kerry, chairman of the influential Senate Foreign Relations Committee, commented in the hearings, with definite understanement "There is a striking overlap between the world's sources of energy and the world's sources of instability, and we need to take note of that carefully. Iran, Iraq, Sudan, Russia, the Caucasus, Nigeria, Venezuela are all on the frontlines of our energy supply challenges, but also the fault lines of our geopolitics."

What the Democrat Senator did not mention is that those countries were on the “faultlines of our geopolitics” because US foreign policy since the end of the Cold War had made them into faultline states in order to increase Washington control over the economic future of Eurasia including both China and Russia, as well as over the energy-dependent European Union. For Washington, that control has been THE central preoccupation of all US foreign policy since the fall of the Berlin Wall in November 1989.

Gas for Nabucco?

The major problem with Nabucco now is not the willingness of Turkey to build the longest part of the pipeline to Bulgaria. That has been agreed. What remains however is a huge problem of who will fill that pipeline with ample volumes of natural gas to make it economically practical. Here is where it gets dicey.

Until now the main gas supply for Nabucco should be Azerbaijan, source of large oil reserves to fill another Anglo-American-backed pipeline run by a British Petroleum consortium to bring Baku oil from the Caspian Sea to the west independent of Russia. That Baku-Tbilisi-Ceyhan oil pipeline was the real reason Washington backed the 2004 Georgian “Rose Revolution” that put the erratic dictator Mikhail Saakashvili into power, pushing out veteran Soviet-era fox Edouard Shevardnadze, who had become too friendly with Moscow for the likes of Bush-Cheney oil geopolitics.

But now Azerbaijan may have problems providing enough gas to make Nabucco feasible. In June, Azerbaijan signed with Russia’s Gazprom for gas from Stage 2 of the Shah Deniz field -- the same field Nabucco hopes to tap for its pipeline.

The Gazprom-Azeri deal states that other purchasers must outbid Gazprom, giving Russia a possible lever to stall or even to kill the Nabucco project, (which is intended to decrease Europe’s reliance on Russia’s gas), by pushing the price of gas from Shah Deniz up too high to make Nabucco profitable on commercial terms as a rival to Russia’s South Stream. Azerbaijan’s President Aliyev seems to be playing a cat-and-mouse game with both Russia and the EU-Washington, to play one off against the other for the highest price. Gazprom agreed to pay an unusually high price of $350 per thousand cubic meters for their Shah Deniz gas, a clear political not economic decision by Moscow which owns controlling interest in Gazprom.

To keep hopes alive for the completion of a viable Nabucco, Washington has few cards to play. Even were Azerbaijan to agree to sell gas and Nabucco to buy it on competitive terms to Gazprom, industry sources say the Azeri gas would alone not suffice to fill the pipeline. Where could the remaining gas come?

One possible answer is Iraq; the second is Iran. Both are with huge geopolitical problems for Washington to put it mildly.

Senator Lugar, just back from his trip to Ankara to observe the Nabucco signing, told his Senate colleagues the answer to the Nabucco gas supply problem might lie in Iraq, which he claimed could supply up to half of the gas for Nabucco. "Ideally, in the way of the world, the natural gas - and maybe in due course oil supplies - coming out of a united Iraq might provide this kind of capital, which would be a miraculous happening and a wonderful ending to a very tragic period in their history," Lugar said. Ideally it sounds nice. Practically is another question, even with the US retaining its vast network of permanent US military bases across Iraq. Iraqui gas to Turkey would pass through Kurdish areas providing the Kurds with a lucrative new revenue stream, something not too devoutly desired in Ankara.

The second option, which also happens to hold the world’s second largest reserves of identified natural gas next to Russia, is Iran.

Uuuuuuhaaa. Ouch! That doesn’t quite fit into the geopolitically correct map used in Washington these days.

Turkish Prime Minister Recep Tayyip Erdogan invited both Russia and Iran to join the Nabucco project, RIA Novosti reported. He stated, “We want Iran to join the project when conditions will allow, and also hope for Russia’s participation in it.”

For its part, Teheran is enjoying the cat-and-mouse game: "European companies understand the fact that the project will be economically justified in case Iran is the supplier,"" Seyyed Reza Kasaiizadeh, National Iranian Gas Export Company’s managing director told press on the day of the Ankara Nabucco signing. He claimed, rightly, that supplying the Nabucco pipeline with Iran's gas is the most economical alternative. “Despite political oppositions, Iran sees itself as s potential supplier of the project,” he added. That didn’t go down well in Washington.

Richard Morningstar, the State Department's Special Envoy for Eurasian Energy, told the Senate that Iran should not benefit from Nabucco until Tehran agrees to resolve the dispute over its nuclear program. "This would be the absolute worst time to encourage Iran to participate in a project in Nabucco, when we have received absolutely nothing in return," he said. Significantly, he noted that Nabucco could be used as an incentive to get Iran to better cooperate and engage with the international community.

Why Armenia?

The natural route to bring Iranian gas to Europe via Nabucco goes through Armenia, the small and fiercely independent nation sandwiched between Iran, Georgia, Azerbaijan and Turkey. In early 2007 a small pipeline opened bringing Iranian gas to Armenia. A second pipeline, if built, would potentially allow Iran to bring its gas via Turkey and Nabucco to European markets. This begins to explain why Obama made the issue of Turkish reconciliation of the long-standing tensions between Ankara and Armenia over the Armenian charges of genocide during World War I a priority in his April talks with Prime Minister Erdogan.

It seems Obama’s advisers are playing a far more subtle geopolitical game than did Cheney and Bush. By holding out several juicy financial carrots, to Turkey, to Armenia, even to Teheran if it were to abandon its nuclear ambitions, Washington hopes to throw a giant monkey wrench into the attempt of Moscow to retain a significant control over Eurasian energy supplies to the EU, a major lever to ensure more stable EU-Russian relations amid growing threats to Russia’s security from Washington’s misnamed missile defense shield being built in Poland and the Czech Republic.

Notably, on the latter point, it is worth noting that Obama refused to give an inch during the recent summit talks in Russia. That’s because Washington’s agenda of geopolitical control over the Eurasian Continent is the only lever of maintaining the hegemony of a failing American Century at this point. Full Spectrum Dominance or none seems to be the motto.

Dirty deal for workers and retirees

Dirty deal for workers and retirees

By Martha Grevatt

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A 100-year-old towering structure was razed to the ground July 10. From its wreckage a new General Motors Company—miniature by comparison—has emerged.

GM’s Chapter 11 filing, and its exit a record-breaking 40 days later, has been called a “surgical” or “quick rinse” bankruptcy. For workers and retirees, however, the damage can hardly be compared to having an appendix removed or to cleaning soiled linens.

The Pontiac brand is gone. The Saab, Opel, Vauxhall, Hummer and Saturn brands are in the process of being sold. By the end of this year GM’s total U.S. employment will stand at 67,000—down from 91,000 at this year’s start. This includes another wave of job cuts for 4,000 non-unionized salaried employees on top of the 20,000-plus union jobs on the chopping block as part of the government-ordered restructuring. Between now and December 2011, 13 plants will close.

Workers suffer heavy cuts

Workers represented by the United Auto Workers took huge wage and benefit cuts. Wages for newly hired workers are frozen at $14 an hour—one-and-a-half times the poverty level for a family of four—for the next six years. Retirees lost vision and dental coverage.

For the next contract, which will run from 2011 to 2016, the UAW agreed to allow an arbitrator to impose a “competitive wage.” Under the terms of the U.S. Treasury loan to GM, workers are forbidden to strike.

The attack on the UAW membership is just the tip of the iceberg. GM plans to close at least 1,300 dealerships next year employing around 60,000 mechanics, salespeople and other workers. New York Bankruptcy Court Judge Robert Gerber overruled dealer objections, allowing the sale of GM’s remaining assets to proceed.

Objections were also raised in bankruptcy court by the International Union of Electrical Workers-Communication Workers of America. The IUE-CWA represents just less than 10 percent of GM’s 550,000 union retirees, while a few thousand more belong to the Steelworkers or the Operating Engineers. The costs of their health benefits are not being transferred to the UAW-administered Voluntary Employee Beneficiary Association.

The Treasury had demanded that the UAW VEBA take half of GM’s contractual obligations in company stock. The other unions were not part of this deal, so their retired members will soon be losing most of their health care coverage. The IUE-CWA retirees demonstrated outside the bankruptcy court, but their objections too were overruled.

Also left behind in “Old Motor Co.” were potential liabilities in a class-action asbestos exposure lawsuit and individual defective product lawsuits. The plaintiffs may have no means of holding GM accountable for their suffering.

Moreover, because the auto industry is considered a “multiplier” industry, the drastic cuts in auto production are already hurting workers in steel, rubber, glass and a host of related industries. A number of major auto parts companies have filed or are expected to file for Chapter 11 bankruptcy. Whole communities are affected by plant closings.

For 40 days and 40 nights workers and their families watched their futures drown. This was not a “quick rinse” but a flood of economic destruction.

Bosses happy

Not everyone is hurting, however. If one catches GM CEO Fritz Henderson or the new chairman, Edward Whitacre Jr., cracking a smile, it’s for good reason. The new company has erased $40 billion in private debt, and now only owes the government $11 billion. Now that wages, benefits and the workforce itself have been reduced, Henderson gleefully announced, “We have the important parts of the business necessary to make the company great again.” (Detroit Free Press, July 14)

The so-called industry analysts are feigning astonishment at the speed with which GM completed the sale of its assets to the new company. Even the Chrysler bankruptcy took two days longer.

In the past, the process of using Chapter 11 bankruptcy to break union contracts and force huge concessions—as in steel, airlines and auto parts—lasted several years. It was the intervention by the capitalist state, beginning with the Bush administration, which sped up the process here. By threatening to deny bailout funding and forcing GM—and also Chrysler—into liquidation, the government illegally interfered with collective bargaining and scared the workers into granting givebacks that the bosses were all too happy to accept.

The U.S. government at present holds a 60-percent stake in the new GM. The UAW VEBA, the governments of Canada and Ontario, and GM bondholders hold the other 40 percent.

Government aids big capital

The White House Auto Task Force—which orchestrated this massive transfer of wealth out of the hands of the workers and retirees who created it—was drawn entirely from the ranks of finance capital and their think tanks. Now that he’s done his dirty work, Task Force Chair Stephen Rattner plans to quit and go back to Wall Street. When GM Co. is returned to private hands—which Rattner claimed will occur without much delay—stockholders will be able to extract bigger profits from a smaller and lower-paid workforce.

Between GM and Chrysler, more than 30,000 union jobs in the plants are disappearing. Even given the unprecedented role of the state, this devastating attack on the working class seems incomprehensible. The other factor was the acquiescence of the top leadership of the UAW.

When UAW President Ron Gettelfinger spoke out over GM’s plans to import a new small car to be produced in China, GM then agreed to instead keep a Michigan plant open and build the subcompact there. That’s one fewer plant closing, which is good, but why didn’t he demand that no plants be closed? Why the silence over the dealer closings affecting tens of thousands of unionized mechanics, such as those around New York City who belong to UAW Local 259? What about the IUE-CWA retirees who are getting a raw deal?

What happened to the old union principle, that an injury to one is an injury to all?

Rank-and-file workers need to organize themselves at the grassroots level. Some way we must map out a strategy to fight to overturn these rotten contracts and demand our right to our jobs.

America's White Underclass

America's White Underclass

When seeing ain't believing, somebody's blind

By Joe Bageant

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"White underclass" is a term I've used often in my writing, and most American readers seem to know what I mean. They've got eyes and live in the same nation I do. But in a sudden burst of journalistic responsibility, I decided that if I am going to throw around the word underclass, then I should offer some clearer, perhaps more scientific definition.

So I started writing this with a pile of published research papers before me. Now they are in the trash can by my side. Looking down on them, I can see the gobbledygook titles, the stuff of which government policy and political platforms are made. They run together in slurry of the language of our society's commissars: Concerning-Prevalence-Growth-and-Dynamics-Concentrated Urban Poverty Areas- block-level vs. tract-level segregation-800-tract-tables-urban abstracts-Defining-and-Measuring-the-Underclass-from-The Journal of Policy Analysis and Management-statistical-summary-of …

What I find is that nobody in social science seems to agree on the term, or, being firmly placed in the true white middle class themselves, even agree if such a thing as a white underclass exists. You can't smell the rabble from the putting green. To others, some blacks for example, the term white underclass is an oxymoron, or maybe yet another new white social code word to be deciphered. I can't blame them for their wariness. You have to be an American to get even these code words. For instance, for all practical purposes and to most Americans, regardless of race, the term "middle class" means "white." Plain and simple. We all know that, even members of the "black middle class."

Middle class also has implications of people's occupations, usually white collar occupations, though it also includes some of the ever thinning ranks of blue-collar workers. But this comes down to describing human beings solely in terms of their jobs in the capitalist labor marketplace, and assumptions about income and whether one takes their daily shower before they go to work or after they come home. By that definition, anyone of working age who doesn't have a steady job of the right type, for whatever reason, is in some sort of "economic underclass." In other words, they are the people that middle class folks feel should damned well be working, if they are over age 18 and have a pulse. ("If I gotta do time in this meaningless workhouse of a nation, you do too!") This underclass includes any people of color seen on the street at midday during the week, single mothers, and paraplegics too, now that the middle class is paying taxes for handicap parking spaces and wheelchair access to the public shitters.

Another way we define underclass is as "losers." People who cannot talk, think, or act like middle class professional and managerial workers, people who cannot even be posers. There is absolutely no excuse for these people. We've got television 24/7 to show 'em how to behave. They could learn to act like the blue collar workers we see on the endless reruns of The King of Queens (an American sitcom about a parcel service delivery truck driver.). They could at least be funny and amiable fer godz sake.

From reading the studies, I can see that social scientists dislike plural nouns, and thus shun the word losers. So they call this the "educational underclass." Either way, it comes down to folks too wooly and uncurried for office water cooler society. Nobody is denying that they all should have jobs, of course, just nowhere near the water cooler.

Yes, eight to eighty, crippled blind or crazy, Americans generally agree that every man or woman in America should have a full time job, except those women who manage to snag a wealthy man. They are exempt, as are the middle class commissariat's own beer guzzling spawn keeping the pizza delivery and the all-night video arcade businesses thriving in college towns across the republic.

Then you've got your moral underclass. Like the rest of us, they come in two major varieties -- male and female. Females who don't bother to get married before they have babies (the non-technical term is "welfare sluts"), and men who have things more serious on their national police state blotters than a parking ticket. "Non-mainstreamers," in socio-demographic speak. Many of these are men who say, "Screw it, I ain't gonna even bother to work my ass off and be treated like dirt for six bucks an hour. I'd rather shoot pool." Me too.

The unwed mothers come in two varieties. There are those who decide they want children, but are choosy about the husband that traditionally comes with the deal. And there are those who are so young and naïve due to cultural circumstance and environment they do not know what this country does to, not for, single mothers. They often find themselves working at least part time (workfare), yet permanently institutionalized into poverty by our social services industry, instead of being lifted out of it. More than 45 percent of U.S. single mothers are poor, compared to five percent in Sweden and Finland, where no stigma is attached and substantial public resources are applied to child health and development. But research done in Europe shows that even if U.S. women had a zero rate of single motherhood, poverty among American women would still be higher than in European and other socially advanced nations.

Armchair sociologist that I am, I have a theory about this: Millions of American women are in poverty because they are paid poverty wages. I could be wrong, I often am, but there seems to be a connection between poverty and money. I started developing this theory last year when I was in a Melbourne, Australia hotel and learned from a single mother hotel housekeeper there that she made $19 an hour, had government assisted childcare and was going to college at night toward becoming a medical technician. Hmmm… Over here we tell single mothers, "Get a six dollar an hour job or get married bitch! Workfare, baby, workfare." Then too, contrary to the American middle class belief system, out-of-wedlock babies are increasing at all levels of white American society. Even more contrary to popularly held notions, as many of these children turn out to be as well adjusted people as do children of the middle class. But for damned sure poorer in most cases.

And finally we have simple snottiness as a line of underclass demarcation -- one's manner of physical gesture or accent. Believe me from personal experience, a Southern accent in America is no ticket to the top. But even with a Southern accent, if you talk like a college grad, don't wear bib overhauls or gang banger gear, and appear to know where South America is on a map, Americans will deem you middle class. Actually, if you smile a lot, and sound like any sort of white customer service type, it will fly. It's called having the appropriate social and cultural skill set. Yeah, right, appropriate to be hired as a telemarketer so you can piss people off by interrupting their dinner hour.

But even if you gather aluminum cans from dumpsters for a living, with effort, you can "pass" like light skinned black folks used to do in this country. As testimony to this, I, who am a high school dropout with a Southern accent, have successfully managed entire magazine publishing groups for a living. (The secret is balls.) If I'd been black or Hispanic though, I'd have been distributing the urinal cakes in the rest rooms at night. So yes, there is a slight edge to whiteness, though not nearly as much as minorities assume. Still, you gotta make the most of that little edge.

In the end, race, gender or sexual preference are just moving parts of the class machine, with middle class perceptions setting the standard. You can indeed be black or queer, but with the properly buffed patina of white middle class mojo you can make it to the top, or near to the top of the heap (in America, proximity to the top of our cultural garbage heap is everything). All the rest of us are mere consumer refuse, as the Michael Jackson Morbidity Festival demonstrated. You can even be celebrated as an icon of diversity if you act white and middle class enough. Obama is Harvard white guy enough, Ellen DeGeneres is going strong ten years after coming out, gay Congressman Barney Franks still gets reelected. They've all got white middle class mojo. Al Sharpton on the other hand, has cootie mojo. (Tip for Al: They need golf cart drivers at the Congressional Country Club. A year of that and you'd know all you need to know about the white mojo shtick. Because you can watch Obama play golf there).

When it comes to the underclass, there is no arguing that some people are members because they are so damned uneducated they cannot count their toes or read well enough to fill out a job app, the causes of which are too deep and tangled to go into at the moment. Others just don't care to do the smiling grammatically correct wimp assed customer service zombie thing. They prefer swinging a bigger hammer than that -- doing real work, like America used to do. And doing it without kissing ass, which is why they are called the "permanently jobless." As sociologist Christopher Jencks points out, "There is no absolute standard dictating what people need to know in order to get along in society. There is however, an absolute rule that you get along better if you know what the elite knows than if you do not." He also cautions that "the term underclass combines so many different meanings that social scientists must use it with extreme care."

Which is fine. But I'm no social scientist. If in my travels and experience in American life I see that tens of millions of Americans being screwed silly by a handful of chiselers at the top, or if I see one percent of Americans earning as much annually as the bottom 45 percent of Americans, then that 45 percent is an underclass. When I see a 70-year-old man on his second pacemaker limping through Wal-Mart as a "greeter" so he can pay at least something on last winter's heating bill this month, then he is part of an underclass. When I see the humiliated single mom waitress tugging downward on the ridiculously short red plastic skirt she must wear at the Hooter's type joint so her crotch won't show, she's part of an underclass of humiliated and socially oppressed people. Screw the hairsplitting about who qualifies as underclass and what color they are. Just fix it. Or reap the consequences.

We're finally starting to hear a little discussion about the white underclass in this country. Mainly because so many middle class folks are terrified of falling into it. Frankly, I hope they do. We've got room for them. All the lousy, humiliating jobs have not yet been outsourced. The Devil still has plenty for them to do down here.

Call all of this anecdotal evidence. You won't be the first. I was on a National Public Radio show last year with a couple of political consultants, demographers as I remember. One, a lady, was obviously part of the Democratic political syndicate, the other was part of the Republican political mob. The Democratic expert said dismissively of my remarks, "Well! Some people here seem to believe anecdotal evidence is relevant." Meaning me. I held my tongue. But what I wanted to say was this:

Sister, most of us live anecdotal lives in an anecdotal world. We survive by our wits and observations, some casual, others vital to our sustenance. That plus daily experience, be it good bad or ugly as the ass end of a razorback hog. And what we see happening to us and others around us is what we know as life, the on-the-ground stuff we must deal with or be dealt out of the game. There's no time for rigorous scientific analysis. Nor need. We can see the guy next door who's drinking himself to death because, "I never did have a good job, just heavy labor, but now I'm all busted up, got no insurance and no job and it looks like I'll never have another one and I've got four more years to go before Social Security." He doesn't need scientific proof. He doesn't need another job either. He needs a cold beer, a soft armchair, some Tylenol PM and a modest guarantee of security for the rest of his life. Freedom from fear and toil and illness.

And furthermore, Sister, we cannot see much evidence that other, more elite people's scientific analysis of our lives has ever benefited us much. When you're fucked, you know it. You don't need scientific verification.

I wanted to say that on the radio. But I didn't. The little white guy mojo voice in my head told me not to. So I just laughed good naturedly. Like any other good American.

May God forgive me.

No Bernie Madoff For The Most Vulnerable To Blame

No Bernie Madoff For The Most Vulnerable To Blame

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Amidst interminable "reporting" on the "poor" victims of Ponzi maven Bernie Madoff - would anyone care if people had blown $65 billion trying to get richer in Las Vegas? - an alarming July 5 NY Times headline informs: "Safety Net Is Fraying for the Very Poor."

In the story, by Erik Eckholm, we learn Obama's stimulus package has softened the impact of recession on many of the working poor; but the neediest have become more destitute. Estimates of those lacking homes, jobs, and all basic support range as high as 3.5 million.

As dupes of Madoff like Elie Wiesel kvetch about his and his charity's lost millions, the LA Times reported that "officials at Hollywood Presbyterian Medical Center, Kaiser Permanente West Los Angeles and Martin Luther King Jr./Drew Medical Center had discharged patients, put them in cabs and dumped them on skid row." The hospital officials pleaded that only the most destitute area in Southern California has "a concentration of social services for the patients, including homeless shelters and drug and alcohol programs." (April 7, 2009)

ABC News showed video of Carol Ann Reyes, 63, being "loaded into a cab by Kaiser Permanente hospital staff and dumped on Skid Row, wearing nothing more than a hospital gown and socks." Regina Chambers, who works at the Union Rescue Mission, said Reyes "was very disoriented. She didn't know where she was or what she was doing."

Marveil Williams, another dumping victim, informed ABC: "They told me I needed to get out that hospital bed and go find somewhere to stay." The reporter concluded: "His head and eyes still swollen, Williams was dumped on the doorstep of Skid Row's Union Rescue Mission." Other area hospitals also far from downtown practiced similar policies. Police officials complained that "the practice worsens the already grim conditions on skid row. They also disputed the hospitals' contention that the patients taken to skid row are always ready for release." (March 24, 2006)

Hospital managers insisted "dumping" indigent people assures "the best interests of the patients because skid row offers their best chance of receiving the follow-up services -- as well as shelter -- that they need once they are discharged." Mehera Christian, director of public affairs for Kaiser Permanente Metro Los Angeles, whose hospital is eight miles west of downtown, said: "There are just a scarce number of places in the community to assist our homeless." (LA Times, April 7, 2009)

Since last November, homelessness has increased in California while the state continued to reduce benefits and services to the poor. In May, A., a sixty year old African American woman, complained to her health care worker that she received $154 less on her monthly disability check - leaving her $436 a month. Her rent is $300. She began "working the streets" at age 12. Her godmother eventually took her in and she finished high school, married, had children and worked at a series of unskilled jobs. Then, eight years ago, her boy friend set her on fire in a fit of pique, leaving her unable to work.

"What was I supposed to do when a woman calls me at home and says she's his wife? He admits it and I tell him to leave and he gets mad, you know, and he drugged me and while I was passed out he poured lighter fluid on me and lit me. Now that shit will wake you up."

A. earns "bus money" by recycling. The burn scars show vividly on her arms and cover her torso. She spends her days going to crowded soup kitchens to scrounge enough food, and visits her new "boy friend" at a state supported rehab home where he is recovering from a stroke. "You can't have too much of a social life on $136 a month," she chuckles.

J., white and 36, begins the day by injecting herself with 2 grams of heroin "just to get well." She says she wants to go on methadone and stop using, but it never works out. It began 20 years ago, she recalls, when a pimp pretending to love her got her hooked and turned her out. Once on the habit she had to work to meet the cost of her daily intake, now $200. She earns this by giving blow jobs and shoplifting. "You steal a box of detergent, find a receipt on the sidewalk or in the trash to match the purchase price and the store refunds the money," she explains. "After several hours of this and a couple of blow jobs she makes enough to score," says a person who treats her at a free clinic.

Recently, J. met a bus driver who promised to pay her $12 a day in methadone fees. "He really likes me. He says he wants to go into business with me. You know, I could do graphic art." She repeats this pipe dream of a man who will "save me, take care of me, get me off dope."

The abscesses from 20 years of daily injecting have left her arms and legs a mass of cavernous scar tissue. She clings to the dream that someone will come along and save her. But she lacks the will to go to the methadone clinic by herself and rescue herself.

Nan, a former high school teacher, suffers from post-traumatic stress disorder. A female student assaulted her with a knife, but didn't actually cut her. The incident and subsequent mental and emotional problems caused her to quit teaching. She got disability payments and then got a job in a bakery. But she had problems relating to her boss and had to leave that position as well. Back on disability, she could not afford to pay the rent on her apartment. Last November, she became homeless and now lives in a secluded spot in the Oakland hills with her dog. She still has access to a social worker and some psychological help, but the budgets for these programs are being cut. She has no hope of getting a roof over her head, especially with her only friend, the dog. From teacher to homeless woman without a viable agenda!

The people who lost millions or hundreds of thousands speculating with Madoff have generated media attention, which they would not have done if they had lost their money in a Vegas casino. The truly poor remain marginal in all arenas of consciousness. We see them on downtown streets, begging, talking to themselves, sleeping, or just staring into space.

In 1997, my wife and I stopped our car on Nebraska Avenue in Northwest Washington DC. We were on our way out of town. A man in his thirties lay on the curb, moaning. "I fell. I couldn't walk any more," he told my wife, a nurse. We helped him sit up. He had just been discharged from DC General Hospital despite the fact that he suffered from acute pancreatitis. "I was a practicing lawyer and let the bottle get the better of me," he explained in the next few minutes. "So now I'm jobless, homeless, without my family and hospitals don't keep people for more than a day." We gave him $20 and hailed a cab and told the driver to take him to the homeless shelter.

Most of us do not want to admit the obvious: there but for the grace of God -- or State legislatures - go I. Responding to recession, people who feel absolutely assured by God's Grace, Members of State legislatures in almost half of the states have dramatically cut programs for the disabled and elderly and reduced public schools budgets as well. The states remain in the red to the tune of tens of billions.

In the 1960s, California built public colleges and universities, expanded state parks and made libraries more accessible. But the wealthy don't use public education, health or transportation and own parks on their estates.

Tax cuts - the mantra of the right wing - means less money for public services. It also means more homeless, jobless, and hopeless people.

Funny, how few Members of Congress even hesitate before voting $800 billion for a war system - excuse me, defense, that doesn't defend us - and hopeless far away wars. The wretched of our country, however, don't merit even much newspaper sympathy - compared to those swindled by the iniquitous Madoff.

Georgia, South Dakota banks bring failures to 55 in '09

Georgia, South Dakota banks bring failures to 55 in '09

Peach State sees tenth failure of 2009, South Dakota sees first since 1992

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Winder, Ga.-based First Piedmont Bank and Sioux Falls, S.D.-based BankFirst were closed by regulators Friday, bringing the number of U.S. bank failures in 2009 to 55 as the credit crisis continues to claim victims.

First Piedmont Bank the 10th to fail in Georgia this year. Athens, Ga.-based First American Bank and Trust Company has agreed to assume the failed bank's deposits, according to the Federal Deposit Insurance Corp.

First Piedmont had $115 million in assets and $109 million in deposits as of July 6, the FDIC said. Its failure should cost the deposit insurance fund $29 million.

BankFirst is the first South Dakota-based bank to fail since 1992, according to the FDIC.

Grand Forks, N.D.-based Alerus Financial, National Association has agreed to assume the failed bank's deposits.

BankFirst had $275 million in assets and $254 million in deposits as of April 30, the FDIC said.

The bank's failure will cost the deposit insurance fund $91 million.

City suspends payment of contracts

City suspends payment of contracts

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Running out of cash because of the state budget deadlock, the City of Philadelphia has stopped paying many of its bills until the impasse is resolved, City Finance Director Rob Dubow said this morning.

The city must temporarily withhold about $120 million in July and August to avoid running out of cash completely, Dubow said. Payments to contractors stopped Wednesday. Dubow, Budget Director Stephen Agostini and Treasurer Rebecca Rhynhart said that the city will pay its payroll, benefits, debt service and "emergency" contracts. The $4 million a month paid to foster parents, for instance, is considered an emergency, and other contracts will be considered on a case-by-case basis.

In a noon press conference, Mayor Nutter said the city would ask vendors to "understand where we are."

"We're asking them to work with us through this crisis," Nutter said.

The city is suffering for a number of reasons, all related to the state budget, city officials said.

First, the city anticipated receiving nearly $100 million in state payments in July and August that are frozen until a new budget passes. Second, the city is asking the legislature to approve a 1-cent increase in the sales tax, which would generate about $9 million a month, beginning Aug. 1. Third, the city had planned, as it does every year, to take out a $275 million, short-term "tax revenue anticipation note" or TRAN, which municipalities use to provide cash to cover expenses until their tax revenues are collected.

Without the expected state payments and sales tax revenues coming in, borrowing the $275 million would be prohibitively expensive, Dubow said.

“I have made repeated trips to Harrisburg over the last several weeks and I know that lawmakers are working hard to pass a fair and balanced budget,” Nutter said in a press release. “That said, the delay in the State budget process is severely impacting the City’s cash flow and we have no option but to take these difficult steps.”

Passage of the state budget would immediately solve part of the problem, though the city is also dependent on separate legislation to allow a sales-tax increase, and approvals to changes in the pension plan are needed before the city can borrow the $275 million with the TRAN, Dubow said.

Nutter said that "all new capital projects will be under stringent review."

"Over the next few days the City will review every capital project and will determine which can proceed in the absence of the passage of the State budget and the passage of legislation authorizing the City to raise the sales tax by 1% and make changes to its pension payments," Nutter's press release stated.

Even by suspending contract payments, the city cash on hand would dip to $111 million at the end of August. Agostini said anything under $150 million presents a potential problem for the city.

At a news conference outside his Harrisburg office, Rendell urged lawmakers to approve the 1-cent sales tax increase the city is asking for.

“It’s my hope that the state will do at least the one percent temporary increase in the Philadelphia sales tax. I stress temporary, and I think the citizens can believe the mayor when he says temporary," said Rendell who nevertheless predicted it won't happen until after the state budget is done.

Asked whether the city's predicament adds urgency to getting the state budget done, Rendell said: “I don’t think that can be the tail that wags the dog. I am concerned about it, just as I am concerned about our ability to meet our vendor bills. But look, this is so important to the state’s future…that we have got to get this right. As much as those short-term exigencies concern me, they can not be what motivates me.”

Safety questions over swine flu jab

Safety questions over swine flu jab

By Jeremy Laurance

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Vaccine will be rushed out before results of health checks are known

The first doses of swine flu vaccine will be given to the public before full data on its safety and effectiveness become available, doctors confirmed yesterday.

The aim is to provide maximum protection against the pandemic in the shortest possible time.

But, unlike seasonal flu vaccine, the pandemic version will be spread over two doses in a higher quantity, and one brand is expected to contain a chemical additive to make it go further, potentially increasing the risk of side-effects.

Children, who are most vulnerable to swine flu and are likely to be among those first in line for the jab, may get the vaccine more than a month before trial results are received.

Adam Finn, professor of paediatrics at the University of Bristol and an expert on vaccination who will be testing the pandemic vaccine, said: "There will be a period where a risk judgement will have to be made. It will depend if there is an increase in the number of cases and deaths. Children are potent spreaders [of the virus] – they are now seen as the engine of the epidemic. We are dealing with information as it comes in – we could be dealing with a far worse epidemic, and we need to act sooner rather than later."

Yesterday it emerged that a baby aged under six months died at the Royal Free Hospital, London, last week and a 39-year-old mother who was reported to have given birth died at Whipps Cross Hospital, east London, on Monday. The Department for Children, Schools and Families said 1,000 schools had been affected by swine flu and some could be forced to stay shut after the summer holiday if the number of cases escalates.

The pressure to protect the population from the growing pandemic, and the short time available for production and testing of the vaccine since the H1N1 virus was identified in May, mean the licensing process is to be accelerated.

A previous vaccine against swine flu turned out to be worse than the disease. An outbreak in the US in 1976 infected 200 soldiers at a military camp in New Jersey, of whom 12 were hospitalised and one died. But before it was over 40 million people had been vaccinated, 25 of whom died and 500 of whom developed Guillain-Barre syndrome, an inflammation of the nervous system which can cause paralysis and be fatal.

Doctors said yesterday that today's vaccines are purer and cause fewer side-effects. Though the virus is mostly mild in its effects, it has claimed 29 lives in the UK and hospitalised 652 people in England. The NHS was ordered this week to plan for a worst-case scenario in which swine flu might cause 65,000 deaths over the coming winter, including several thousand deaths among children.

Discussions are still going on between the manufacturers, the European Medicines Evaluation Agency (EMEA), and the Department of Health over how much data will be required.

The Government has placed advance orders for up to 132 million doses of vaccine with two manufacturers, GlaxoSmithKline and Baxter. The manufacturers have tested and licensed in advance three "core" vaccines in preparation for a pandemic. These are vehicles into which the H1N1 pandemic strain of the virus is inserted.

A spokesman for the EMEA said the first samples of the fully functional pandemic vaccine were expected by the end of July and a decision on whether to approve them would be taken within five days. Trials involving 200 to 400 patients would be conducted, but the vaccine would be made available for use by the NHS before the results came in.

"What the manufacturers will be submitting will not have any clinical trial data. We expect the interim adult data from September and the first paediatric data from October onwards," he said.

Last night a spokesperson from the Department of Health defended the EMEA, saying : "The UK has one of the most successful immunisation programmes in the world.

"Appropriate trials to assess safety and the immune responses have been carried out on vaccines very similar to the swine flu vaccine. The vaccines have been shown to have a good safety profile. More than 40,000 doses of the vaccines which the swine flu vaccines are based on have been given without any safety concerns."

Legal immunity set for swine flu vaccine makers

Legal immunity set for swine flu vaccine makers

By MIKE STOBBE

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The last time the government embarked on a major vaccine campaign against a new swine flu, thousands filed claims contending they suffered side effects from the shots. This time, the government has already taken steps to head that off.

Vaccine makers and federal officials will be immune from lawsuits that result from any new swine flu vaccine, under a document signed by Secretary of Health and Human Services Kathleen Sebelius, government health officials said Friday.

Since the 1980s, the government has protected vaccine makers against lawsuits over the use of childhood vaccines. Instead, a federal court handles claims and decides who will be paid from a special fund.

The document signed by Sebelius last month grants immunity to those making a swine flu vaccine, under the provisions of a 2006 law for public health emergencies. It allows for a compensation fund, if needed.

The government takes such steps to encourage drug companies to make vaccines, and it's worked. Federal officials have contracted with five manufacturers to make a swine flu vaccine. First identified in April, swine flu has so far caused about 263 deaths, according to numbers released by the Centers for Disease Control and Prevention on Friday.

The CDC said more than 40,000 Americans have had confirmed or probable cases, but those are people who sought health care. It's likely that more than 1 million Americans have been sickened by the flu, many with mild cases.

The virus hits younger people harder that seasonal flu, but so far hasn't been much more deadly than the strains seen every fall and winter. But health officials believe the virus could mutate to a more dangerous form, or at least contribute to a potentially heavier flu season than usual.

"We do expect there to be an increase in influenza this fall," with a bump in cases perhaps beginning earlier than normal, said Dr. Anne Schuchat, director of the CDC's National Center for Immunization and Respiratory Diseases.

On Friday, the Food and Drug Administration approved the regular winter flu vaccine, a final step before shipments to clinics and other vaccination sites could begin.

The last time the government faced a new swine flu virus was in 1976. Cases of swine flu in soldiers at Fort Dix, N.J., including one death, made health officials worried they might be facing a deadly pandemic like the one that killed millions around the world in 1918 and 1919.

Federal officials vaccinated 40 million Americans during a national campaign. A pandemic never materialized, but thousands who got the shots filed injury claims, saying they suffered a paralyzing condition called Guillain-Barre Syndrome or other side effects.

"The government paid out quite a bit of money," said Stephen Sugarman, a law professor who specializes in product liability at the University of California at Berkeley.

Vaccines aren't as profitable as other drugs for manufacturers, and without protection against lawsuits "they're saying, 'Do we need this?'" Sugarman said.

The move to protect makers of a swine flu didn't go over well with Paul Pennock, a prominent New York plaintiffs attorney on medical liability cases. The government will likely call on millions of Americans to get the vaccinations to prevent the disease from spreading, he noted.

"If you're going to ask people to do this for the common good, then let's make sure for the common good that these people will be taken care of if something goes wrong," Pennock said.

US Helped Chinese Interrogate Uighurs at Guantanamo

Uighur detainees: U.S. helped Chinese interrogate us

Grace Chung

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U.S. military personnel at Guantanamo Bay, Cuba, actively helped Chinese interrogators question members of China's Uighur minority, including physically restraining them so they could be photographed against their will, according to testimony presented Thursday to a congressional subcommittee.

The testimony is certain to add to the controversy over how the U.S. government has handled the Uighurs, who were turned over to U.S. troops in Afghanistan by bounty hunters who were paid $5,000 per captive.

Eventually, the Uighurs were cleared of any connection to terrorism and ordered released from Guantanamo. Nine have been freed; 13 more remain at the prison as officials scour the world for a country that will take them.

Human rights advocates have accused the U.S. of helping China gather information from the Uighurs for use against their friends and families back home, where tension between the predominantly Muslim Uighurs and the dominant Han Chinese frequently breaks into public protest and violence.

On Sunday, 192 people died and 1,600 people were injured in one of the largest ethnic clashes in years when Chinese riot police battled Uighur protesters in Urumqi, the capital of Xingjian province in northwest China.

China insists that the Uighurs held at Guantanamo are terrorists and has protested their release to other nations.

The written testimony presented Thursday to the House Foreign Affairs subcommittee on international organizations and human rights was the first detailed account from the Uighurs themselves about their treatment at Guantanamo.

Jay Alan Liotta, the director of the Pentagon's Office of Detainee Policy, defended the visits by the Chinese, which took place over a day and a half in September 2002. "It has been — and currently remains — long-standing department policy that visiting foreign officials must agree that they will abide by all DOD policies, rules, and procedures," he said.

He declined, however, to talk about the Uighurs' specific allegations.

Among the Uighurs' claims:

_ U.S. military personnel treated them harshly in the days before Chinese officials visited the Guantanamo Bay detention facility in an effort to soften them up for interrogation.

_ That harsh treatment included keeping the detainees awake, subjecting them to frigid temperatures, and keeping them isolated from one another and other prisoners. All of those techniques were approved for use on detainees by then-Defense Secretary Donald H. Rumsfeld.

_ U.S. soldiers followed Chinese officials' orders to restrain detainees they said weren't cooperating. One detainee testified that an American told him the harsh treatment he'd received after his interrogation had been at the direction of the Chinese.

"They attempted to take my picture; however, I did not agree to this," Ablikim Turahun wrote of his Chinese interrogators. "They called for American soldiers and ordered them to hold me, so that my picture could be taken. The soldiers grabbed me, pulling my beard, pressing on my throat, twisting my hands behind my back, and as a result my picture was taken by force."

Turahun said he was placed in isolation after the interrogations.

"The room was so very cold and dark," he wrote. "During the 20 days, it was very difficult to sleep, because I was not given any blankets or sheets by which to cover myself in this isolation room."

When he asked the guard commander why he'd been placed there, the commander replied that, it was "not his decision, but that of the Chinese delegation who had instructed that I should be put in isolation."

Two other detainees, Abu Bakker Qassim and Khalil Mamut, made similar allegations.

"I refused to be photographed. One Chinese interrogator went outside and brought in two American soldiers," Qassim wrote. "These two soldiers held me tight and the Chinese forcefully took a picture of me."

Mamut said two American soldiers placed him in shackles and chains for seven hours after his interrogation session. The next day, he was told by the Chinese that he was being punished for not cooperating with the interrogation.

"They informed me that they will take me back to China by force, and once I arrived I would be tortured, and beaten," he said.

A military panel at Guantanamo declared Qassim not an enemy combatant in March 2005, and he was released to Albania 14 months later. Mamut and Turahum also were cleared for release in 2005, but remained at Guantanamo until June 11, despite a federal court order for their release last year, and were given asylum in Bermuda.

An attorney for the Uighurs, Jason Pinney, called their interrogation by Chinese officials "their lowest point" at Guantanamo.

"All of this would not be possible without the support and cooperation of the United States," Pinney told the House Foreign Affairs oversight committee. "Military personnel went as far as forcibly holding up my clients' heads by the hair and beard so that the Chinese could take their picture."

The Uighurs said that the Chinese interrogations took place in September 2002, shortly after they arrived at Guantanamo. They were questioned for as long as nine hours without food or drink, they said.

During the interrogations, the Chinese threatened to take the Uighurs back to China, where the Chinese said the Uighurs would face harsh consequences.

Adel Adbdul Hakim, who now resides in Sweden, wrote that one interrogator told him that he was "lucky" to be in Guantanamo and that if he'd been in China, he'd be "finished."

The Uighurs also complained that information they'd given to Americans on the condition of confidentiality had been shared with the Chinese officials, who flaunted it during the interrogations.

"When some Uighur detainees refused to give their names, the Chinese interrogators said that Americans they trusted had already provided them with their photos, full names, and addresses," Qassim wrote. "They also showed the Uighurs the materials that were given by the Americans."

"When we were in Kandahar prison, we told the Americans that we would tell them everything if they would keep our materials confident. They promised not to give our materials to the Chinese, or hand us over to the Chinese."

During the hearing, subcommittee members angrily denounced the Pentagon's refusal to let them travel to Guantanamo to visit Uighurs still detained there, even after the Uighurs had agreed to meet with them.

"I reject any suggestion that the executive (branch) can define what constitutes the congressional oversight. It is not the prerogative of the executive to determine the role of the first branch of government," said Rep. Bill Delahunt, D-Mass., the subcommittee's chairman.

"Why do we have to keep secrets from the American people that our enemies obviously know about?" asked Rep. Dana Rohrabacher of California, the subcommittee's senior Republican.

The hearing was the third Delahunt has held on the Uighurs' detention.

Most of the men remain in Guantanamo because of Congress' refusal to admit former detainees into the U.S. So far, Bermuda has accepted four and Palau has publicly agreed to accept the remaining 13, but the agreement has yet to be finalized. Albania accepted five of the detainees in 2006.