Thursday, February 28, 2008
Wednesday, February 27, 2008
Low-Cost European Airlines by destinations
http://www.attitudetravel.com/lowcostairlines/europe/#map
Tuesday, February 26, 2008
Rising price Inflation Creates food riots in Middle East
Rising Inflation Creates Unease in Middle East
Bryan Denton for The New York Times
The cost of many basic foods, like at this market in Amman, has
doubled. Some in the middle class are tilting toward poverty.
By ROBERT F. WORTH
Published: February 25, 2008
AMMAN, Jordan — Even as it enriches Arab rulers, the recent oil-price boom is helping to fuel an extraordinary rise in the cost of food and other basic goods that is squeezing this region’s middle class and setting off strikes, demonstrations and occasional riots from Morocco to the Persian Gulf.
Bryan Denton for The New York Times
Many in Jordan are feeling the squeeze of higher prices. At a mall in Amman, the empty aisles reflect people’s inability to spend.
Here in Jordan, the cost of maintaining fuel subsidies amid the surge in prices forced the government to remove almost all the subsidies this month, sending the price of some fuels up 76 percent overnight. In a devastating domino effect, the cost of basic foods like eggs, potatoes and cucumbers doubled or more.
In Saudi Arabia, where inflation had been virtually zero for a decade, it recently reached an official level of 6.5 percent, though unofficial estimates put it much higher. Public protests and boycotts have followed, and 19 prominent clerics posted an unusual statement on the Internet in December warning of a crisis that would cause “theft, cheating, armed robbery and resentment between rich and poor.”
The inflation has many causes, from rising global demand for commodities to the monetary constraints of currencies pegged to the weakening American dollar. But one cause is the skyrocketing price of oil itself, which has quadrupled since 2002. It is helping push many ordinary people toward poverty even as it stimulates a new surge of economic growth in the gulf.
“Now we have to choose: we either eat or stay warm. We can’t do both,” said Abdul Rahman Abdul Raheem, who works at a clothing shop in a mall in Amman and once dreamed of sending his children to private school. “We’re not really middle class anymore; we’re at the poverty level.”
Some governments have tried to soften the impact of high prices by increasing wages or subsidies on foods. Jordan, for instance, has raised the wages of public-sector employees earning less than 300 dinars ($423) a month by 50 dinars ($70). For those earning more than 300 dinars, the raise was 45 dinars, or $64. But that compensates for only a fraction of the price increases, and most people who work in the private sector get no such relief.
The fact that the inflation is coinciding with new oil wealth has fed perceptions of corruption and economic injustice, some analysts say.
“About two-thirds of Jordanians now believe there is widespread corruption in the public and private sector,” said Mohammed al-Masri, the public opinion director at the Center for Strategic Studies at the University of Jordan. “The middle class is less and less able to afford what they used to, and more and more suspicious.”
In a few places the price increases have led to violence. In Yemen, prices for bread and other foods have nearly doubled in the past four months, setting off a string of demonstrations and riots in which at least a dozen people were killed. In Morocco, 34 people were sentenced to prison on Wednesday for participating in riots over food prices, the Moroccan state news service reported. Even tightly controlled Jordan has had nonviolent demonstrations and strikes.
Inflation was also a factor — often overlooked — in some recent clashes that were seen as political or sectarian. A confrontation in Beirut between Lebanese Army soldiers and a group of Shiite protesters that left seven people dead started with demonstrations over power cuts and rising bread prices.
In Bahrain and the United Arab Emirates, inflation is in the double digits, and foreign workers, who constitute a vast majority of the work force, have gone on strike in recent months because of the declining purchasing power of the money they send home. The workers are paid in currencies that are pegged to the dollar, and the value of their salaries — translated into Indian rupees and other currencies — has dropped significantly.
The Middle East’s heavy reliance on food imports has made it especially vulnerable to the global rise in commodity prices over the past year, said George T. Abed, the former governor of the Palestine Monetary Authority and a director at the Institute of International Finance, an organization based in Washington.
Corruption, inefficiency and monopolistic economies worsen the impact, as government officials or business owners artificially inflate prices or take a cut of such increases.
“For many basic products, we don’t have free market prices, we have monopoly prices,” said Samer Tawil, a former minister of national economy in Jordan. “Oil, cement, rice, meat, sugar: these are all imported almost exclusively by one importer each here. Corruption is one thing when it’s about building a road, but when it affects my food, that’s different.”
In the oil-producing gulf countries, governments that are flush with oil money can soften the blow by spending more. The United Arab Emirates increased the salaries of public sector employees by 70 percent this month; Oman raised them 43 percent. Saudi Arabia also raised wages and increased subsidies on some foods. Bahrain set up a $100 million fund to be distributed this year to people most affected by rising prices. But all this government spending has the unfortunate side effect of worsening inflation, economists say.
In Syria, where oil production is drying up, prices have also risen sharply. Although it has begun to liberalize its rigid socialist economy, the government has repeatedly put off plans to eliminate the subsidies that keep prices artificially low for its citizens, fearing domestic reprisals.
Even so, the inflation of the past few months has taken a toll on all but the rich.
Thou al-Fakar Hammad, an employee in the contracts office of the Syrian state oil company, has a law degree and earns just less than 15,000 Syrian pounds, or $293, a month, twice the average national wage. His salary was once more than adequate, and until recently he sent half of it to his parents.
But rising prices have changed all that, he said. Now he has taken a second job teaching Arabic on weekends to help support his wife and young child. Unable to buy a car, he takes public buses from his two-room apartment just outside Damascus to work. He can afford the better quality diapers for his son to wear only at night and resorts to cheaper ones during the day. He cannot send anything to his parents.
“I have to live day to day,” he said. “I can’t budget for everything because, should my child get sick, I’d spend a lot of what I earn on medication for him.”
At the same time, a new class of entrepreneurs, most of them with links to the government, has built gaudy mansions and helped transform Damascus, the Syrian capital, with glamorous new restaurants and cafes. That has helped fuel a perception of corruption and unfairness, analysts say. On Wednesday the state-owned newspaper Al Thawra published a poll that found that 450 of 452 Syrians believed that their state institutions were riddled with corruption.
“Many people believe that most of the government’s economic policies are adopted to suit the interests of the newly emerging Syrian aristocracy, while disregarding the interests of the poor and lower middle class,” said Marwan al-Kabalan, a political science professor at Damascus University.
The same attitudes are visible in Jordan. Even before the subsidies on fuel were removed this month, inflation had badly eroded the average family’s earning power over the past five years, said Mr. Tawil, the former economic minister. Although the official inflation rate for 2007 was 5.4 percent, government studies have shown that middle-income families are spending far more on food and consuming less, he added. Last year a survey by the Economist Intelligence Unit found that Amman was the most expensive Arab capital in cost of living.
Mr. Abdul Raheem, the clothing store employee in Amman, said, “No one can be in the government now and be clean.”
Meanwhile, his own life has been transformed, Mr. Abdul Raheem said. He ticked off a list of prices: potatoes have jumped to about 76 cents a pound from 32 cents. A carton of 30 eggs went to nearly $4.25 from just above $2; cucumbers rose to 58 cents a pound from about 22. All this in a matter of weeks.
“These were always the basics,” he said. “Now they’re luxuries.”
With a salary equivalent to $423 and rent at $176, paying for food and fuel exhausts his income, he said. “But we are much better off than others,” he added. “We are the average.”
Nawara Mahfoud contributed reporting from Damascus, Syria.
Bryan Denton for The New York Times
The cost of many basic foods, like at this market in Amman, has
doubled. Some in the middle class are tilting toward poverty.
By ROBERT F. WORTH
Published: February 25, 2008
AMMAN, Jordan — Even as it enriches Arab rulers, the recent oil-price boom is helping to fuel an extraordinary rise in the cost of food and other basic goods that is squeezing this region’s middle class and setting off strikes, demonstrations and occasional riots from Morocco to the Persian Gulf.
Bryan Denton for The New York Times
Many in Jordan are feeling the squeeze of higher prices. At a mall in Amman, the empty aisles reflect people’s inability to spend.
Here in Jordan, the cost of maintaining fuel subsidies amid the surge in prices forced the government to remove almost all the subsidies this month, sending the price of some fuels up 76 percent overnight. In a devastating domino effect, the cost of basic foods like eggs, potatoes and cucumbers doubled or more.
In Saudi Arabia, where inflation had been virtually zero for a decade, it recently reached an official level of 6.5 percent, though unofficial estimates put it much higher. Public protests and boycotts have followed, and 19 prominent clerics posted an unusual statement on the Internet in December warning of a crisis that would cause “theft, cheating, armed robbery and resentment between rich and poor.”
The inflation has many causes, from rising global demand for commodities to the monetary constraints of currencies pegged to the weakening American dollar. But one cause is the skyrocketing price of oil itself, which has quadrupled since 2002. It is helping push many ordinary people toward poverty even as it stimulates a new surge of economic growth in the gulf.
“Now we have to choose: we either eat or stay warm. We can’t do both,” said Abdul Rahman Abdul Raheem, who works at a clothing shop in a mall in Amman and once dreamed of sending his children to private school. “We’re not really middle class anymore; we’re at the poverty level.”
Some governments have tried to soften the impact of high prices by increasing wages or subsidies on foods. Jordan, for instance, has raised the wages of public-sector employees earning less than 300 dinars ($423) a month by 50 dinars ($70). For those earning more than 300 dinars, the raise was 45 dinars, or $64. But that compensates for only a fraction of the price increases, and most people who work in the private sector get no such relief.
The fact that the inflation is coinciding with new oil wealth has fed perceptions of corruption and economic injustice, some analysts say.
“About two-thirds of Jordanians now believe there is widespread corruption in the public and private sector,” said Mohammed al-Masri, the public opinion director at the Center for Strategic Studies at the University of Jordan. “The middle class is less and less able to afford what they used to, and more and more suspicious.”
In a few places the price increases have led to violence. In Yemen, prices for bread and other foods have nearly doubled in the past four months, setting off a string of demonstrations and riots in which at least a dozen people were killed. In Morocco, 34 people were sentenced to prison on Wednesday for participating in riots over food prices, the Moroccan state news service reported. Even tightly controlled Jordan has had nonviolent demonstrations and strikes.
Inflation was also a factor — often overlooked — in some recent clashes that were seen as political or sectarian. A confrontation in Beirut between Lebanese Army soldiers and a group of Shiite protesters that left seven people dead started with demonstrations over power cuts and rising bread prices.
In Bahrain and the United Arab Emirates, inflation is in the double digits, and foreign workers, who constitute a vast majority of the work force, have gone on strike in recent months because of the declining purchasing power of the money they send home. The workers are paid in currencies that are pegged to the dollar, and the value of their salaries — translated into Indian rupees and other currencies — has dropped significantly.
The Middle East’s heavy reliance on food imports has made it especially vulnerable to the global rise in commodity prices over the past year, said George T. Abed, the former governor of the Palestine Monetary Authority and a director at the Institute of International Finance, an organization based in Washington.
Corruption, inefficiency and monopolistic economies worsen the impact, as government officials or business owners artificially inflate prices or take a cut of such increases.
“For many basic products, we don’t have free market prices, we have monopoly prices,” said Samer Tawil, a former minister of national economy in Jordan. “Oil, cement, rice, meat, sugar: these are all imported almost exclusively by one importer each here. Corruption is one thing when it’s about building a road, but when it affects my food, that’s different.”
In the oil-producing gulf countries, governments that are flush with oil money can soften the blow by spending more. The United Arab Emirates increased the salaries of public sector employees by 70 percent this month; Oman raised them 43 percent. Saudi Arabia also raised wages and increased subsidies on some foods. Bahrain set up a $100 million fund to be distributed this year to people most affected by rising prices. But all this government spending has the unfortunate side effect of worsening inflation, economists say.
In Syria, where oil production is drying up, prices have also risen sharply. Although it has begun to liberalize its rigid socialist economy, the government has repeatedly put off plans to eliminate the subsidies that keep prices artificially low for its citizens, fearing domestic reprisals.
Even so, the inflation of the past few months has taken a toll on all but the rich.
Thou al-Fakar Hammad, an employee in the contracts office of the Syrian state oil company, has a law degree and earns just less than 15,000 Syrian pounds, or $293, a month, twice the average national wage. His salary was once more than adequate, and until recently he sent half of it to his parents.
But rising prices have changed all that, he said. Now he has taken a second job teaching Arabic on weekends to help support his wife and young child. Unable to buy a car, he takes public buses from his two-room apartment just outside Damascus to work. He can afford the better quality diapers for his son to wear only at night and resorts to cheaper ones during the day. He cannot send anything to his parents.
“I have to live day to day,” he said. “I can’t budget for everything because, should my child get sick, I’d spend a lot of what I earn on medication for him.”
At the same time, a new class of entrepreneurs, most of them with links to the government, has built gaudy mansions and helped transform Damascus, the Syrian capital, with glamorous new restaurants and cafes. That has helped fuel a perception of corruption and unfairness, analysts say. On Wednesday the state-owned newspaper Al Thawra published a poll that found that 450 of 452 Syrians believed that their state institutions were riddled with corruption.
“Many people believe that most of the government’s economic policies are adopted to suit the interests of the newly emerging Syrian aristocracy, while disregarding the interests of the poor and lower middle class,” said Marwan al-Kabalan, a political science professor at Damascus University.
The same attitudes are visible in Jordan. Even before the subsidies on fuel were removed this month, inflation had badly eroded the average family’s earning power over the past five years, said Mr. Tawil, the former economic minister. Although the official inflation rate for 2007 was 5.4 percent, government studies have shown that middle-income families are spending far more on food and consuming less, he added. Last year a survey by the Economist Intelligence Unit found that Amman was the most expensive Arab capital in cost of living.
Mr. Abdul Raheem, the clothing store employee in Amman, said, “No one can be in the government now and be clean.”
Meanwhile, his own life has been transformed, Mr. Abdul Raheem said. He ticked off a list of prices: potatoes have jumped to about 76 cents a pound from 32 cents. A carton of 30 eggs went to nearly $4.25 from just above $2; cucumbers rose to 58 cents a pound from about 22. All this in a matter of weeks.
“These were always the basics,” he said. “Now they’re luxuries.”
With a salary equivalent to $423 and rent at $176, paying for food and fuel exhausts his income, he said. “But we are much better off than others,” he added. “We are the average.”
Nawara Mahfoud contributed reporting from Damascus, Syria.
Debt Slavery: What The USA Bankruptcy Bill Could Do To You
Published on Thursday, March 31, 2005 by the BlackCommentator.com
Debt Slavery: What The Bankruptcy Bill Could Do To You
by David Swanson
The U.S. Senate has passed a dream bill for credit card and financial service companies that, if passed by the House, will land millions of American families in debt slavery. Rather than being able to file for Chapter 7 bankruptcy and make a difficult new start, families and individuals will be placed on long-term payment plans to credit card companies, companies that will take their houses, their cars, their child-support payments, and their paychecks.
If you think you're unlikely to land yourself a share-cropping position in this new feudal system, ask yourself if you can be sure that no one in your family will get sick, be injured, die, lose a job, or get divorced. More than one in every 100 adults in America files for bankruptcy each year. If you're a child, the chances of your family filing for bankruptcy are about twice that. (Kids cost money.) These rates have doubled in the past decade. The basic reason that bankruptcies have increased is that personal debt has increased. In fact, in proportion to debt, bankruptcies are actually down.
About 50 percent of all families who are forced to file for bankruptcy do so as the result of medical expenses. And three quarters of those have health insurance. Another 40 percent have suffered a death in the family, lost their job, or gotten divorced, or suffered some combination of these factors and medical costs. Almost everyone who files for bankruptcy does so as a last resort. Sixty-one percent of those who do so have gone without medical care that they needed but could not afford. Fifty percent have failed to get prescriptions filled. A third have had their utilities shut off. Twenty-one percent have gone without food. Seven percent have moved their elderly parents to cheaper care facilities.
The satirical magazine, The Onion, posted fictional comments on the bankruptcy bill from people in the street, one of which said "Well, there goes my foolproof get-bankrupt-quick scheme!" Only in the mind of a comic or a Republican do people try to go bankrupt. But some Democrats (see below) seem not to be grasping this concept either.
After filing for Chapter 7 bankruptcy, you're required to liquidate some assets and pay off what you can. But you are then able to write off the rest of your debt and start over, albeit with a credit record that will make it harder to borrow and sometimes harder to find work. Under the current system, if a judge finds that you have significant assets or income, you can be denied Chapter 7 and be required to enter into Chapter 13 bankruptcy, in which you pay off your debt over a number of years. This current "means test" is conducted by a judge who is able to look at actual income and expenses, as well as to distinguish between someone whose child has diabetes and someone who's been going on reckless shopping sprees.
The bill that is coming up for a vote in the House would create a new means test that would forbid making any such distinctions. It would even forbid comparing what someone actually earns with what they actually have to pay for rent and basic expenses. A court would be forced to use standard government figures for expenses, regardless of what you're actually having to pay. It would base your income on your last six months of income, even if you just got laid off. If your income is below the median, it would spare you the means test but require that you purchase credit counseling, even if you have no money to pay for it and it isn't offered anywhere near your home. It would also require significant new legal expenses and paperwork.
But wait, there’s more
The problems with this bill could fill an encyclopedia. In fact, the thing is 500 pages of convoluted changes to current law. But, before looking at a few of the details, let's stop and think about the basic idea.
Credit card companies, like most lenders, charge interest rates based on the risk they see of each borrower failing to pay back the loan. Some people pay 9 percent on their credit card and others pay 29 percent. The higher rate is supposed to cover the losses the lender will suffer when some of the riskier borrowers default. This system has been bringing in massive record profits for the credit card companies: $30 billion last year.
"Here's what's so strange," writes Corinne Cooper, a retired law professor in Arizona, "The credit card companies collect this risk premium, year in and year out. But when the risk actually happens and the borrower cannot pay, the lenders want the Federal government to intervene to force the debtor to pay, by passing a law prohibiting them from filing bankruptcy and discharging the debts. It's as if a life insurance company took premium payments for years and then asked the government to pass a law prohibiting death! Bankruptcy is credit death, and if this bill passes, the courts will be clogged with credit 'zombies' – consumers who can never pay back their debt, and never get rid of it. Why, then, shouldn't the debtor be able to recover all that extra interest paid to cover risk?"
So, here we have an extremely profitable industry and a legal system that's basically working. And yet, as with Social Security, a corporate lobby group and their servants in Congress have tried to manufacture a "crisis." In this case, the imaginary crisis is fraud in bankruptcies. As with Social Security, there's a grain of truth that can be found if you dig for it, but the largest problems are being entirely ignored, as are real unrelated crises (such as health care, war, trade, wages, pensions, voting rights, the deficit, etc.). Estimates of cases of abuse of bankruptcy law range from 3 to 10 percent. The non-partisan American Bankruptcy Institute estimates that at most 3 percent of filers – and almost certainly less – are able to discharge debts they could actually pay. But few analysts see this bill (HR 685) as a useful way to go after those abuses. Several have referred to it with such metaphors as "shooting a gnat with an elephant gun."
In fact, an elephant gun would have been useful if someone had known which way to aim it. Corporations have a very easy time filing bankruptcy. CEOs are able to squirrel away fortunes while canceling employees' pensions. Millionaires can file for bankruptcy and keep unlimited amounts of money out of reach in "asset protection trusts" as well as in super-expensive houses. The press secretary for the bill's primary sponsor, Senator Charles Grassley, told the New York Times that "the senator's staff was unaware of the trusts and the loophole for the wealthy that they represented." Uh-huh.
These loopholes need not be exploited offshore, as in the olden days. There are a number of states that allow them, regardless of whether the robber baron lives in the state. But the legal costs of setting up "asset protection trusts" place them beyond the reach of most people. Oh, and corporations are allowed to shop for friendly judges from state to state, a right that Congress recently took away from the victims of corporate practices who try to file class action suits. The current bankruptcy bill leaves these millionaires' loopholes in place, although it requires that pirates of industry have purchased their mansions three and a third years prior to bankruptcy if they intend to keep them through the homestead exemption.
To watch a spokesperson for this abomination of a bill get taken down by a knowledgeable opponent on CNN, click here.
In this interchange, George Mason University's Todd Zywicki is no match for Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard University. These two also testified to the Senate Judiciary Committee, which found Zywicki more convincing. You'll notice, though, that he argues that there is massive fraud without providing any evidence, and at the end is reduced to claiming that it is 10 percent. He starts out trying to use as evidence of fraud simply the fact that bankruptcies are up, combined with a bizarre claim that we're living through an age of widespread prosperity. Excuse me? He points to the stock market as a sign of prosperity, apparently unaware of how many people own little or no stock. Then he points to housing prices having shot through the roof. Zywicki also cites low interest rates. I don't know about you, but my paycheck stretches farther with low interest rates. Sometimes I just pay half the tab at the grocery store. "It's OK," I tell them, "interest rates are low!" Zywicki also mentions low unemployment, which would be relevant if it were true.
The hypocrisy
The Republicans (and the corporate Democrats) have outdone their usual level of hypocrisy this time. This bankruptcy bill would make it very difficult for a family like Terri Schiavo's to ever get out of debt. It would deny bankruptcy protection to the families of soldiers killed in Iraq or sent to Iraq and away from their jobs and incomes. It would make it very difficult for small business owners who take risks and fail to start over. And it would impose on individuals a standard of fiscal responsibility to which the White House and Congress, not to mention the credit card companies, do not even pretend.
Columnist Robert Scheer notes that Grassley, the bill's sponsor in the Senate, in another bit of hypocrisy "actively opposes abortion and same-sex marriage on biblical grounds yet believes the Good Book's clear definition and condemnation of usury is irrelevant. The Old Testament, revered by Jews, Muslims and Christians alike, mandates debt forgiveness after seven years, as was pointed out earlier this month by an organization of Christian lawyers in a letter to Grassley. 'I can't listen to Christian lawyers,' said the senator, 'because I would be imposing the Bible on a diverse population.'"
This would be funny if this bill were going to be easily defeated. It can be defeated in the House if we put our minds to it, and – if need be – put our bodies on the line for it in nonviolent civil disobedience. But this fight won't be easy. Corporate America has been pushing this bill for eight years. It passed both houses of Congress once before and then was vetoed by President Clinton. Two years ago, it passed the Senate, but the House voted it down because the Senate had attached an amendment that would have prevented violent anti-abortion demonstrators from avoiding paying damages to clinics. This time around, the Senate and the Senate Judiciary Committee voted down that amendment and numerous other amendments aimed at making this bill less than utterly disgusting.
These included amendments to:
– close off the trusts loophole for millionaires,
– limit the homestead exemption,
– create a minimum homestead exemption to save the homes of the elderly,
– protect employees and retirees from corporate practices that deprive them of their earnings and retirement savings when a business files for bankruptcy,
– discourage predatory lending practices,
– exempt debtors from means testing if their financial problems were caused by identity theft,
– limit the amount of interest that can be charged on any extension of credit to 30 percent,
– preserve existing bankruptcy protections for individuals experiencing economic distress as caregivers to ill or disabled family members,
– exempt debtors whose financial problems were caused by serious medical problems from means testing,
– provide protection for medical debt homeowners,
– require enhanced disclosure to consumers regarding the consequences of making only minimum required payments in the repayment of credit card debt, and for other purposes,
– protect service members and veterans from means testing in bankruptcy, to disallow certain claims by lenders charging usurious interest rates to service members, and to allow service members to exempt property based on the law of the State of their premilitary residence.
Each of these amendments was proposed by a Democrat, and each was voted down by the Republican majority.
Similar amendments were voted down in the House Judiciary Committee on March 16, including:
– An amendment by John Conyers (D-MI) protecting military personnel from predatory payday lenders,
– An amendment by Mel Watt (D-NC) exempting tuition costs from the expense calculation in the means test
– An amendment by Adam Schiff (D-CA) protecting people whose bankruptcy is due to identity theft
– An amendment by Howard Berman (D-CA) protecting bankruptcy filers who file due to medical crises
– An amendment by Jerry Nadler (D-NY) which would make debts arising from civil rights violations non-dischargable in bankruptcy.
The Democrats
The greatest hypocrisy on this bill may come from the Democrats, who often speak as if they are the party of working people. Some Democratic senators spoke against the bill and then voted for it. One of them, Senator Joe Lieberman, spoke for it and against it, voted for cloture (cutting off debate and moving the bill toward passage) and then voted against the bill. Another, Senator Hillary Clinton, did not vote for or against the bill. Nineteen Democratic Senators voted for the bill, while 24 voted against it. These are the 19 who chose to side with the credit card companies:
Sen. Joe Biden (D-Delaware)
Sen. Tom Carper (D-Delaware)
Sen. Ben Nelson (D-Nebraska)
Sen. Tim Johnson (D-South Dakota)
Sen. Max Baucus (D-Montana)
Sen. Evan Bayh (D-Indiana)
Sen. Jeff Bingaman (D-New Mexico)
Sen. Robert Byrd (D-West Virginia)
Sen. Kent Conrad (D-North Dakota)
Sen. Dan Inouye (D-Hawaii)
Sen. Jim Jeffords (I-Vermont)
Sen. Herb Kohl (D-Wisconsin)
Sen. Mary Landrieu (D-Louisiana)
Sen. Blanche Lincoln (D-Arkansas)
Sen. Bill Nelson (D-Florida)
Sen. Mark Pryor (D-Arkansas)
Sen. Harry Reid (D-Nevada)
Sen. Ken Salazar (D-Colorado)
Sen. Debbie Stabenow (D-Michigan)
The Senate Democrats have stood strong and begun to win over moderate Republicans on Social Security. They have blocked judicial appointments. They are not powerless. They chose to let the bankruptcy bill pass.
House Democrats are showing glaring signs of weakness, and many of them will back this bill if they don't feel pressure from their constituents to oppose it. The House Judiciary Committee passed the bill, 22-13, with one Democrat, Rep. Rick Boucher of Virginia, joining the majority Republicans to support the legislation.
These 20 House Democrats wrote a letter to Speaker Dennis Hastert supporting the bankruptcy bill. The ones with an asterisk have also signed on as co-sponsors of the bill. The first three on the list are members of the Congressional Black Caucus:
Rep. Harold E. Ford, Jr. (D-TN) Rep. Artur Davis (D-AL) Rep. Gregory W. Meeks (D-NY) Rep. Ellen O. Tauscher (D-CA) Rep. John Larson (D-CT) Rep. Jim Davis (D-FL) * Rep. Ed Case (D-HI) * Rep. Melissa Bean (D-IL) Rep. Dennis Moore (D-KS) Rep. Mike McIntyre (D-NC) Rep. Shelley Berkley (D-NV) Rep. Steve J. Israel (D-NY) Rep. Carolyn McCarthy (D-NY) Rep. Joseph Crowley (D-NY) * Rep. David Wu (D-OR) Rep. Darlene Hooley (D-OR) * Rep. Stephanie Herseth (D-SD) Rep. Jay Inslee (D-WA) Rep. Adam Smith (D-WA) * Rep. Ron Kind (D-WI)
The following Democratic Congress Members did not sign the letter to Hastert but have signed on as co-sponsors of the bill:
Rep. Robert E. Andrews (D-NJ) Rep. Rick Boucher (D-VA)
As noted above, Boucher also voted for the bill in the Judiciary Committee.
The first obvious explanation for the Democrats' behavior is campaign contributions. And this explanation has even penetrated the corporate media. The New York Times wrote:
"The main lobbying forces for the bill – a coalition that included Visa, MasterCard, the American Bankers Association, MBNA America, Capital One, Citicorp, the Ford Motor Credit Company and the General Motors Acceptance Corporation – spent more than $40 million in political fund-raising efforts and many millions more on lobbying efforts since 1989."
To phone, fax, or Email these and other Congress Members to tell them how you feel, go to DebtSlavery.org.
At this link you'll find various analyses of the money trail.
The Senators who voted yes received more on average from credit card and financial services companies than did those who voted no. Democrats who voted yes received the most. But, at the same time, some of the Senators and Congress Members supporting the bill have received more money from labor than from credit card and financial services companies. So, why the betrayal of workers?
One reason may be that this bill has been the single top agenda item for these companies for years. They've given money specifically for this for years. They wrote the bill and endlessly lobbied for it. The benefits they offer are not merely contributions. In the case of Congressman Jim Moran (D., Va.), MBNA bailed him out of debt with a sweetheart loan in order to win his support for denying others any hope. These companies also offer the possibility of connections to others with wealth, the possibility of well-paid careers after Congress, of the use of company jets, and so forth. And it's not just the financial companies that support this bill. Any corporation that realizes it could someday go the way of Enron, or even K-mart, favors this bill. The US Chamber of Commerce has lobbied for this bill.
In contrast, this issue has not been at the top of the agenda for grassroots advocacy groups, for labor, for civil rights groups. It's been on the agenda, but not near the top. Debtslavery.org is working to change that in the next days or weeks, to build pressure on Congress Members, Democratic and Republican alike, to oppose this bill.
"Why did we lose so many votes on cloture on such an awful, venal piece of legislation?" a House Democratic staffer asked rhetorically on DailyKos.
"It's really a structural matter in terms of who Democrats end up soliciting for campaign donations. Most Dems have a pretty solid labor-environmental-trial lawyer base that they then try to build out from to amass a large enough war chest to scare off challengers.
"Groups that lack steady conflict with the labor-enviro-lawyer triumvirate offer the most attractive targets. That's why Dems end up cozied up to the technology and financial services industry – few labor issues since they're mostly not unionized/union organizer's targets, few environmental issues b/c they don't pump soot into the air, and relatively less contact with the trial lobby.
"Since campaign contributions play a significant role and Dems have demonstrably fewer targets, especially on K Street, many Dems end up VERY close to the industries that pushed hardest for the bill – namely the American Banker's Association and the credit card companies....
"If we take any lesson from the bankruptcy bill and Bush's slavish support of corporate interest groups, it's that we as progressives need to find a way to think of ways to give consumers' issues teeth. Then maybe bills like this won't even make it to the floor. If there's no penalty for voting for a pro-Chamber bill, Dems have an easier time peeling off and supporting bad legislation. If you need proof, just watch how many House members vote yes on the bill when it comes up. I bet it's at least 320+."
The Democrats also organize into New Democrats and Blue Dog Democrats to build strength as the Republican Wing of the Democratic Party. After David Sirota, a fellow at the Center for American Progress (CAP), sent out an Email accusing 16 of the 20 House Democrats who had written to Hastert of doing so because of money they'd received from credit card and financial services companies, CAP President John Podesta, in the words of The Hill newspaper, "faced pointed questions from lawmakers at [a] New Democrat Coalition (NDC) meeting.... Nearly every lawmaker who arrived ... voiced concern about the Sirota broadside, calling it overtly personal and unhelpful to the two organizations' shared goal of helping the Democratic Party grow.... Some participants said they were looking for more contrition than they received from Podesta and wanted assurances that his organization would abstain from attacking centrist Democrats for their pro-business stances."
Congressional Black Caucus Member Artur Davis (D-Ala.), had this to say:
"The unfortunate thing about the Email is that it questioned the good faith of the Democrats who support the bankruptcy bill. Whenever you question the good faith, that's problematic. But I certainly don't blame John for that e-mail. I don't think it was authorized."
The media
It's also possible that some senators believed no one was watching when they voted for the Debt Slavery Bill of 2005. The media coverage has been nowhere near that of the Social Security "crisis," much less Terri Schiavo. There's been very little on the airwaves, and only relatively more in print. But the media has not done nearly as bad a job on this as it's done on a long list of other issues. Numerous opinion pieces have denounced this bill with unbridled fury at the cruelty and arrogance it embodies. And some of the news articles have been fairly decent as well. One gets the impression that what 19 Democratic Senators were able to stomach, some editors and journalists are unable to.
Of course, what coverage there has been has been limited by the media's childish understanding of "balance," as exhibited in the video clip above. Print articles, similarly, present two views from two sources (never one or three), without including information of which of the claims made have evidence behind them. Of course, some pieces of information that are considered neutral, such as the increase in bankruptcy filings, are presented directly by the journalist as factual, but the cause of that increase and other contested points are off-limits for actual reporting because they are contested. While the New York Times and the Washington Post and others have produced some good and lengthy articles, often these articles are framed with poor headlines and leads that obscure the important information. Short, one-paragraph stories on this issue have been, as usual, more misleading than the longer ones. And why have there been no opinion polls? But in every aspect, the media has out-performed its usual miserable standard.
The media has, in a move that is always damaging to democracy, reported too heavily on the horse race, predicting a near certain passage of the bill, predicting a last-minute surge in filings before it's enacted, and praising the Republicans for being winners, even when acknowledging that their bill will hurt millions of people. Here's how Newsweek summed things up:
"GOPs + New bankruptcy bill is latest victory for No Big Business Left Behind. Bonus: Deadbeat millionaires keep their loot.
"Dems – The "party of the people" can't even protect cancer victims overwhelmed by bills. Talk about bankrupt."
Not just ordinary readers, but Democratic Party strategists will look at something like that and decide that the solution is to move even closer to the Republicans, because they are winners.
Here's a typically misleading lead to an article from Newhouse News Service:
"The bankruptcy bill speeding through Congress has triggered a debate over who goes bankrupt in the United States and whose fault it is.
"Lenders say that for some, bankruptcy is not a last resort but rather an easy way out of debt. The bill, they say, would crack down on abuse and force individuals to take more personal responsibility. But its critics say that bankruptcies typically are caused by emergencies, such as medical crises or layoffs. [But who has evidence to support their claims? And what exactly was journalism school for?]
"One thing is certain: As consumer indebtedness has skyrocketed, so have bankruptcy filings. A review of data from the Federal Reserve, U.S. Bankruptcy Courts and the Census Bureau found that credit card debt and bankruptcy filings have increased nearly in lockstep since 1980."
Here's an excerpt from the San Antonio Express News that builds on a myth that credit card companies would lower their rates on the rest of us if some of their customers weren't sneaking out of their debt:
"In a statement explaining why changes are needed, Sen. Chuck Grassley, R-Iowa, said bankruptcy 'was not intended to be a convenient financial planning tool where deadbeats can get out of paying their debt scot-free while honest Americans who play by the rules have to foot the bill.'"
While those comments went uncritically reported in the media, other voices were heard in the progressive and "mainstream" media. WashingtonPost.com has done a good and more honest job of presenting information originally reported in the print version of the paper.
The editor of Fortune Magazine, Andy Serwer, has done even better. He wrote:
"As for the bankruptcy bill, too many Americans have been copying big business – and they shouldn't be allowed to do that. Folks just don't understand that companies that declare bankruptcy – like US Air, Winn-Dixie, and Kmart – are living, breathing entities. And a bankrupt company like, say, Interstate Bakeries (they make Ho Hos and Ding Dongs) is more important than any one citizen, regardless of whether or not he or she makes Ding Dongs for a living. You follow? Another problem is that personal bankruptcies were cleaning out the credit card industry. According to CardWeb.com, profits in the card biz grew from $ 12.9 billion in 1995 to $ 31.6 billion last year. That's only a 144% increase in a decade, which is a scandal. Earnings should have been up at least 300%!
"I guess what I'm suggesting is a return to the Gilded Age, when it was ‘anything goes’ and everything did. The way we're stifling wages, ending personal bankruptcies, and blocking lawsuits, soon even corpulent guys in top hats may be coming back into style."
Even the New Republic's Noam Scheiber suffered an outbreak of populism, writing:
"[S]upport for the bill by Democratic moderates betrays a striking obliviousness to the most important debate underway within the Democratic Party. Moderate Democrats have been under assault from grassroots liberals lately for selling out Democratic values in their rush to appease conservative interests. I normally think this criticism is highly misplaced, and that moderates have exactly the right instincts when it comes to social issues and foreign policy, even most economic issues. But in this case the moderates proved the liberals' point for them, which could set back the cause of moderates within the party for months, if not years. It really is a colossal, inexcusable mistake."
All I can say is, let's hope so!
Taking action
To learn more, to contact your Congress Member, and to find out what else you can do, visit http://www.debtslavery.org.
Debt Slavery: What The Bankruptcy Bill Could Do To You
by David Swanson
The U.S. Senate has passed a dream bill for credit card and financial service companies that, if passed by the House, will land millions of American families in debt slavery. Rather than being able to file for Chapter 7 bankruptcy and make a difficult new start, families and individuals will be placed on long-term payment plans to credit card companies, companies that will take their houses, their cars, their child-support payments, and their paychecks.
If you think you're unlikely to land yourself a share-cropping position in this new feudal system, ask yourself if you can be sure that no one in your family will get sick, be injured, die, lose a job, or get divorced. More than one in every 100 adults in America files for bankruptcy each year. If you're a child, the chances of your family filing for bankruptcy are about twice that. (Kids cost money.) These rates have doubled in the past decade. The basic reason that bankruptcies have increased is that personal debt has increased. In fact, in proportion to debt, bankruptcies are actually down.
About 50 percent of all families who are forced to file for bankruptcy do so as the result of medical expenses. And three quarters of those have health insurance. Another 40 percent have suffered a death in the family, lost their job, or gotten divorced, or suffered some combination of these factors and medical costs. Almost everyone who files for bankruptcy does so as a last resort. Sixty-one percent of those who do so have gone without medical care that they needed but could not afford. Fifty percent have failed to get prescriptions filled. A third have had their utilities shut off. Twenty-one percent have gone without food. Seven percent have moved their elderly parents to cheaper care facilities.
The satirical magazine, The Onion, posted fictional comments on the bankruptcy bill from people in the street, one of which said "Well, there goes my foolproof get-bankrupt-quick scheme!" Only in the mind of a comic or a Republican do people try to go bankrupt. But some Democrats (see below) seem not to be grasping this concept either.
After filing for Chapter 7 bankruptcy, you're required to liquidate some assets and pay off what you can. But you are then able to write off the rest of your debt and start over, albeit with a credit record that will make it harder to borrow and sometimes harder to find work. Under the current system, if a judge finds that you have significant assets or income, you can be denied Chapter 7 and be required to enter into Chapter 13 bankruptcy, in which you pay off your debt over a number of years. This current "means test" is conducted by a judge who is able to look at actual income and expenses, as well as to distinguish between someone whose child has diabetes and someone who's been going on reckless shopping sprees.
The bill that is coming up for a vote in the House would create a new means test that would forbid making any such distinctions. It would even forbid comparing what someone actually earns with what they actually have to pay for rent and basic expenses. A court would be forced to use standard government figures for expenses, regardless of what you're actually having to pay. It would base your income on your last six months of income, even if you just got laid off. If your income is below the median, it would spare you the means test but require that you purchase credit counseling, even if you have no money to pay for it and it isn't offered anywhere near your home. It would also require significant new legal expenses and paperwork.
But wait, there’s more
The problems with this bill could fill an encyclopedia. In fact, the thing is 500 pages of convoluted changes to current law. But, before looking at a few of the details, let's stop and think about the basic idea.
Credit card companies, like most lenders, charge interest rates based on the risk they see of each borrower failing to pay back the loan. Some people pay 9 percent on their credit card and others pay 29 percent. The higher rate is supposed to cover the losses the lender will suffer when some of the riskier borrowers default. This system has been bringing in massive record profits for the credit card companies: $30 billion last year.
"Here's what's so strange," writes Corinne Cooper, a retired law professor in Arizona, "The credit card companies collect this risk premium, year in and year out. But when the risk actually happens and the borrower cannot pay, the lenders want the Federal government to intervene to force the debtor to pay, by passing a law prohibiting them from filing bankruptcy and discharging the debts. It's as if a life insurance company took premium payments for years and then asked the government to pass a law prohibiting death! Bankruptcy is credit death, and if this bill passes, the courts will be clogged with credit 'zombies' – consumers who can never pay back their debt, and never get rid of it. Why, then, shouldn't the debtor be able to recover all that extra interest paid to cover risk?"
So, here we have an extremely profitable industry and a legal system that's basically working. And yet, as with Social Security, a corporate lobby group and their servants in Congress have tried to manufacture a "crisis." In this case, the imaginary crisis is fraud in bankruptcies. As with Social Security, there's a grain of truth that can be found if you dig for it, but the largest problems are being entirely ignored, as are real unrelated crises (such as health care, war, trade, wages, pensions, voting rights, the deficit, etc.). Estimates of cases of abuse of bankruptcy law range from 3 to 10 percent. The non-partisan American Bankruptcy Institute estimates that at most 3 percent of filers – and almost certainly less – are able to discharge debts they could actually pay. But few analysts see this bill (HR 685) as a useful way to go after those abuses. Several have referred to it with such metaphors as "shooting a gnat with an elephant gun."
In fact, an elephant gun would have been useful if someone had known which way to aim it. Corporations have a very easy time filing bankruptcy. CEOs are able to squirrel away fortunes while canceling employees' pensions. Millionaires can file for bankruptcy and keep unlimited amounts of money out of reach in "asset protection trusts" as well as in super-expensive houses. The press secretary for the bill's primary sponsor, Senator Charles Grassley, told the New York Times that "the senator's staff was unaware of the trusts and the loophole for the wealthy that they represented." Uh-huh.
These loopholes need not be exploited offshore, as in the olden days. There are a number of states that allow them, regardless of whether the robber baron lives in the state. But the legal costs of setting up "asset protection trusts" place them beyond the reach of most people. Oh, and corporations are allowed to shop for friendly judges from state to state, a right that Congress recently took away from the victims of corporate practices who try to file class action suits. The current bankruptcy bill leaves these millionaires' loopholes in place, although it requires that pirates of industry have purchased their mansions three and a third years prior to bankruptcy if they intend to keep them through the homestead exemption.
To watch a spokesperson for this abomination of a bill get taken down by a knowledgeable opponent on CNN, click here.
In this interchange, George Mason University's Todd Zywicki is no match for Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard University. These two also testified to the Senate Judiciary Committee, which found Zywicki more convincing. You'll notice, though, that he argues that there is massive fraud without providing any evidence, and at the end is reduced to claiming that it is 10 percent. He starts out trying to use as evidence of fraud simply the fact that bankruptcies are up, combined with a bizarre claim that we're living through an age of widespread prosperity. Excuse me? He points to the stock market as a sign of prosperity, apparently unaware of how many people own little or no stock. Then he points to housing prices having shot through the roof. Zywicki also cites low interest rates. I don't know about you, but my paycheck stretches farther with low interest rates. Sometimes I just pay half the tab at the grocery store. "It's OK," I tell them, "interest rates are low!" Zywicki also mentions low unemployment, which would be relevant if it were true.
The hypocrisy
The Republicans (and the corporate Democrats) have outdone their usual level of hypocrisy this time. This bankruptcy bill would make it very difficult for a family like Terri Schiavo's to ever get out of debt. It would deny bankruptcy protection to the families of soldiers killed in Iraq or sent to Iraq and away from their jobs and incomes. It would make it very difficult for small business owners who take risks and fail to start over. And it would impose on individuals a standard of fiscal responsibility to which the White House and Congress, not to mention the credit card companies, do not even pretend.
Columnist Robert Scheer notes that Grassley, the bill's sponsor in the Senate, in another bit of hypocrisy "actively opposes abortion and same-sex marriage on biblical grounds yet believes the Good Book's clear definition and condemnation of usury is irrelevant. The Old Testament, revered by Jews, Muslims and Christians alike, mandates debt forgiveness after seven years, as was pointed out earlier this month by an organization of Christian lawyers in a letter to Grassley. 'I can't listen to Christian lawyers,' said the senator, 'because I would be imposing the Bible on a diverse population.'"
This would be funny if this bill were going to be easily defeated. It can be defeated in the House if we put our minds to it, and – if need be – put our bodies on the line for it in nonviolent civil disobedience. But this fight won't be easy. Corporate America has been pushing this bill for eight years. It passed both houses of Congress once before and then was vetoed by President Clinton. Two years ago, it passed the Senate, but the House voted it down because the Senate had attached an amendment that would have prevented violent anti-abortion demonstrators from avoiding paying damages to clinics. This time around, the Senate and the Senate Judiciary Committee voted down that amendment and numerous other amendments aimed at making this bill less than utterly disgusting.
These included amendments to:
– close off the trusts loophole for millionaires,
– limit the homestead exemption,
– create a minimum homestead exemption to save the homes of the elderly,
– protect employees and retirees from corporate practices that deprive them of their earnings and retirement savings when a business files for bankruptcy,
– discourage predatory lending practices,
– exempt debtors from means testing if their financial problems were caused by identity theft,
– limit the amount of interest that can be charged on any extension of credit to 30 percent,
– preserve existing bankruptcy protections for individuals experiencing economic distress as caregivers to ill or disabled family members,
– exempt debtors whose financial problems were caused by serious medical problems from means testing,
– provide protection for medical debt homeowners,
– require enhanced disclosure to consumers regarding the consequences of making only minimum required payments in the repayment of credit card debt, and for other purposes,
– protect service members and veterans from means testing in bankruptcy, to disallow certain claims by lenders charging usurious interest rates to service members, and to allow service members to exempt property based on the law of the State of their premilitary residence.
Each of these amendments was proposed by a Democrat, and each was voted down by the Republican majority.
Similar amendments were voted down in the House Judiciary Committee on March 16, including:
– An amendment by John Conyers (D-MI) protecting military personnel from predatory payday lenders,
– An amendment by Mel Watt (D-NC) exempting tuition costs from the expense calculation in the means test
– An amendment by Adam Schiff (D-CA) protecting people whose bankruptcy is due to identity theft
– An amendment by Howard Berman (D-CA) protecting bankruptcy filers who file due to medical crises
– An amendment by Jerry Nadler (D-NY) which would make debts arising from civil rights violations non-dischargable in bankruptcy.
The Democrats
The greatest hypocrisy on this bill may come from the Democrats, who often speak as if they are the party of working people. Some Democratic senators spoke against the bill and then voted for it. One of them, Senator Joe Lieberman, spoke for it and against it, voted for cloture (cutting off debate and moving the bill toward passage) and then voted against the bill. Another, Senator Hillary Clinton, did not vote for or against the bill. Nineteen Democratic Senators voted for the bill, while 24 voted against it. These are the 19 who chose to side with the credit card companies:
Sen. Joe Biden (D-Delaware)
Sen. Tom Carper (D-Delaware)
Sen. Ben Nelson (D-Nebraska)
Sen. Tim Johnson (D-South Dakota)
Sen. Max Baucus (D-Montana)
Sen. Evan Bayh (D-Indiana)
Sen. Jeff Bingaman (D-New Mexico)
Sen. Robert Byrd (D-West Virginia)
Sen. Kent Conrad (D-North Dakota)
Sen. Dan Inouye (D-Hawaii)
Sen. Jim Jeffords (I-Vermont)
Sen. Herb Kohl (D-Wisconsin)
Sen. Mary Landrieu (D-Louisiana)
Sen. Blanche Lincoln (D-Arkansas)
Sen. Bill Nelson (D-Florida)
Sen. Mark Pryor (D-Arkansas)
Sen. Harry Reid (D-Nevada)
Sen. Ken Salazar (D-Colorado)
Sen. Debbie Stabenow (D-Michigan)
The Senate Democrats have stood strong and begun to win over moderate Republicans on Social Security. They have blocked judicial appointments. They are not powerless. They chose to let the bankruptcy bill pass.
House Democrats are showing glaring signs of weakness, and many of them will back this bill if they don't feel pressure from their constituents to oppose it. The House Judiciary Committee passed the bill, 22-13, with one Democrat, Rep. Rick Boucher of Virginia, joining the majority Republicans to support the legislation.
These 20 House Democrats wrote a letter to Speaker Dennis Hastert supporting the bankruptcy bill. The ones with an asterisk have also signed on as co-sponsors of the bill. The first three on the list are members of the Congressional Black Caucus:
Rep. Harold E. Ford, Jr. (D-TN) Rep. Artur Davis (D-AL) Rep. Gregory W. Meeks (D-NY) Rep. Ellen O. Tauscher (D-CA) Rep. John Larson (D-CT) Rep. Jim Davis (D-FL) * Rep. Ed Case (D-HI) * Rep. Melissa Bean (D-IL) Rep. Dennis Moore (D-KS) Rep. Mike McIntyre (D-NC) Rep. Shelley Berkley (D-NV) Rep. Steve J. Israel (D-NY) Rep. Carolyn McCarthy (D-NY) Rep. Joseph Crowley (D-NY) * Rep. David Wu (D-OR) Rep. Darlene Hooley (D-OR) * Rep. Stephanie Herseth (D-SD) Rep. Jay Inslee (D-WA) Rep. Adam Smith (D-WA) * Rep. Ron Kind (D-WI)
The following Democratic Congress Members did not sign the letter to Hastert but have signed on as co-sponsors of the bill:
Rep. Robert E. Andrews (D-NJ) Rep. Rick Boucher (D-VA)
As noted above, Boucher also voted for the bill in the Judiciary Committee.
The first obvious explanation for the Democrats' behavior is campaign contributions. And this explanation has even penetrated the corporate media. The New York Times wrote:
"The main lobbying forces for the bill – a coalition that included Visa, MasterCard, the American Bankers Association, MBNA America, Capital One, Citicorp, the Ford Motor Credit Company and the General Motors Acceptance Corporation – spent more than $40 million in political fund-raising efforts and many millions more on lobbying efforts since 1989."
To phone, fax, or Email these and other Congress Members to tell them how you feel, go to DebtSlavery.org.
At this link you'll find various analyses of the money trail.
The Senators who voted yes received more on average from credit card and financial services companies than did those who voted no. Democrats who voted yes received the most. But, at the same time, some of the Senators and Congress Members supporting the bill have received more money from labor than from credit card and financial services companies. So, why the betrayal of workers?
One reason may be that this bill has been the single top agenda item for these companies for years. They've given money specifically for this for years. They wrote the bill and endlessly lobbied for it. The benefits they offer are not merely contributions. In the case of Congressman Jim Moran (D., Va.), MBNA bailed him out of debt with a sweetheart loan in order to win his support for denying others any hope. These companies also offer the possibility of connections to others with wealth, the possibility of well-paid careers after Congress, of the use of company jets, and so forth. And it's not just the financial companies that support this bill. Any corporation that realizes it could someday go the way of Enron, or even K-mart, favors this bill. The US Chamber of Commerce has lobbied for this bill.
In contrast, this issue has not been at the top of the agenda for grassroots advocacy groups, for labor, for civil rights groups. It's been on the agenda, but not near the top. Debtslavery.org is working to change that in the next days or weeks, to build pressure on Congress Members, Democratic and Republican alike, to oppose this bill.
"Why did we lose so many votes on cloture on such an awful, venal piece of legislation?" a House Democratic staffer asked rhetorically on DailyKos.
"It's really a structural matter in terms of who Democrats end up soliciting for campaign donations. Most Dems have a pretty solid labor-environmental-trial lawyer base that they then try to build out from to amass a large enough war chest to scare off challengers.
"Groups that lack steady conflict with the labor-enviro-lawyer triumvirate offer the most attractive targets. That's why Dems end up cozied up to the technology and financial services industry – few labor issues since they're mostly not unionized/union organizer's targets, few environmental issues b/c they don't pump soot into the air, and relatively less contact with the trial lobby.
"Since campaign contributions play a significant role and Dems have demonstrably fewer targets, especially on K Street, many Dems end up VERY close to the industries that pushed hardest for the bill – namely the American Banker's Association and the credit card companies....
"If we take any lesson from the bankruptcy bill and Bush's slavish support of corporate interest groups, it's that we as progressives need to find a way to think of ways to give consumers' issues teeth. Then maybe bills like this won't even make it to the floor. If there's no penalty for voting for a pro-Chamber bill, Dems have an easier time peeling off and supporting bad legislation. If you need proof, just watch how many House members vote yes on the bill when it comes up. I bet it's at least 320+."
The Democrats also organize into New Democrats and Blue Dog Democrats to build strength as the Republican Wing of the Democratic Party. After David Sirota, a fellow at the Center for American Progress (CAP), sent out an Email accusing 16 of the 20 House Democrats who had written to Hastert of doing so because of money they'd received from credit card and financial services companies, CAP President John Podesta, in the words of The Hill newspaper, "faced pointed questions from lawmakers at [a] New Democrat Coalition (NDC) meeting.... Nearly every lawmaker who arrived ... voiced concern about the Sirota broadside, calling it overtly personal and unhelpful to the two organizations' shared goal of helping the Democratic Party grow.... Some participants said they were looking for more contrition than they received from Podesta and wanted assurances that his organization would abstain from attacking centrist Democrats for their pro-business stances."
Congressional Black Caucus Member Artur Davis (D-Ala.), had this to say:
"The unfortunate thing about the Email is that it questioned the good faith of the Democrats who support the bankruptcy bill. Whenever you question the good faith, that's problematic. But I certainly don't blame John for that e-mail. I don't think it was authorized."
The media
It's also possible that some senators believed no one was watching when they voted for the Debt Slavery Bill of 2005. The media coverage has been nowhere near that of the Social Security "crisis," much less Terri Schiavo. There's been very little on the airwaves, and only relatively more in print. But the media has not done nearly as bad a job on this as it's done on a long list of other issues. Numerous opinion pieces have denounced this bill with unbridled fury at the cruelty and arrogance it embodies. And some of the news articles have been fairly decent as well. One gets the impression that what 19 Democratic Senators were able to stomach, some editors and journalists are unable to.
Of course, what coverage there has been has been limited by the media's childish understanding of "balance," as exhibited in the video clip above. Print articles, similarly, present two views from two sources (never one or three), without including information of which of the claims made have evidence behind them. Of course, some pieces of information that are considered neutral, such as the increase in bankruptcy filings, are presented directly by the journalist as factual, but the cause of that increase and other contested points are off-limits for actual reporting because they are contested. While the New York Times and the Washington Post and others have produced some good and lengthy articles, often these articles are framed with poor headlines and leads that obscure the important information. Short, one-paragraph stories on this issue have been, as usual, more misleading than the longer ones. And why have there been no opinion polls? But in every aspect, the media has out-performed its usual miserable standard.
The media has, in a move that is always damaging to democracy, reported too heavily on the horse race, predicting a near certain passage of the bill, predicting a last-minute surge in filings before it's enacted, and praising the Republicans for being winners, even when acknowledging that their bill will hurt millions of people. Here's how Newsweek summed things up:
"GOPs + New bankruptcy bill is latest victory for No Big Business Left Behind. Bonus: Deadbeat millionaires keep their loot.
"Dems – The "party of the people" can't even protect cancer victims overwhelmed by bills. Talk about bankrupt."
Not just ordinary readers, but Democratic Party strategists will look at something like that and decide that the solution is to move even closer to the Republicans, because they are winners.
Here's a typically misleading lead to an article from Newhouse News Service:
"The bankruptcy bill speeding through Congress has triggered a debate over who goes bankrupt in the United States and whose fault it is.
"Lenders say that for some, bankruptcy is not a last resort but rather an easy way out of debt. The bill, they say, would crack down on abuse and force individuals to take more personal responsibility. But its critics say that bankruptcies typically are caused by emergencies, such as medical crises or layoffs. [But who has evidence to support their claims? And what exactly was journalism school for?]
"One thing is certain: As consumer indebtedness has skyrocketed, so have bankruptcy filings. A review of data from the Federal Reserve, U.S. Bankruptcy Courts and the Census Bureau found that credit card debt and bankruptcy filings have increased nearly in lockstep since 1980."
Here's an excerpt from the San Antonio Express News that builds on a myth that credit card companies would lower their rates on the rest of us if some of their customers weren't sneaking out of their debt:
"In a statement explaining why changes are needed, Sen. Chuck Grassley, R-Iowa, said bankruptcy 'was not intended to be a convenient financial planning tool where deadbeats can get out of paying their debt scot-free while honest Americans who play by the rules have to foot the bill.'"
While those comments went uncritically reported in the media, other voices were heard in the progressive and "mainstream" media. WashingtonPost.com has done a good and more honest job of presenting information originally reported in the print version of the paper.
The editor of Fortune Magazine, Andy Serwer, has done even better. He wrote:
"As for the bankruptcy bill, too many Americans have been copying big business – and they shouldn't be allowed to do that. Folks just don't understand that companies that declare bankruptcy – like US Air, Winn-Dixie, and Kmart – are living, breathing entities. And a bankrupt company like, say, Interstate Bakeries (they make Ho Hos and Ding Dongs) is more important than any one citizen, regardless of whether or not he or she makes Ding Dongs for a living. You follow? Another problem is that personal bankruptcies were cleaning out the credit card industry. According to CardWeb.com, profits in the card biz grew from $ 12.9 billion in 1995 to $ 31.6 billion last year. That's only a 144% increase in a decade, which is a scandal. Earnings should have been up at least 300%!
"I guess what I'm suggesting is a return to the Gilded Age, when it was ‘anything goes’ and everything did. The way we're stifling wages, ending personal bankruptcies, and blocking lawsuits, soon even corpulent guys in top hats may be coming back into style."
Even the New Republic's Noam Scheiber suffered an outbreak of populism, writing:
"[S]upport for the bill by Democratic moderates betrays a striking obliviousness to the most important debate underway within the Democratic Party. Moderate Democrats have been under assault from grassroots liberals lately for selling out Democratic values in their rush to appease conservative interests. I normally think this criticism is highly misplaced, and that moderates have exactly the right instincts when it comes to social issues and foreign policy, even most economic issues. But in this case the moderates proved the liberals' point for them, which could set back the cause of moderates within the party for months, if not years. It really is a colossal, inexcusable mistake."
All I can say is, let's hope so!
Taking action
To learn more, to contact your Congress Member, and to find out what else you can do, visit http://www.debtslavery.org.
Middle Class May Be Subject To Food Rations, Warns UN.
Experts warn of food riots as foreign troops cleared to patrol American cities
Paul Joseph Watson
Monday, February 25th, 2008
The UN is warning of a food shortage crisis and drawing up plans for food rations which will hit even middle-class suburban populations as inflation and economic uncertainty causes the prices of staple food commodities to skyrocket.
The United Nation's World Food Programme cautions today that if it doesn't receive more funding, it will have to halt food aid to developing countries like Mexico and China.
"The WFP crisis talks come as the body sees the emergence of a “new area of hunger” in developing countries where even middle-class, urban people are being “priced out of the food market” because of rising food prices," reports the Financial Times.
The warning coincides with a speech by William Lapp, of US-based consultancy Advanced Economic Solutions, who cautioned that rising agricultural raw material prices would translate this year into sharply higher food inflation.
It also parallels a prediction by Don Coxe, a Chicago-based global portfolio strategist for BMO Financial Group who correctly forecast the fall of the dollar and the rise in price of gold and oil years in advance, who last week spoke of a "global food crisis" which will cause the world to enter into, "A period of food shortages and swiftly rising prices," leading to government embargoes.
With the U.S. on the verge of a recession and, as many analysts have warned, a potential second great depression, those long scoffed at for hoarding vast quantities of storable food may unfortunately be able to say "I told you so" if the dollar continues to deteriorate and people begin to be priced out of the food market.
Global food prices have skyrocketed by as much as 60 per cent in the past year, while UN officials warn of the likelihood of food riots.
"If prices continue to rise, I would not be surprised if we began to see food riots,” said Jacques Diouf, director-general of the UN’s Food and Agriculture Organisation, last October.
Many see the food shortages, whether real or manufactured, as simply another pretext for the implementation of martial law and the introduction of foreign troops to patrol major U.S. cities.
A recent announcement by Northcom confirmed that U.S. and Canadian troops will be allowed to patrol each other's countries in the event of a national emergency.
"U.S. Air Force Gen. Gene Renuart, commander of North American Aerospace Defense Command and U.S. Northern Command, and Canadian Air Force Lt.-Gen. Marc Dumais, commander of Canada Command, have signed a Civil Assistance Plan that allows the military from one nation to support the armed forces of the other nation during a civil emergency," reads a Northcom press release.
Paul Joseph Watson
Monday, February 25th, 2008
The UN is warning of a food shortage crisis and drawing up plans for food rations which will hit even middle-class suburban populations as inflation and economic uncertainty causes the prices of staple food commodities to skyrocket.
The United Nation's World Food Programme cautions today that if it doesn't receive more funding, it will have to halt food aid to developing countries like Mexico and China.
"The WFP crisis talks come as the body sees the emergence of a “new area of hunger” in developing countries where even middle-class, urban people are being “priced out of the food market” because of rising food prices," reports the Financial Times.
The warning coincides with a speech by William Lapp, of US-based consultancy Advanced Economic Solutions, who cautioned that rising agricultural raw material prices would translate this year into sharply higher food inflation.
It also parallels a prediction by Don Coxe, a Chicago-based global portfolio strategist for BMO Financial Group who correctly forecast the fall of the dollar and the rise in price of gold and oil years in advance, who last week spoke of a "global food crisis" which will cause the world to enter into, "A period of food shortages and swiftly rising prices," leading to government embargoes.
With the U.S. on the verge of a recession and, as many analysts have warned, a potential second great depression, those long scoffed at for hoarding vast quantities of storable food may unfortunately be able to say "I told you so" if the dollar continues to deteriorate and people begin to be priced out of the food market.
Global food prices have skyrocketed by as much as 60 per cent in the past year, while UN officials warn of the likelihood of food riots.
"If prices continue to rise, I would not be surprised if we began to see food riots,” said Jacques Diouf, director-general of the UN’s Food and Agriculture Organisation, last October.
Many see the food shortages, whether real or manufactured, as simply another pretext for the implementation of martial law and the introduction of foreign troops to patrol major U.S. cities.
A recent announcement by Northcom confirmed that U.S. and Canadian troops will be allowed to patrol each other's countries in the event of a national emergency.
"U.S. Air Force Gen. Gene Renuart, commander of North American Aerospace Defense Command and U.S. Northern Command, and Canadian Air Force Lt.-Gen. Marc Dumais, commander of Canada Command, have signed a Civil Assistance Plan that allows the military from one nation to support the armed forces of the other nation during a civil emergency," reads a Northcom press release.
Prozac, used by 40m people, does not work say scientists.
Prozac, used by 40m people, does not work say scientists
Analysis of unseen trials and other data concludes it is no better than placebo
A single Prozac capsule. Photograph: Alamy
Prozac, the bestselling antidepressant taken by 40 million people worldwide, does not work and nor do similar drugs in the same class, according to a major review released today.
The study examined all available data on the drugs, including results from clinical trials that the manufacturers chose not to publish at the time. The trials compared the effect on patients taking the drugs with those given a placebo or sugar pill.
When all the data was pulled together, it appeared that patients had improved - but those on placebo improved just as much as those on the drugs.
The only exception is in the most severely depressed patients, according to the authors - Prof Irving Kirsch from the department of psychology at Hull University and colleagues in the US and Canada. But that is probably because the placebo stopped working so well, they say, rather than the drugs having worked better.
"Given these results, there seems little reason to prescribe antidepressant medication to any but the most severely depressed patients, unless alternative treatments have failed," says Kirsch. "This study raises serious issues that need to be addressed surrounding drug licensing and how drug trial data is reported."
The paper, published today in the journal PLoS (Public Library of Science) Medicine, is likely to have a significant impact on the prescribing of the drugs. The National Institute for Health and Clinical Excellence (Nice) already recommends that counselling should be tried before doctors prescribe antidepressants. Kirsch, who was one of the consultants for the guidelines, says the new analysis "would suggest that the prescription of antidepressant medications might be restricted even more".
The review breaks new ground because Kirsch and his colleagues have obtained for the first time what they believe is a full set of trial data for four antidepressants.
They requested the full data under freedom of information rules from the Food and Drug Administration, which licenses medicines in the US and requires all data when it makes a decision.
The pattern they saw from the trial results of fluoxetine (Prozac), paroxetine (Seroxat), venlafaxine (Effexor) and nefazodone (Serzone) was consistent. "Using complete data sets (including unpublished data) and a substantially larger data set of this type than has been previously reported, we find the overall effect of new-generation antidepressant medication is below recommended criteria for clinical significance," they write.
Two more frequently prescribed antidepressants were omitted from the study because scientists were unable to obtain all the data.
Concerns have been raised in recent years about the side-effects of this class of antidepressant. Evidence that they could prompt some young people to consider suicide led to a warning to doctors not to prescribe them for the under-18s - with the exception of Prozac, which was considered more effective than the rest.
In adults, however, the depression-beating benefits were thought to outweigh the risks. Since its launch in the US in 1988, some 40 million people have taken Prozac, earning tens of billions of dollars for the manufacturer, Eli Lilly. Although the patent lapsed in 2001, fluoxetine continues to make the company money - it is now the active ingredient in Sarafem, a pill sold by Lilly for premenstrual syndrome.
Eli Lilly was defiant last night. "Extensive scientific and medical experience has demonstrated that fluoxetine is an effective antidepressant," it said in a statement. "Since its discovery in 1972, fluoxetine has become one of the world's most-studied medicines. Lilly is proud of the difference fluoxetine has made to millions of people living with depression."
A spokesman for GlaxoSmithKline, which makes Seroxat, said the authors had failed to acknowledge the "very positive" benefits of the treatment and their conclusions were "at odds with what has been seen in actual clinical practice".
He added: "This analysis has only examined a small subset of the total data available while regulatory bodies around the world have conducted extensive reviews and evaluations of all the data available, and this one study should not be used to cause unnecessary alarm and concern for patients."
Analysis of unseen trials and other data concludes it is no better than placebo
A single Prozac capsule. Photograph: Alamy
Prozac, the bestselling antidepressant taken by 40 million people worldwide, does not work and nor do similar drugs in the same class, according to a major review released today.
The study examined all available data on the drugs, including results from clinical trials that the manufacturers chose not to publish at the time. The trials compared the effect on patients taking the drugs with those given a placebo or sugar pill.
When all the data was pulled together, it appeared that patients had improved - but those on placebo improved just as much as those on the drugs.
The only exception is in the most severely depressed patients, according to the authors - Prof Irving Kirsch from the department of psychology at Hull University and colleagues in the US and Canada. But that is probably because the placebo stopped working so well, they say, rather than the drugs having worked better.
"Given these results, there seems little reason to prescribe antidepressant medication to any but the most severely depressed patients, unless alternative treatments have failed," says Kirsch. "This study raises serious issues that need to be addressed surrounding drug licensing and how drug trial data is reported."
The paper, published today in the journal PLoS (Public Library of Science) Medicine, is likely to have a significant impact on the prescribing of the drugs. The National Institute for Health and Clinical Excellence (Nice) already recommends that counselling should be tried before doctors prescribe antidepressants. Kirsch, who was one of the consultants for the guidelines, says the new analysis "would suggest that the prescription of antidepressant medications might be restricted even more".
The review breaks new ground because Kirsch and his colleagues have obtained for the first time what they believe is a full set of trial data for four antidepressants.
They requested the full data under freedom of information rules from the Food and Drug Administration, which licenses medicines in the US and requires all data when it makes a decision.
The pattern they saw from the trial results of fluoxetine (Prozac), paroxetine (Seroxat), venlafaxine (Effexor) and nefazodone (Serzone) was consistent. "Using complete data sets (including unpublished data) and a substantially larger data set of this type than has been previously reported, we find the overall effect of new-generation antidepressant medication is below recommended criteria for clinical significance," they write.
Two more frequently prescribed antidepressants were omitted from the study because scientists were unable to obtain all the data.
Concerns have been raised in recent years about the side-effects of this class of antidepressant. Evidence that they could prompt some young people to consider suicide led to a warning to doctors not to prescribe them for the under-18s - with the exception of Prozac, which was considered more effective than the rest.
In adults, however, the depression-beating benefits were thought to outweigh the risks. Since its launch in the US in 1988, some 40 million people have taken Prozac, earning tens of billions of dollars for the manufacturer, Eli Lilly. Although the patent lapsed in 2001, fluoxetine continues to make the company money - it is now the active ingredient in Sarafem, a pill sold by Lilly for premenstrual syndrome.
Eli Lilly was defiant last night. "Extensive scientific and medical experience has demonstrated that fluoxetine is an effective antidepressant," it said in a statement. "Since its discovery in 1972, fluoxetine has become one of the world's most-studied medicines. Lilly is proud of the difference fluoxetine has made to millions of people living with depression."
A spokesman for GlaxoSmithKline, which makes Seroxat, said the authors had failed to acknowledge the "very positive" benefits of the treatment and their conclusions were "at odds with what has been seen in actual clinical practice".
He added: "This analysis has only examined a small subset of the total data available while regulatory bodies around the world have conducted extensive reviews and evaluations of all the data available, and this one study should not be used to cause unnecessary alarm and concern for patients."
Monday, February 25, 2008
Cheap drug with potential to kill most cancers NOT being looked into by pharmaceutical companies
Cheap, 'safe' drug kills most cancers
Updated 16:37 12 December 2007
NewScientist.com news service
Andy Coghlan
Enlarge image
What makes cancer cells different - and how to kill them
Tools
New Scientist has received an unprecedented amount of interest in this story from readers. If you would like up-to-date information on any plans for clinical trials of DCA in patients with cancer, or would like to donate towards a fund for such trials, please visit the site set up by the University of Alberta and the Alberta Cancer Board. We will also follow events closely and will report any progress as it happens.
It sounds almost too good to be true: a cheap and simple drug that kills almost all cancers by switching off their “immortality”. The drug, dichloroacetate (DCA), has already been used for years to treat rare metabolic disorders and so is known to be relatively safe.
It also has no patent, meaning it could be manufactured for a fraction of the cost of newly developed drugs.
Evangelos Michelakis of the University of Alberta in Edmonton, Canada, and his colleagues tested DCA on human cells cultured outside the body and found that it killed lung, breast and brain cancer cells, but not healthy cells. Tumours in rats deliberately infected with human cancer also shrank drastically when they were fed DCA-laced water for several weeks.
DCA attacks a unique feature of cancer cells: the fact that they make their energy throughout the main body of the cell, rather than in distinct organelles called mitochondria. This process, called glycolysis, is inefficient and uses up vast amounts of sugar.
Until now it had been assumed that cancer cells used glycolysis because their mitochondria were irreparably damaged. However, Michelakis’s experiments prove this is not the case, because DCA reawakened the mitochondria in cancer cells. The cells then withered and died (Cancer Cell, DOI: 10.1016/j.ccr.2006.10.020).
Michelakis suggests that the switch to glycolysis as an energy source occurs when cells in the middle of an abnormal but benign lump don’t get enough oxygen for their mitochondria to work properly (see diagram). In order to survive, they switch off their mitochondria and start producing energy through glycolysis.
Crucially, though, mitochondria do another job in cells: they activate apoptosis, the process by which abnormal cells self-destruct. When cells switch mitochondria off, they become “immortal”, outliving other cells in the tumour and so becoming dominant. Once reawakened by DCA, mitochondria reactivate apoptosis and order the abnormal cells to die.
“The results are intriguing because they point to a critical role that mitochondria play:
they impart a unique trait to cancer cells that can be exploited for cancer therapy,” says Dario Altieri, director of the University of Massachusetts Cancer Center in Worcester.
The phenomenon might also explain how secondary cancers form. Glycolysis generates lactic acid, which can break down the collagen matrix holding cells together. This means abnormal cells can be released and float to other parts of the body, where they seed new tumours.
DCA can cause pain, numbness and gait disturbances in some patients, but this may be a price worth paying if it turns out to be effective against all cancers. The next step is to run clinical trials of DCA in people with cancer. These may have to be funded by charities, universities and governments: pharmaceutical companies are unlikely to pay because they can’t make money on unpatented medicines. The pay-off is that if DCA does work, it will be easy to manufacture and dirt cheap.
Paul Clarke, a cancer cell biologist at the University of Dundee in the UK, says the findings challenge the current assumption that mutations, not metabolism, spark off cancers. “The question is: which comes first?” he says.
Updated 16:37 12 December 2007
NewScientist.com news service
Andy Coghlan
Enlarge image
What makes cancer cells different - and how to kill them
Tools
New Scientist has received an unprecedented amount of interest in this story from readers. If you would like up-to-date information on any plans for clinical trials of DCA in patients with cancer, or would like to donate towards a fund for such trials, please visit the site set up by the University of Alberta and the Alberta Cancer Board. We will also follow events closely and will report any progress as it happens.
It sounds almost too good to be true: a cheap and simple drug that kills almost all cancers by switching off their “immortality”. The drug, dichloroacetate (DCA), has already been used for years to treat rare metabolic disorders and so is known to be relatively safe.
It also has no patent, meaning it could be manufactured for a fraction of the cost of newly developed drugs.
Evangelos Michelakis of the University of Alberta in Edmonton, Canada, and his colleagues tested DCA on human cells cultured outside the body and found that it killed lung, breast and brain cancer cells, but not healthy cells. Tumours in rats deliberately infected with human cancer also shrank drastically when they were fed DCA-laced water for several weeks.
DCA attacks a unique feature of cancer cells: the fact that they make their energy throughout the main body of the cell, rather than in distinct organelles called mitochondria. This process, called glycolysis, is inefficient and uses up vast amounts of sugar.
Until now it had been assumed that cancer cells used glycolysis because their mitochondria were irreparably damaged. However, Michelakis’s experiments prove this is not the case, because DCA reawakened the mitochondria in cancer cells. The cells then withered and died (Cancer Cell, DOI: 10.1016/j.ccr.2006.10.020).
Michelakis suggests that the switch to glycolysis as an energy source occurs when cells in the middle of an abnormal but benign lump don’t get enough oxygen for their mitochondria to work properly (see diagram). In order to survive, they switch off their mitochondria and start producing energy through glycolysis.
Crucially, though, mitochondria do another job in cells: they activate apoptosis, the process by which abnormal cells self-destruct. When cells switch mitochondria off, they become “immortal”, outliving other cells in the tumour and so becoming dominant. Once reawakened by DCA, mitochondria reactivate apoptosis and order the abnormal cells to die.
“The results are intriguing because they point to a critical role that mitochondria play:
they impart a unique trait to cancer cells that can be exploited for cancer therapy,” says Dario Altieri, director of the University of Massachusetts Cancer Center in Worcester.
The phenomenon might also explain how secondary cancers form. Glycolysis generates lactic acid, which can break down the collagen matrix holding cells together. This means abnormal cells can be released and float to other parts of the body, where they seed new tumours.
DCA can cause pain, numbness and gait disturbances in some patients, but this may be a price worth paying if it turns out to be effective against all cancers. The next step is to run clinical trials of DCA in people with cancer. These may have to be funded by charities, universities and governments: pharmaceutical companies are unlikely to pay because they can’t make money on unpatented medicines. The pay-off is that if DCA does work, it will be easy to manufacture and dirt cheap.
Paul Clarke, a cancer cell biologist at the University of Dundee in the UK, says the findings challenge the current assumption that mutations, not metabolism, spark off cancers. “The question is: which comes first?” he says.
Sunday, February 24, 2008
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Saturday, February 23, 2008
Part I: Mortgage Crisis Triggers Walk-Aways - Mortgage Debt Not Seen Since Great Depression
February 22, 2008 | Stuart Breakstone, a lawyer in Memphis, and his wife Lori owe about $670,000 on their home. Not since the Depression has a larger share of Americans owed more on their homes than they are worth. (Photo: Rollin Riggs / The New York Times)
To understand why the next phase of the nation’s housing crisis might mean financially troubled owners just give up and walk away from their homes, look no further than the winding roads and carefully tended lawns of the Piedmont subdivision in the once-booming exurbs of Washington.
Here, in Virginia farmland 40 miles south of the nation’s capital, builders in the last decade carved out development after development – hundreds of homes in gated communities that sold in a snap. At Piedmont, people camped out in line to get a contract, buying into plans for 2,000 spacious, traditional-style brick homes with decorative lamp posts on every lawn. The prices – at $600,000 and up – might seem high in softer markets elsewhere in the country. But in this expensive area, they felt affordable to people willing to trade a long and trying commute for a much larger home, adjacent golf course and community pool. Helped, of course, by interest-only loans, little or no down payments, and adjustable-rate mortgages.
But Piedmont’s amenities don’t mean as much to many of its homeowners these days. Housing prices haven’t just dropped – they’ve tanked, falling by as much as $200,000 to $250,000. By one estimate, some 80 percent of new listings here are either foreclosures or short sales, in which owners give their houses back to the bank at a fire-sale price, leaving their credit intact. Should the bank accept the short sale, it forgives the remainder of the mortgage. But banks often reject short sales. If owners can’t wrangle one, and they still want from under their loan, they might have to bring $200,000 in cash to closing, just to sell their house at a rock-bottom price.
Housing prices haven’t just dropped – they’ve tanked, falling by as much as $200,000 to $250,000.
Think, for a moment, about the likelihood of that actually happening.
Across the country, more than 30 percent of homeowners who bought in the last two years are now saddled with negative equity, meaning they owe more on their mortgages than their homes are worth, the research firm Zillow reported recently. Those homeowners can’t easily sell or refinance their way out of those loans, especially with house prices still falling. The Wall Street Journal described this as a vicious cycle, giving borrowers "an incentive to walk away from their mortgages."
It’s more fodder for a blogosphere already inflamed by the prospect of widespread walkaways, prompted by Bank of America CEO Kenneth Lewis’ observation that social attitudes toward default have changed, making walkaways culturally acceptable. Fear of walkways also motivated a recent plan to delay foreclosures for some borrowers. Although walkaway reports remain anecdotal so far, "I think there is a real tendency to move in that direction," Susan Wachter, a real estate professor at The Wharton School at the University of Pennsylvania, told the Orange County Register recently.
In the meantime, short sales, or at least attempts at them, are climbing as the next best thing, boosted by a Bush administration move late last year to let homeowners off the hook for taxes on the forgiven mortgage debt. Word on the cul-de-sac at Piedmont is that behind closed doors, many people haven’t paid their mortgages in months, sometimes many months, but banks aren’t foreclosing right away, as had been the norm. They’re moving slowly, the whole system clogged by other foreclosures. In California, it takes so long for banks to foreclose that attorneys advise people simply to stay in their homes, go on with their lives, pay down credit debt and wait for the notice – a modern, upscale version of squatting. As they wait for to hear from the bank, some Piedmont owners try to pull off a short sale, work out a repayment plan or just sit tight, playing a financial game of cat and mouse that doesn’t always end well for either side.
Trina Arce, 30, much to her dismay, is playing that game.
She stirs her tea while leaning on a granite countertop in the gourmet kitchen of her Piedmont home, the one she and her husband can no longer afford, the one they’ve listed for three months now as a short sale: "When we moved in we thought we’d spend the rest of our lives here," she said, pointing to the expansive rooms with gleaming wood floors."I used to say, ‘I love our house. It’s so wonderful. We’re going to live here forever.’’’ Now I just say, ‘God, I hate this place. I just want to get out of here.’"
...the mortgage crisis has altered in significant ways the long-held American dream of home ownership
The fact that owners here and in other overpriced markets around the country are willing and even eager to give their homes to the bank at a huge loss, or that they might consider walking away, is proof that the mortgage crisis has altered in significant ways the long-held American dream of home ownership. It’s cast a pall on the once-reverent relationship between buyer and house, a shift in attitude likely to have effects for years to come, even after the housing market eventually shakes off its excess inventories and returns to normal, whatever that might come to encompass.
People once valued their homes above all. In studying consumers who filed for bankruptcy, experts found that they’d hand over their credit cards, their cars, their savings, whatever else they had, even if it made no financial sense, just to keep their homes. There was shame, or sadness, the pain of losing a long-treasured home, the embarrassment of failing on a mortgage, the melancholy of older couples leaving behind the homes where they’d raised their families. Losing a home conjured images of the Great Depression, memories of hard times shared by grandparents around the kitchen table.
Now there’s just relief.
Arce and her husband, Pablo, bought their five-bedroom house in 2004 for $605,000 with an interest-only loan, watched it climb in value quickly to $750,000, and then witnessed its steep decline, beginning last year. Panicked, and worried about mortgage payments that are only going to rise, they put it on the market last summer for $550,000. No takers. Lowered it to $525,000. Then $500,000. Nothing. For the past three months, it’s been at $450,000, and offered as a short sale. It’s not moving.
Each morning, they say hello to neighbors out to pick up the morning paper or to enjoy a walk, who bought foreclosed homes at the bottom of the market, paying $420,000 or so for places just like theirs. So they deal with that, on top of the stress of trying each month to scrape together the mortgage payment, something they just can’t manage anymore. They’ve got a lively two-year-old daughter and another on the way. It’s either a short sale or… disaster.
They don’t want to walk away and ruin their credit. They don’t know what to do. And that’s the hardest part of the waiting game—not being sure what might happen next, with none of the alternatives looking particularly good.
"It’s crazy," said Arce, whose income as a mortgage broker took the same steep fall as housing prices. "We just want to get rid of it. It makes no sense to sit here and pay $4,000 every month for the same house that’s selling down the street for $200,000 less."
If the craziness incites people to give up and walk away, no one should be too surprised, said Joel Kotkin, author of "The City: A Global History" and an expert on social, economic and global trends. Just look around. "All you have to do is go to parts of the Midwest that are filled with farms that have been left behind and abandoned and that had been there for generations," Kotkin said. "This is a capitalist system. When things don’t go well, we move on."
And on. And on. Since Levittown rose from Long Island potato fields after World War II, the path to home ownership has led further and further out from the cities to new developments, with bigger and bigger homes. It’s precisely those exurbs that are most vulnerable in the foreclosure crisis, Kotkin contends. Look at Stockton, Calif., or Modesto, hit especially hard by mortgage problems, far from jobs, cities, and schools. They are communities that don’t really have a reason to be there, other than that’s where they are. "You have places where people haven’t lived for a long time and they don’t have particularly strong roots," Kotkin said. "There’s not a lot of reason for them to stay. It’s why rootedness is becoming a very important thing."
It’s also why the relentless expansion into the exurbs might stall. Even before the mortgage crisis, exurbs were coming under closer scrutiny due to the high costs of maintaining the large homes and transportation expenses, said Kenneth T. Jackson, author of "Crabgrass Frontier," an influential history of the expansion of American suburbs. Now that houses there aren’t exploding in value, it makes them an even less promising place. "As energy costs go up, the ability to move further and further off is going to be impeded," Jackson said. "I think there will be a slow change, an evolution over the next 15 to 20 years. It will be a movement not just back to the city, but to higher density, and to less of a tendency to move far out on the fringe."
To understand why the next phase of the nation’s housing crisis might mean financially troubled owners just give up and walk away from their homes, look no further than the winding roads and carefully tended lawns of the Piedmont subdivision in the once-booming exurbs of Washington.
Here, in Virginia farmland 40 miles south of the nation’s capital, builders in the last decade carved out development after development – hundreds of homes in gated communities that sold in a snap. At Piedmont, people camped out in line to get a contract, buying into plans for 2,000 spacious, traditional-style brick homes with decorative lamp posts on every lawn. The prices – at $600,000 and up – might seem high in softer markets elsewhere in the country. But in this expensive area, they felt affordable to people willing to trade a long and trying commute for a much larger home, adjacent golf course and community pool. Helped, of course, by interest-only loans, little or no down payments, and adjustable-rate mortgages.
But Piedmont’s amenities don’t mean as much to many of its homeowners these days. Housing prices haven’t just dropped – they’ve tanked, falling by as much as $200,000 to $250,000. By one estimate, some 80 percent of new listings here are either foreclosures or short sales, in which owners give their houses back to the bank at a fire-sale price, leaving their credit intact. Should the bank accept the short sale, it forgives the remainder of the mortgage. But banks often reject short sales. If owners can’t wrangle one, and they still want from under their loan, they might have to bring $200,000 in cash to closing, just to sell their house at a rock-bottom price.
Housing prices haven’t just dropped – they’ve tanked, falling by as much as $200,000 to $250,000.
Think, for a moment, about the likelihood of that actually happening.
Across the country, more than 30 percent of homeowners who bought in the last two years are now saddled with negative equity, meaning they owe more on their mortgages than their homes are worth, the research firm Zillow reported recently. Those homeowners can’t easily sell or refinance their way out of those loans, especially with house prices still falling. The Wall Street Journal described this as a vicious cycle, giving borrowers "an incentive to walk away from their mortgages."
It’s more fodder for a blogosphere already inflamed by the prospect of widespread walkaways, prompted by Bank of America CEO Kenneth Lewis’ observation that social attitudes toward default have changed, making walkaways culturally acceptable. Fear of walkways also motivated a recent plan to delay foreclosures for some borrowers. Although walkaway reports remain anecdotal so far, "I think there is a real tendency to move in that direction," Susan Wachter, a real estate professor at The Wharton School at the University of Pennsylvania, told the Orange County Register recently.
In the meantime, short sales, or at least attempts at them, are climbing as the next best thing, boosted by a Bush administration move late last year to let homeowners off the hook for taxes on the forgiven mortgage debt. Word on the cul-de-sac at Piedmont is that behind closed doors, many people haven’t paid their mortgages in months, sometimes many months, but banks aren’t foreclosing right away, as had been the norm. They’re moving slowly, the whole system clogged by other foreclosures. In California, it takes so long for banks to foreclose that attorneys advise people simply to stay in their homes, go on with their lives, pay down credit debt and wait for the notice – a modern, upscale version of squatting. As they wait for to hear from the bank, some Piedmont owners try to pull off a short sale, work out a repayment plan or just sit tight, playing a financial game of cat and mouse that doesn’t always end well for either side.
Trina Arce, 30, much to her dismay, is playing that game.
She stirs her tea while leaning on a granite countertop in the gourmet kitchen of her Piedmont home, the one she and her husband can no longer afford, the one they’ve listed for three months now as a short sale: "When we moved in we thought we’d spend the rest of our lives here," she said, pointing to the expansive rooms with gleaming wood floors."I used to say, ‘I love our house. It’s so wonderful. We’re going to live here forever.’’’ Now I just say, ‘God, I hate this place. I just want to get out of here.’"
...the mortgage crisis has altered in significant ways the long-held American dream of home ownership
The fact that owners here and in other overpriced markets around the country are willing and even eager to give their homes to the bank at a huge loss, or that they might consider walking away, is proof that the mortgage crisis has altered in significant ways the long-held American dream of home ownership. It’s cast a pall on the once-reverent relationship between buyer and house, a shift in attitude likely to have effects for years to come, even after the housing market eventually shakes off its excess inventories and returns to normal, whatever that might come to encompass.
People once valued their homes above all. In studying consumers who filed for bankruptcy, experts found that they’d hand over their credit cards, their cars, their savings, whatever else they had, even if it made no financial sense, just to keep their homes. There was shame, or sadness, the pain of losing a long-treasured home, the embarrassment of failing on a mortgage, the melancholy of older couples leaving behind the homes where they’d raised their families. Losing a home conjured images of the Great Depression, memories of hard times shared by grandparents around the kitchen table.
Now there’s just relief.
Arce and her husband, Pablo, bought their five-bedroom house in 2004 for $605,000 with an interest-only loan, watched it climb in value quickly to $750,000, and then witnessed its steep decline, beginning last year. Panicked, and worried about mortgage payments that are only going to rise, they put it on the market last summer for $550,000. No takers. Lowered it to $525,000. Then $500,000. Nothing. For the past three months, it’s been at $450,000, and offered as a short sale. It’s not moving.
Each morning, they say hello to neighbors out to pick up the morning paper or to enjoy a walk, who bought foreclosed homes at the bottom of the market, paying $420,000 or so for places just like theirs. So they deal with that, on top of the stress of trying each month to scrape together the mortgage payment, something they just can’t manage anymore. They’ve got a lively two-year-old daughter and another on the way. It’s either a short sale or… disaster.
They don’t want to walk away and ruin their credit. They don’t know what to do. And that’s the hardest part of the waiting game—not being sure what might happen next, with none of the alternatives looking particularly good.
"It’s crazy," said Arce, whose income as a mortgage broker took the same steep fall as housing prices. "We just want to get rid of it. It makes no sense to sit here and pay $4,000 every month for the same house that’s selling down the street for $200,000 less."
If the craziness incites people to give up and walk away, no one should be too surprised, said Joel Kotkin, author of "The City: A Global History" and an expert on social, economic and global trends. Just look around. "All you have to do is go to parts of the Midwest that are filled with farms that have been left behind and abandoned and that had been there for generations," Kotkin said. "This is a capitalist system. When things don’t go well, we move on."
And on. And on. Since Levittown rose from Long Island potato fields after World War II, the path to home ownership has led further and further out from the cities to new developments, with bigger and bigger homes. It’s precisely those exurbs that are most vulnerable in the foreclosure crisis, Kotkin contends. Look at Stockton, Calif., or Modesto, hit especially hard by mortgage problems, far from jobs, cities, and schools. They are communities that don’t really have a reason to be there, other than that’s where they are. "You have places where people haven’t lived for a long time and they don’t have particularly strong roots," Kotkin said. "There’s not a lot of reason for them to stay. It’s why rootedness is becoming a very important thing."
It’s also why the relentless expansion into the exurbs might stall. Even before the mortgage crisis, exurbs were coming under closer scrutiny due to the high costs of maintaining the large homes and transportation expenses, said Kenneth T. Jackson, author of "Crabgrass Frontier," an influential history of the expansion of American suburbs. Now that houses there aren’t exploding in value, it makes them an even less promising place. "As energy costs go up, the ability to move further and further off is going to be impeded," Jackson said. "I think there will be a slow change, an evolution over the next 15 to 20 years. It will be a movement not just back to the city, but to higher density, and to less of a tendency to move far out on the fringe."
Friday, February 22, 2008
Scotiabank Euro account.
No monthly account fee with a minimum monthly balance of €200, otherwise a monthly maintenance fee of €1.00 applies. Includes two teller assisted withdrawal transactions per month.²
Additional teller assisted withdrawal transactions are charged at €0.60 each.
Additional teller assisted withdrawal transactions are charged at €0.60 each.
MBNA Starwood Preferred Guest (SPG) Credit Card.
Do you use a rewards based credit card for the points? I know I do. Have you ever wondered which credit card gives you the best bang for your buck? That's one thing that I always look for, the best value for your dollar. I do that whenever i'm in stores, restaurants and especially when buying a stock. Picking a credit card to use is no different for me and after doing some extensive research, I have found the card for me. That card is the MBNA Starwood Preferred Guest (SPG) Credit Card.
Why do I like the SPG credit card the most? Simply because it gives you a great return on your spending (with NO blackout dates), it has NO annual fee with free supplementary cards, it includes a comprehensive insurance package and they have a super fast online system (updates within minutes of transaction).
Lets talk a bit about their rewards program. SPG is a HOTEL points program that gives you points towards staying in Sheraton, Westin, 4 points, Luxury Collection, St. Regis, Meridien, and W hotels. SPG has been winning awards for many years now as the best rewards program out there.
How many points do you get for using the SPG credit card?
You get 1 point for every $2 spent
5000 bonus points upon first purchase
5000 bonus points for your first stay (that you pay for)
5000 bonus points for every $10,000 that you spend for up to 15k bonus points ($30k spent).
For example, if you spend $30k in your first year and get all of your bonuses, you can obtain 40k points which is enough for 4 nights in a category 4 hotel (middle-upper class). After your first year, you get around 1 pt for every $1 that you spend up to $30k. After $30k spending, you only get 1 point for every $2 that you spend.
Here is the SPG rewards chart:Program: Category
1 2 3 4 5 6
Free Night - Weekdays 3,000 4,000 7,000 10,000 12,000 - 16,000 20,000 - 25,000
Free Night - Weekends just 2,000! just 3,000! 7,000 10,000 12,000 - 16,000 20,000 - 25,000
Cash & Points 1,200 Starpoints +$25 1,600 Starpoints + $30 2,800 Starpoints + $45 4,000 Starpoints + $60 n/a n/a
5th Night Free n/a n/a 28,000 40,000 48,000 - 64,000 80,000 - 100,000
Room Upgrade 1,000 - 1,500 1,000 - 1,500 1,000 - 1,500 1,000 - 1,500 1,500 - 2,750 1,500 - 2,750
Suite Upgrade 3,000 4,000 7,000 10,000 12,000 - 16,000 20,000 - 25,000
50% off Regular Rack Rates 1,000 1,000 1,000 1,000 1,000 1,000
Nights & Flights n/a n/a 60,000 70,000 n/a n/a
An example rewards redemption:
Sheraton Bal Harbour Best Resort - Category 4 (Florida)
March Price: $362USD/night (~$480 CAD inc taxes)
Points Required: 10k points/night
Spending Required: $10k (after first year, less during first year)
Return on spending: $480/$10000 = 4.8% RETURN !
So, who has a 1% cash back card? :) This kind of return is a bit on the high end but I typically get around 2.5%-4% return / redemption. Their point system also has a bunch of great features like cash and points, 5th night free and SPG to airline point conversions. The cash and points system (one of my favorites) is where they let you combine cash and points towards selected SPG hotels who join the program. It's really great for people who don't have an obscene amount of points but want to stay at SPG hotels at a substantial discount. The 5th night free is just that, book 5 nights with any of their hotels on points, and you get the 5th night free. So if you booked a Category 4 hotel for 5 nights, it would cost you 40k points instead of 50k. Their SPG to airline points transfer system also offers generous perks where they give you an additional 5k points for every 20k spg points that you transfer. They support a large number of airline point programs (except Aeroplan) :(.
Some other features as mentioned before is a comprehensive warranty/insurance program which includes travel, car rental, and purchase/theft insurance along with double warranty on purchases (for up to 1 year).
Who is this card suited for? This card is best for those who like to travel and spend up to $30k on their primary credit card every year. If you don't pay off your credit cards in FULL every month, this card is NOT for you. They charge around 20% interest/annum.
It may sound like I work for MBNA and even if I did, it would be easy to push this product. But alas, i'm just a regular Joe trying to get the best bang my buck, and the SPG credit card is on top of the rewards (no annual fee) credit card list. Anyone know if there's a MBNA affiliate link? :)
For more info visit:
SPG.com
SPG Forum on Flyertalk
Top Cash Back Credit Cards in Canada
Why do I like the SPG credit card the most? Simply because it gives you a great return on your spending (with NO blackout dates), it has NO annual fee with free supplementary cards, it includes a comprehensive insurance package and they have a super fast online system (updates within minutes of transaction).
Lets talk a bit about their rewards program. SPG is a HOTEL points program that gives you points towards staying in Sheraton, Westin, 4 points, Luxury Collection, St. Regis, Meridien, and W hotels. SPG has been winning awards for many years now as the best rewards program out there.
How many points do you get for using the SPG credit card?
You get 1 point for every $2 spent
5000 bonus points upon first purchase
5000 bonus points for your first stay (that you pay for)
5000 bonus points for every $10,000 that you spend for up to 15k bonus points ($30k spent).
For example, if you spend $30k in your first year and get all of your bonuses, you can obtain 40k points which is enough for 4 nights in a category 4 hotel (middle-upper class). After your first year, you get around 1 pt for every $1 that you spend up to $30k. After $30k spending, you only get 1 point for every $2 that you spend.
Here is the SPG rewards chart:Program: Category
1 2 3 4 5 6
Free Night - Weekdays 3,000 4,000 7,000 10,000 12,000 - 16,000 20,000 - 25,000
Free Night - Weekends just 2,000! just 3,000! 7,000 10,000 12,000 - 16,000 20,000 - 25,000
Cash & Points 1,200 Starpoints +$25 1,600 Starpoints + $30 2,800 Starpoints + $45 4,000 Starpoints + $60 n/a n/a
5th Night Free n/a n/a 28,000 40,000 48,000 - 64,000 80,000 - 100,000
Room Upgrade 1,000 - 1,500 1,000 - 1,500 1,000 - 1,500 1,000 - 1,500 1,500 - 2,750 1,500 - 2,750
Suite Upgrade 3,000 4,000 7,000 10,000 12,000 - 16,000 20,000 - 25,000
50% off Regular Rack Rates 1,000 1,000 1,000 1,000 1,000 1,000
Nights & Flights n/a n/a 60,000 70,000 n/a n/a
An example rewards redemption:
Sheraton Bal Harbour Best Resort - Category 4 (Florida)
March Price: $362USD/night (~$480 CAD inc taxes)
Points Required: 10k points/night
Spending Required: $10k (after first year, less during first year)
Return on spending: $480/$10000 = 4.8% RETURN !
So, who has a 1% cash back card? :) This kind of return is a bit on the high end but I typically get around 2.5%-4% return / redemption. Their point system also has a bunch of great features like cash and points, 5th night free and SPG to airline point conversions. The cash and points system (one of my favorites) is where they let you combine cash and points towards selected SPG hotels who join the program. It's really great for people who don't have an obscene amount of points but want to stay at SPG hotels at a substantial discount. The 5th night free is just that, book 5 nights with any of their hotels on points, and you get the 5th night free. So if you booked a Category 4 hotel for 5 nights, it would cost you 40k points instead of 50k. Their SPG to airline points transfer system also offers generous perks where they give you an additional 5k points for every 20k spg points that you transfer. They support a large number of airline point programs (except Aeroplan) :(.
Some other features as mentioned before is a comprehensive warranty/insurance program which includes travel, car rental, and purchase/theft insurance along with double warranty on purchases (for up to 1 year).
Who is this card suited for? This card is best for those who like to travel and spend up to $30k on their primary credit card every year. If you don't pay off your credit cards in FULL every month, this card is NOT for you. They charge around 20% interest/annum.
It may sound like I work for MBNA and even if I did, it would be easy to push this product. But alas, i'm just a regular Joe trying to get the best bang my buck, and the SPG credit card is on top of the rewards (no annual fee) credit card list. Anyone know if there's a MBNA affiliate link? :)
For more info visit:
SPG.com
SPG Forum on Flyertalk
Top Cash Back Credit Cards in Canada
Turkey Launches Ground Operation in Iraq
Feb 22, 7:36 AM (ET)
By CHRISTOPHER TORCHIA
ISTANBUL, Turkey (AP) - Turkish troops launched a ground incursion across the border into Iraq in pursuit of separatist Kurdish rebels, the military said Friday - a move that dramatically escalates Turkey's conflict with the militants.
It is the first confirmed ground operation by the Turkish military into Iraq since the U.S.-led invasion that toppled Saddam Hussein. It also raised concerns that it could trigger a wider conflict with the U.S.-backed Iraqi Kurds, despite Turkey's assurances that its only target was the Kurdistan Workers' Party, or PKK.
The ground operation started after Turkish warplanes and artillery bombed suspected rebel targets on Thursday, the military said on its Web site. The incursion was backed by the Air Force, the statement said.
Turkey has conducted air raids against the PKK guerrillas in northern Iraq since December, with the help of U.S. intelligence, and it has periodically carried out so-called "hot pursuits" in which small units sometimes spend only a few hours inside Iraq.
The announcement of a cross-border, ground incursion of a type that Turkey carried out before the U.S.-led invasion of Iraq in 2003 was a major development in its conflict with the Kurdish rebels, which started in 1984 and has claimed as many as 40,000 lives.
Turkey staged about two-dozen incursions in Iraq during the rule of Saddam, who launched brutal campaigns against the Kurdish population. Some Turkish offensives involved tens of thousands of troops. Results were mixed, with rebels suffering blows to their ranks and supplies but regrouping after the bulk of the Turkish forces had left.
PKK spokesman Ahmad Danas said two Turkish troops were killed and eight wounded in clashes along the 240-mile border, but there was no comment from the Turkish military and no way to independently confirm the claim.
The Kurdish militants are fighting for autonomy in Turkey's predominantly Kurdish southeast, and have carried out attacks on Turkish targets from bases in northern Iraq. The U.S. and the European Union consider the PKK a terrorist organization.
"The Turkish Armed Forces, which values Iraq's territorial integrity and its stability, will return as soon as planned goals are achieved," the military said. "The executed operation will prevent the region from being a permanent and safe base for the terrorists and will contribute to Iraq's stability and internal peace."
Private NTV television said 10,000 troops were taking part in the offensive and had penetrated six miles into Iraq, though some reports said that not all the troops had been deployed. The operation was reportedly concentrated in the Hakurk region, south of the Turkish border town of Cukurca.
The state-run Anatolia agency reported that warplanes were seen taking off from the air base in Diyarbakir in southeast Turkey. It said planes and helicopters were conducting reconnaissance flights over the border region, and that military units were deployed at the border to prevent rebel infiltration.
Dogan News Agency reported that the Habur border crossing, a major conduit for trade between Iraq and Turkey, was closed to vehicle traffic.
CNN-Turk television, however, quoted Deputy Prime Minister Hayati Yazici as saying the border gate was not closed but that priority was being given to Turkish military vehicles. Trucks routinely ferry supplies bound for U.S. military bases in Iraq through the Habur crossing.
Rear Adm. Gregory Smith, a U.S. spokesman in Iraq, said the military had received assurances from its NATO ally Turkey that it would do everything possible to avoid "collateral damage" to innocent civilians or infrastructure.
"Multi-National Forces-Iraq is aware Turkish ground forces have entered into northern Iraq, for what we understand is an operation of limited duration to specifically target PKK terrorists in that region," Smith said in a statement.
"The United States continues to support Turkey's right to defend itself from the terrorist activities of the PKK and has encouraged Turkey to use all available means, to include diplomacy and close coordination with the Government of Iraq to ultimately resolve this issue," he added.
Matthew Bryza, U.S. deputy assistant secretary for southeastern Europe, cited the importance of a Nov. 5 meeting in which President Bush promised Turkish Prime Minister Recep Tayyip Erdogan that Washington would share intelligence on the PKK.
"The land operation is a whole new level," Bryza said in Belgium. "What I can say is that what we've been doing until now has been working quite well."
The European Commission appealed to Turkey to act with restraint.
"Turkey should refrain from taking any disproportionate military action and respect human rights and the rule of law," said Commission spokeswoman Krisztina Nagy.
"The EU understands Turkey's need to protect its population from terrorism," she said. "We encourage Turkey to continue to pursue dialogue with international partners."
Turkish President Abdullah Gul spoke with his Iraqi counterpart Jalal Talabani late Thursday and gave him information about the goals of the operation, Gul's office said. Gul also invited Talabani to visit Turkey.
The military said its target was PKK rebels and that it does not want to harm civilians "and other local groups that do not act in enmity against the Turkish Armed Forces."
Nihat Ali Ozcan, a terrorism expert with the research center TEPAV, said the operation was likely launched to hit the group before the traditional start of the fighting season in the spring.
"I think it is aimed to keep the PKK under pressure before the group starts entering Turkey," he said on CNN-Turk television.
Iraqi border forces officer Col. Hussein Tamer said Turkish shelling on Thursday hit several Kurdish villages in the Sedafan area, some 20 miles from the border.
Jabbar Yawar, a spokesman for Iraqi Kurdish security forces, said sporadic bombing had taken place in the border areas, but no casualties were reported.
Fouad Hussein, a spokesman for the semiautonomous Kurdish government in Iraq, said the Kurdish Peshmerga forces had been put on alert.
He said Iraqi Kurdish forces also had tightened security around bases housing Turkish military monitors operating in northern Iraq with permission from local authorities under a 1996 agreement.
"The government of Kurdistan ordered the Peshmerga forces to be on alert in fear of any Turkish incursion on Iraqi territory," he said, claiming that Turkish military monitors had tried to leave their bases in violation of the accord.
"Those troops tried to move out, but the Peshmerga forces forced them to return to their camps within half an hour," he said.
Turkish media reports said Friday that a total of 1,200 Turkish monitors in four camps in Iraq were helping to coordinate the ground offensive.
By CHRISTOPHER TORCHIA
ISTANBUL, Turkey (AP) - Turkish troops launched a ground incursion across the border into Iraq in pursuit of separatist Kurdish rebels, the military said Friday - a move that dramatically escalates Turkey's conflict with the militants.
It is the first confirmed ground operation by the Turkish military into Iraq since the U.S.-led invasion that toppled Saddam Hussein. It also raised concerns that it could trigger a wider conflict with the U.S.-backed Iraqi Kurds, despite Turkey's assurances that its only target was the Kurdistan Workers' Party, or PKK.
The ground operation started after Turkish warplanes and artillery bombed suspected rebel targets on Thursday, the military said on its Web site. The incursion was backed by the Air Force, the statement said.
Turkey has conducted air raids against the PKK guerrillas in northern Iraq since December, with the help of U.S. intelligence, and it has periodically carried out so-called "hot pursuits" in which small units sometimes spend only a few hours inside Iraq.
The announcement of a cross-border, ground incursion of a type that Turkey carried out before the U.S.-led invasion of Iraq in 2003 was a major development in its conflict with the Kurdish rebels, which started in 1984 and has claimed as many as 40,000 lives.
Turkey staged about two-dozen incursions in Iraq during the rule of Saddam, who launched brutal campaigns against the Kurdish population. Some Turkish offensives involved tens of thousands of troops. Results were mixed, with rebels suffering blows to their ranks and supplies but regrouping after the bulk of the Turkish forces had left.
PKK spokesman Ahmad Danas said two Turkish troops were killed and eight wounded in clashes along the 240-mile border, but there was no comment from the Turkish military and no way to independently confirm the claim.
The Kurdish militants are fighting for autonomy in Turkey's predominantly Kurdish southeast, and have carried out attacks on Turkish targets from bases in northern Iraq. The U.S. and the European Union consider the PKK a terrorist organization.
"The Turkish Armed Forces, which values Iraq's territorial integrity and its stability, will return as soon as planned goals are achieved," the military said. "The executed operation will prevent the region from being a permanent and safe base for the terrorists and will contribute to Iraq's stability and internal peace."
Private NTV television said 10,000 troops were taking part in the offensive and had penetrated six miles into Iraq, though some reports said that not all the troops had been deployed. The operation was reportedly concentrated in the Hakurk region, south of the Turkish border town of Cukurca.
The state-run Anatolia agency reported that warplanes were seen taking off from the air base in Diyarbakir in southeast Turkey. It said planes and helicopters were conducting reconnaissance flights over the border region, and that military units were deployed at the border to prevent rebel infiltration.
Dogan News Agency reported that the Habur border crossing, a major conduit for trade between Iraq and Turkey, was closed to vehicle traffic.
CNN-Turk television, however, quoted Deputy Prime Minister Hayati Yazici as saying the border gate was not closed but that priority was being given to Turkish military vehicles. Trucks routinely ferry supplies bound for U.S. military bases in Iraq through the Habur crossing.
Rear Adm. Gregory Smith, a U.S. spokesman in Iraq, said the military had received assurances from its NATO ally Turkey that it would do everything possible to avoid "collateral damage" to innocent civilians or infrastructure.
"Multi-National Forces-Iraq is aware Turkish ground forces have entered into northern Iraq, for what we understand is an operation of limited duration to specifically target PKK terrorists in that region," Smith said in a statement.
"The United States continues to support Turkey's right to defend itself from the terrorist activities of the PKK and has encouraged Turkey to use all available means, to include diplomacy and close coordination with the Government of Iraq to ultimately resolve this issue," he added.
Matthew Bryza, U.S. deputy assistant secretary for southeastern Europe, cited the importance of a Nov. 5 meeting in which President Bush promised Turkish Prime Minister Recep Tayyip Erdogan that Washington would share intelligence on the PKK.
"The land operation is a whole new level," Bryza said in Belgium. "What I can say is that what we've been doing until now has been working quite well."
The European Commission appealed to Turkey to act with restraint.
"Turkey should refrain from taking any disproportionate military action and respect human rights and the rule of law," said Commission spokeswoman Krisztina Nagy.
"The EU understands Turkey's need to protect its population from terrorism," she said. "We encourage Turkey to continue to pursue dialogue with international partners."
Turkish President Abdullah Gul spoke with his Iraqi counterpart Jalal Talabani late Thursday and gave him information about the goals of the operation, Gul's office said. Gul also invited Talabani to visit Turkey.
The military said its target was PKK rebels and that it does not want to harm civilians "and other local groups that do not act in enmity against the Turkish Armed Forces."
Nihat Ali Ozcan, a terrorism expert with the research center TEPAV, said the operation was likely launched to hit the group before the traditional start of the fighting season in the spring.
"I think it is aimed to keep the PKK under pressure before the group starts entering Turkey," he said on CNN-Turk television.
Iraqi border forces officer Col. Hussein Tamer said Turkish shelling on Thursday hit several Kurdish villages in the Sedafan area, some 20 miles from the border.
Jabbar Yawar, a spokesman for Iraqi Kurdish security forces, said sporadic bombing had taken place in the border areas, but no casualties were reported.
Fouad Hussein, a spokesman for the semiautonomous Kurdish government in Iraq, said the Kurdish Peshmerga forces had been put on alert.
He said Iraqi Kurdish forces also had tightened security around bases housing Turkish military monitors operating in northern Iraq with permission from local authorities under a 1996 agreement.
"The government of Kurdistan ordered the Peshmerga forces to be on alert in fear of any Turkish incursion on Iraqi territory," he said, claiming that Turkish military monitors had tried to leave their bases in violation of the accord.
"Those troops tried to move out, but the Peshmerga forces forced them to return to their camps within half an hour," he said.
Turkish media reports said Friday that a total of 1,200 Turkish monitors in four camps in Iraq were helping to coordinate the ground offensive.
Vegas Nightclub Doormen Making $500,000 -- A YEAR!
NORM: Feds take a look at LV cash flow
A lot of people saw it coming.
Rumors have been flying for more than a year that the high-flying, cash-laden nightclub scene was being scrutinized by the feds.
The shoe dropped Wednesday when the Internal Revenue Service and other law enforcement authorities raided Pure nightclub and Pure Management Group headquarters, confiscating a number of computers.
Cash-heavy operations are known to get the attention of the IRS.
Sources have been telling me that doormen at several clubs are clearing $8,000 to $10,000 a night before they share tips. So much cash is pouring in that some doormen are making $400,000 to $500,000 a year, several nightclub executives told me.
"Pure has guys at the door making more than the president," said one executive with intimate knowledge of the cover-charge system. He was referring to the annual salary of the president of the United States, which is $400,000, plus benefits.
A Pure executive told me over the weekend that 5,000 people showed up for Paris Hilton's 27th birthday party and her guest appearance with the Pussycat Dolls.
About six months ago, on a busy night at Pure, I overheard two men bitterly complaining about the cover charge. "They wanted $1,000 per person. I said the highest I'd go was $800!" one said.
It's not just Pure, the largest club in town with a capacity of 2,400. Grumbles about nightclub gouging have been growing louder.
In my nearly completed book "Vegas Confidential: Sinsational Celebrity Tales," I write: "It's no secret that most clubs understand that the longer the line the higher the anxiety. That's where the 'line slide' comes in.
"If people have been waiting all night, they're not going to go somewhere else and start over," said a club exec (not at Pure).
"Club employees, usually the size of big league umpires, will go down the line and fish for people who really want to get in. The line guy might get $200, but now everyone in the group is still going to have to pay a $30 to $40 cover charge. Sometimes, the doorman demands more, maybe $50 to $100 per person."
Then there's bottle service, which means you have to buy a bottle to sit in the VIP section. The usual requirement is one bottle per three patrons. Two-bottle minimums are not uncommon. Bottles at most clubs are going for $350 to $650 a piece.
A lot of people saw it coming.
Rumors have been flying for more than a year that the high-flying, cash-laden nightclub scene was being scrutinized by the feds.
The shoe dropped Wednesday when the Internal Revenue Service and other law enforcement authorities raided Pure nightclub and Pure Management Group headquarters, confiscating a number of computers.
Cash-heavy operations are known to get the attention of the IRS.
Sources have been telling me that doormen at several clubs are clearing $8,000 to $10,000 a night before they share tips. So much cash is pouring in that some doormen are making $400,000 to $500,000 a year, several nightclub executives told me.
"Pure has guys at the door making more than the president," said one executive with intimate knowledge of the cover-charge system. He was referring to the annual salary of the president of the United States, which is $400,000, plus benefits.
A Pure executive told me over the weekend that 5,000 people showed up for Paris Hilton's 27th birthday party and her guest appearance with the Pussycat Dolls.
About six months ago, on a busy night at Pure, I overheard two men bitterly complaining about the cover charge. "They wanted $1,000 per person. I said the highest I'd go was $800!" one said.
It's not just Pure, the largest club in town with a capacity of 2,400. Grumbles about nightclub gouging have been growing louder.
In my nearly completed book "Vegas Confidential: Sinsational Celebrity Tales," I write: "It's no secret that most clubs understand that the longer the line the higher the anxiety. That's where the 'line slide' comes in.
"If people have been waiting all night, they're not going to go somewhere else and start over," said a club exec (not at Pure).
"Club employees, usually the size of big league umpires, will go down the line and fish for people who really want to get in. The line guy might get $200, but now everyone in the group is still going to have to pay a $30 to $40 cover charge. Sometimes, the doorman demands more, maybe $50 to $100 per person."
Then there's bottle service, which means you have to buy a bottle to sit in the VIP section. The usual requirement is one bottle per three patrons. Two-bottle minimums are not uncommon. Bottles at most clubs are going for $350 to $650 a piece.
Zimbabwe Inflation hits 100 580% .
ZIMBABWE’S year-on-year inflation for January has breached the 100 000% barrier after picking up 34 367,9 percentage points to hit a new high of 100 580,2%.
All indications are that the economy will crumble further this year.
Figures released last week showed that the year-on-year inflation figure for December 2007 stood at 66 212,3%.
The January inflation figure means that prices as measured by all items on the Consumer Price Index (CPI) increased by an average 100 580,2% between January 2007 and January 2008.
Food and non-alcoholic beverage inflation was at 105 580,2% while the non-food and alcoholic stood at 97 885,7%.
The Central Statistical Office (CSO) said the month-on-month inflation for January was 120,8% indicating a 119,3 percentage points drop on the December figure of 240,1%. "The month-on-month food and non-alcoholic beverages inflation stood at 86,9% in January 2008," the CSO said.
On the month-on-month basis the non-food inflation stood at 147,8% showing a drop of 51,2 percentage points on the December figure of 199%.
The surge in inflation came as the fragile Zimbabwean dollar continued to crumble against the major currencies.
The Zimbabwe dollar which ended last week at $6,5 million against the United States dollar was by yesterday trading at $11 million. Foreign market traders expect it to reach $15 million by the end of next week. The Zimbabwean dollar also continued to weaken against the rand and the pound sterling. — Staff Writer.
All indications are that the economy will crumble further this year.
Figures released last week showed that the year-on-year inflation figure for December 2007 stood at 66 212,3%.
The January inflation figure means that prices as measured by all items on the Consumer Price Index (CPI) increased by an average 100 580,2% between January 2007 and January 2008.
Food and non-alcoholic beverage inflation was at 105 580,2% while the non-food and alcoholic stood at 97 885,7%.
The Central Statistical Office (CSO) said the month-on-month inflation for January was 120,8% indicating a 119,3 percentage points drop on the December figure of 240,1%. "The month-on-month food and non-alcoholic beverages inflation stood at 86,9% in January 2008," the CSO said.
On the month-on-month basis the non-food inflation stood at 147,8% showing a drop of 51,2 percentage points on the December figure of 199%.
The surge in inflation came as the fragile Zimbabwean dollar continued to crumble against the major currencies.
The Zimbabwe dollar which ended last week at $6,5 million against the United States dollar was by yesterday trading at $11 million. Foreign market traders expect it to reach $15 million by the end of next week. The Zimbabwean dollar also continued to weaken against the rand and the pound sterling. — Staff Writer.
Wednesday, February 20, 2008
The Sting
"Society is nothing more than a large group of single individuals. In order to understand society you must understand how a single individual thinks and acts. Since you are an individual, if you understand what motivates you, you can understand society. Let us return to the island.
Once cast onto your deserted island, all you need do to raise your standard of living is work hard and create more wealth. The more wealth you create, the higher your standard of living. As your work improves your life, you will be stimulated to work even harder. Successful effort begets more effort. But it works the other way, too. Anything that destroys or steals away your wealth or anything that causes you to abandon your labors and thus reduces production, will cause your standard of living to fall. If you try to grow a vegetable garden and the wild pigs keep breaking down your fence and eating your plants before you can harvest them, you will shift your labor away from growing the vegetables and devote it instead to either doing battle with the pigs, building stronger fences or doing something else that yields greater wealth for the effort involved. The theft of your plants by the pigs could lead you to give up gardening altogether.
In the same way, if other people rob you of the fruits of your labor, that, too, will discourage you from continuing to work. Again, you will be forced to devote your energy to defending your property and that will take away from the time you have to produce. Moreover, if someone is successful in stealing from you, that person will have no incentive to produce things himself and thus his production will fall. Theft destroys your incentive to work, as well as the thief's.
The important conclusion to be derived from this is that theft ultimately results in lower production and thus in a lower standard of living for the average member of society. This is the most important conclusion that you will get from this book. If you understand it - really understand it - that understanding will alter almost every economic action you take. Theft is not a moral problem; it is a practical problem. Theft destroys production and everyone, even the thief, eventually loses."
Once cast onto your deserted island, all you need do to raise your standard of living is work hard and create more wealth. The more wealth you create, the higher your standard of living. As your work improves your life, you will be stimulated to work even harder. Successful effort begets more effort. But it works the other way, too. Anything that destroys or steals away your wealth or anything that causes you to abandon your labors and thus reduces production, will cause your standard of living to fall. If you try to grow a vegetable garden and the wild pigs keep breaking down your fence and eating your plants before you can harvest them, you will shift your labor away from growing the vegetables and devote it instead to either doing battle with the pigs, building stronger fences or doing something else that yields greater wealth for the effort involved. The theft of your plants by the pigs could lead you to give up gardening altogether.
In the same way, if other people rob you of the fruits of your labor, that, too, will discourage you from continuing to work. Again, you will be forced to devote your energy to defending your property and that will take away from the time you have to produce. Moreover, if someone is successful in stealing from you, that person will have no incentive to produce things himself and thus his production will fall. Theft destroys your incentive to work, as well as the thief's.
The important conclusion to be derived from this is that theft ultimately results in lower production and thus in a lower standard of living for the average member of society. This is the most important conclusion that you will get from this book. If you understand it - really understand it - that understanding will alter almost every economic action you take. Theft is not a moral problem; it is a practical problem. Theft destroys production and everyone, even the thief, eventually loses."
America's economy risks the mother of all meltdowns
By Martin Wolf
Tue Feb 19, 1:25 PM ET
"I would tell audiences that we were facing not a bubble but a froth - lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy." Alan Greenspan, The Age of Turbulence.
That used to be Mr Greenspan's view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor.
Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome"**. The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe."
Prof Roubini is even fonder of lists than I am. Here are his 12 - yes, 12 - steps to financial disaster.
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had "reckless or toxic features", argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks' ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The "credit crunch" would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a "fat tail" of companies has low profitability and heavy debt. Such defaults would spread losses in "credit default swaps", which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be "a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices".
These, then, are 12 steps to meltdown. In all, argues Prof Roubini: "Total losses in the financial system will add up to more than $1,000bn and the economic recession will become deeper more protracted and severe." This, he suggests, is the "nightmare scenario" keeping Ben Bernanke and colleagues at the US Federal Reserve awake. It explains why, having failed to appreciate the dangers for so long, the Fed has lowered rates by 200 basis points this year. This is insurance against a financial meltdown.
Is this kind of scenario at least plausible? It is. Furthermore, we can be confident that it would, if it came to pass, end all stories about "decoupling". If it lasts six quarters, as Prof Roubini warns, offsetting policy action in the rest of the world would be too little, too late.
Can the Fed head this danger off? In a subsequent piece, Prof Roubini gives eight reasons why it cannot***. (He really loves lists!) These are, in brief: US monetary easing is constrained by risks to the dollar and inflation; aggressive easing deals only with illiquidity, not insolvency; the monoline insurers will lose their credit ratings, with dire consequences; overall losses will be too large for sovereign wealth funds to deal with; public intervention is too small to stabilise housing losses; the Fed cannot address the problems of the shadow financial system; regulators cannot find a good middle way between transparency over losses and regulatory forbearance, both of which are needed; and, finally, the transactions-oriented financial system is itself in deep crisis.
The risks are indeed high and the ability of the authorities to deal with them more limited than most people hope. This is not to suggest that there are no ways out. Unfortunately, they are poisonous ones. In the last resort, governments resolve financial crises. This is an iron law. Rescues can occur via overt government assumption of bad debt, inflation, or both. Japan chose the first, much to the distaste of its ministry of finance. But Japan is a creditor country whose savers have complete confidence in the solvency of their government. The US, however, is a debtor. It must keep the trust of foreigners. Should it fail to do so, the inflationary solution becomes probable. This is quite enough to explain why gold costs $920 an ounce.
The connection between the bursting of the housing bubble and the fragility of the financial system has created huge dangers, for the US and the rest of the world. The US public sector is now coming to the rescue, led by the Fed. In the end, they will succeed. But the journey is likely to be wretchedly uncomfortable.
*A Coming Recession in the US Economy? July 17 2006, www.rgemonitor.com; **The Rising Risk of a Systemic Financial Meltdown, February 5 2008; ***Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not, February 8 2008
Tue Feb 19, 1:25 PM ET
"I would tell audiences that we were facing not a bubble but a froth - lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy." Alan Greenspan, The Age of Turbulence.
That used to be Mr Greenspan's view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor.
Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome"**. The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe."
Prof Roubini is even fonder of lists than I am. Here are his 12 - yes, 12 - steps to financial disaster.
Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had "reckless or toxic features", argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks' ability to offer credit.
Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The "credit crunch" would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a "fat tail" of companies has low profitability and heavy debt. Such defaults would spread losses in "credit default swaps", which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be "a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices".
These, then, are 12 steps to meltdown. In all, argues Prof Roubini: "Total losses in the financial system will add up to more than $1,000bn and the economic recession will become deeper more protracted and severe." This, he suggests, is the "nightmare scenario" keeping Ben Bernanke and colleagues at the US Federal Reserve awake. It explains why, having failed to appreciate the dangers for so long, the Fed has lowered rates by 200 basis points this year. This is insurance against a financial meltdown.
Is this kind of scenario at least plausible? It is. Furthermore, we can be confident that it would, if it came to pass, end all stories about "decoupling". If it lasts six quarters, as Prof Roubini warns, offsetting policy action in the rest of the world would be too little, too late.
Can the Fed head this danger off? In a subsequent piece, Prof Roubini gives eight reasons why it cannot***. (He really loves lists!) These are, in brief: US monetary easing is constrained by risks to the dollar and inflation; aggressive easing deals only with illiquidity, not insolvency; the monoline insurers will lose their credit ratings, with dire consequences; overall losses will be too large for sovereign wealth funds to deal with; public intervention is too small to stabilise housing losses; the Fed cannot address the problems of the shadow financial system; regulators cannot find a good middle way between transparency over losses and regulatory forbearance, both of which are needed; and, finally, the transactions-oriented financial system is itself in deep crisis.
The risks are indeed high and the ability of the authorities to deal with them more limited than most people hope. This is not to suggest that there are no ways out. Unfortunately, they are poisonous ones. In the last resort, governments resolve financial crises. This is an iron law. Rescues can occur via overt government assumption of bad debt, inflation, or both. Japan chose the first, much to the distaste of its ministry of finance. But Japan is a creditor country whose savers have complete confidence in the solvency of their government. The US, however, is a debtor. It must keep the trust of foreigners. Should it fail to do so, the inflationary solution becomes probable. This is quite enough to explain why gold costs $920 an ounce.
The connection between the bursting of the housing bubble and the fragility of the financial system has created huge dangers, for the US and the rest of the world. The US public sector is now coming to the rescue, led by the Fed. In the end, they will succeed. But the journey is likely to be wretchedly uncomfortable.
*A Coming Recession in the US Economy? July 17 2006, www.rgemonitor.com; **The Rising Risk of a Systemic Financial Meltdown, February 5 2008; ***Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not, February 8 2008
WORST FINANCIAL CRISIS SINCE 1931? German State-Owned Banks on Verge of Collapse
WORST FINANCIAL CRISIS SINCE 1931?
German State-Owned Banks on Verge of Collapse
By Wolfgang Reuter
The German government has had to bail out state-owned banks with taxpayers' money after their managements recklessly gambled away billions on subprime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy.
AP
The future is far from bright for Germany's banks.
Ingrid Matthäus-Maier, a member of the center-left Social Democratic Party (SPD) and the CEO of the state-owned KfW banking group, is undoubtedly in one of Germany's highest earnings brackets. Although her annual salary of €418,000 ($614,000) is substantially lower than that of her counterpart at Deutsche Bank, Josef Ackermann, who earns a tidy €13 million a year, she does earn more than twice the salary of German Chancellor Angela Merkel, who has to make do with a mere €200,000.
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That's nice for Matthäus-Maier. A lawyer by profession who was a financial expert for the SPD for many years, she would not have been able to get on the board of a private bank in 1999, the year she joined the board of KfW -- she lacked the banking experience required by law. But KfW is not subject to the same regulations as other banks, which explains why Matthäus-Maier doesn't owe government auditors an explanation -- not even now, in the wake of recent public accusations that she botched the IKB crisis.
As the head of KfW, Matthäus-Maier is a major shareholder in IKB, the Düsseldorf-based bank that is on the brink of bankruptcy and is only being kept afloat by a series of government bailouts running into the billions. Last week was marked by one crisis meeting after the next, but the headstrong government banker had more than the future of IKB on her mind. Indeed, she seemed more concerned about her employment contract and whether it would be extended. Her demands triggered an irritated reaction from the head of the KfW supervisory board, Economics Minister Michael Glos, as well as from others present at the meetings.
Two days later, it was announced that former IKB CEO Stefan Ortseifen could look forward to a princely retirement pension of €31,500 a month -- effectively a token of appreciation for his failures. Ortseifen, after investing billions in the high-risk US subprime mortgage sector, insisted that the "uncertainties in the American mortgage market" would have "practically no effect" on IKB's investments. A few days later, IKB was on the verge of bankruptcy, with its supposed wonderful US investments worth little more than the paper it was printed on.
And German banks are not the only ones being hard hit by the subprime crisis. In the UK, the government earlier this week announced plans to temporarily nationalize the troubled bank Northern Rock until market conditions improved. The bank ran into difficulties last year as a result of the global credit crunch and was forced to ask the Bank of England for a bail-out. The House of Commons passed emergency legislation to nationalize the bank in the early hours of Wednesday morning, and the bill is expected to be approved by the House of Lords by the end of the week.
Amateurism and Greed
Ortseifen and Matthäus-Maier are perfect examples of the fatal mix of amateurism, greed and political protection that is symptomatic for many of Germany's state-owned, partially state-owned and public sector banks. It is an environment that can only thrive in the shadow of the state -- and that has drained more than €20 billion from the public treasury within the last decade.
AP
KfW's Ingrid Matthäus-Maier is accused of botching the IKB crisis.
Until now, the government has always been there to pick up the tab in the end. Fully aware of this safety net, the executives at state-owned banks gambled with their employers' assets as if there was no tomorrow. Munich-based BayernLB did it with stocks in Singapore, Bankgesellschaft Berlin with real estate investments, and WestLB with holdings in British companies.
Anyone who is not responsible for bearing the consequences of the risks he or she takes can easily turn into a gambler. And the bets kept increasing in recent years, getting more and more public-sector banks into financial hot water. Now the banks find themselves lacking the assets they need to weather the turmoil of an international financial crisis.
Matthäus-Maier's bank KfW has already had to provide IKB with close to €5 billion in a series of three bailouts. With KfW itself gradually running out of cash, the federal government has now contributed another €1.9 billion.
The state of North Rhine-Westphalia has injected €1 billion into WestLB, another state-owned bank, as well as providing the ailing bank with another €3 billion in loan guarantees. The situation is even worse in Saxony, where the state has issued €2.73 billion in loan guarantees to Sachsen LB, that state's Landesbank, as Germany's state-backed regional banks are known. The other state-owned banks are providing another €14 billion in guarantees. Hamburg-based HSH Nordbank urgently needs €1 billion in fresh capital, while BayernLB last week reported a €1.9 billion write-down as a result of subprime exposure. BayernLB announced Tuesday that the bank's chief executive, Werner Schmidt, will be stepping down as of March 1 as a result of the crisis.
The situation for Germany's public banks has become so dramatic that it threatens to topple what has been one of the key pillars of the country's banking system. The state-owned banks are supposed to bail each other out when necessary, but the problem is that many are in trouble themselves and hardly in a position to help their peers. And things could get even worse.
If an industry giant like WestLB were forced to its knees -- which almost happened two weeks ago -- at least two other state-owned banks and a dozen savings and loan associations would crumple along with it. The member banks of the German Savings Banks Finance Group (Sparkassen-Finanzgruppe) are closely interlinked, and they are required to vouch for each other -- as long as they are in a position to do so, that is. The failure of a major state-owned bank like WestLB would also inevitably affect corporate customers, even forcing some into bankruptcy.
DER SPIEGEL
Graphic: The federal government's rescue measures for IKB (click to enlarge)
It is a nightmare scenario that the government financial supervisory authority now believes is increasingly likely. Germany's public-sector banks speculated far more heavily than private banks in American subprime mortgage securities. Now these banks' beleaguered executives are calling on the government to bail them out from a disaster of their own making.
It is a paradoxical situation, because the government, responding to pressure from Brussels, was required to withdraw its guarantee of protection for state-owned banks as of July 2005. Since then, it has only been liable for risks incurred before that date.
The consequences of the change were devastating for the public-sector banks, which suddenly found their business model pulled out from under their feet. In the days of government backing, they were able to borrow money at lower rates, which in turn allowed them to offer loans at lower rates than their private competitors. But that advantage ended in 2005.
Hard up for funds, many of the public-sector banks began speculating with high-risk securities. According to a former bank executive, many "literally stocked up on these investments" shortly before the cut-off date. Others even continued to do so after the cut-off date. Lacking a functioning business model, they turned to what was essentially gambling -- and lost.
The hard-hit German banks are now trying desperately to save their skins. The situation is most dramatic at Düsseldorf-based IKB, the first German bank that was almost driven into bankruptcy by the US real estate crisis. Last week, once again, IKB's equity capital vanished into thin air. Jochen Sanio, president of Germany's banking supervisory agency BaFin, threatened to close the bank on Friday unless it could raise €1.5 billion ($2.2 billion). But KfW, IKB's biggest shareholder, was no longer able to bail out the Düsseldorf bank without jeopardizing its official mission, namely supporting small and mid-sized businesses.
DPA
IKB has received several state bailouts.
In the end, the federal government and private banks came up with the funds for the bailout. For Finance Minister Peer Steinbrück, it was critical that IKB not be allowed to go under. The bankruptcy of a bank with such a high credit rating would trigger an unprecedented loss of confidence in the German financial market. In addition, a number of other banks had deposits at IKB worth a total of €18 billion.
"The issue here is ultimately about choosing the lesser evil, and about what is less damaging to the economy," Steinbrück explained at last Wednesday's meeting of the KfW supervisory board, shortly before the board decided to bail out the bank once again. Last Friday, the finance ministry justified the financial injection in a letter to the budget committee of the German parliament, the Bundestag: "Otherwise, we could have seen massive effects on the banking sector, with corresponding effects on the real economy."
A short time earlier, it had been WestLB that was almost ruined by the US subprime mortgage crisis. In a crisis meeting two weeks ago, the two savings and loan associations in North Rhine-Westphalia that own half of WestLB had to admit that they were unable to come up with €1 billion in fresh capital for the ailing bank. They insisted that it was up to the state to cover another €3 billion in risks.
But the state refused, arguing that the savings banks had declined to pledge their shares in WestLB to the state in return for its assumption of the risk, just as they had refused to bring in a private investor. The two sides became embroiled in heated negotiations, until Axel Weber, the head of the German central bank, the Bundesbank, intervened.
Weber proved to be persuasive. Köln-Bonner Sparkasse, a savings bank, had €340 million in deposits with WestLB, which it would be forced to write off if the bank went under. In other words, Weber argued, a WestLB failure would deeply jeopardize Köln-Bonner Sparkasse, as well as at least three other savings banks in North Rhine-Westphalia.
If that happened, the corporate customers of the affected banks could end up without access to their money for weeks, possibly even months. Despite the fact that the customers' deposits are in fact guaranteed, any bank insolvency is preceded by a moratorium on all bank transactions. This, Weber argued, would only lead to further bankruptcies, especially since the remaining savings banks in North Rhine-Westphalia, as their association presidents conceded, would have trouble satisfying the regional economy's liquidity requirements, because they already have a total of €43 billion in WestLB loans on their books. Furthermore, many of these banks also invested in American subprime mortgage securities, which they too would have to write off. The Westphalia-Lippe savings bank association, for instance, invested €100 million in the securities that triggered the worldwide financial crisis.
The officials involved painted grim scenarios. What would happen if customers were to withdraw their deposits from the savings banks en masse? And what if the insolvency of WestLB led to difficulties at two other state-owned banks, HSH Nordbank and BayernLB? How would that affect Bavaria and Hamburg, where the banks are headquartered? Would the public-sector banking system even be capable of surviving the failure of three state-owned banks? Could this in fact lead to the collapse of the entire economy, which would affect growth rates, unemployment and, ultimately, the well-being of society for many years to come? In the end, the participants were so drained that they agreed to a compromise.
Six months ago, BaFin president Jochen Sanio was heavily criticized when he warned of the "worst financial crisis since 1931." But now many politicians are convinced that the situation is far more serious than they had assumed until now.
In an effort to confront the crisis head-on, Jürgen Rüttgers, the governor of North Rhine-Westphalia, has urged Finance Minister Steinbrück to set up a round table of all the parties involved so they can discuss the issue and reach some kind of solution.
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The federal states could still restructure the state-owned banking sector -- by allowing private minority shareholders, for example, or by merging their banks. If a crash does occur, third parties will be dictating the conditions. There will be fire sales, as was the case in Saxony, at significantly less-favorable prices.
But Steinbrück is hesitant. He recently told advisors that if he gives in to Rüttgers' demands, he could end up being "stuck" with the problems. There are also growing calls for the federal government to bail out the states and help them solve their problems. But this is something Steinbrück is apparently unwilling to consider.
The minister also has other things on his agenda -- his fellow SPD member Matthäus-Maier's contract, for example, which will not be extended, but also isn't set to expire until mid-2009. That's when someone else will take over at the helm of KfW -- and that person will be nominated by Angela Merkel's Christian Democrats.
Translated from the German by Christopher Sultan
German State-Owned Banks on Verge of Collapse
By Wolfgang Reuter
The German government has had to bail out state-owned banks with taxpayers' money after their managements recklessly gambled away billions on subprime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy.
AP
The future is far from bright for Germany's banks.
Ingrid Matthäus-Maier, a member of the center-left Social Democratic Party (SPD) and the CEO of the state-owned KfW banking group, is undoubtedly in one of Germany's highest earnings brackets. Although her annual salary of €418,000 ($614,000) is substantially lower than that of her counterpart at Deutsche Bank, Josef Ackermann, who earns a tidy €13 million a year, she does earn more than twice the salary of German Chancellor Angela Merkel, who has to make do with a mere €200,000.
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Find out how you can reprint this DER SPIEGEL article in your publication.
That's nice for Matthäus-Maier. A lawyer by profession who was a financial expert for the SPD for many years, she would not have been able to get on the board of a private bank in 1999, the year she joined the board of KfW -- she lacked the banking experience required by law. But KfW is not subject to the same regulations as other banks, which explains why Matthäus-Maier doesn't owe government auditors an explanation -- not even now, in the wake of recent public accusations that she botched the IKB crisis.
As the head of KfW, Matthäus-Maier is a major shareholder in IKB, the Düsseldorf-based bank that is on the brink of bankruptcy and is only being kept afloat by a series of government bailouts running into the billions. Last week was marked by one crisis meeting after the next, but the headstrong government banker had more than the future of IKB on her mind. Indeed, she seemed more concerned about her employment contract and whether it would be extended. Her demands triggered an irritated reaction from the head of the KfW supervisory board, Economics Minister Michael Glos, as well as from others present at the meetings.
Two days later, it was announced that former IKB CEO Stefan Ortseifen could look forward to a princely retirement pension of €31,500 a month -- effectively a token of appreciation for his failures. Ortseifen, after investing billions in the high-risk US subprime mortgage sector, insisted that the "uncertainties in the American mortgage market" would have "practically no effect" on IKB's investments. A few days later, IKB was on the verge of bankruptcy, with its supposed wonderful US investments worth little more than the paper it was printed on.
And German banks are not the only ones being hard hit by the subprime crisis. In the UK, the government earlier this week announced plans to temporarily nationalize the troubled bank Northern Rock until market conditions improved. The bank ran into difficulties last year as a result of the global credit crunch and was forced to ask the Bank of England for a bail-out. The House of Commons passed emergency legislation to nationalize the bank in the early hours of Wednesday morning, and the bill is expected to be approved by the House of Lords by the end of the week.
Amateurism and Greed
Ortseifen and Matthäus-Maier are perfect examples of the fatal mix of amateurism, greed and political protection that is symptomatic for many of Germany's state-owned, partially state-owned and public sector banks. It is an environment that can only thrive in the shadow of the state -- and that has drained more than €20 billion from the public treasury within the last decade.
AP
KfW's Ingrid Matthäus-Maier is accused of botching the IKB crisis.
Until now, the government has always been there to pick up the tab in the end. Fully aware of this safety net, the executives at state-owned banks gambled with their employers' assets as if there was no tomorrow. Munich-based BayernLB did it with stocks in Singapore, Bankgesellschaft Berlin with real estate investments, and WestLB with holdings in British companies.
Anyone who is not responsible for bearing the consequences of the risks he or she takes can easily turn into a gambler. And the bets kept increasing in recent years, getting more and more public-sector banks into financial hot water. Now the banks find themselves lacking the assets they need to weather the turmoil of an international financial crisis.
Matthäus-Maier's bank KfW has already had to provide IKB with close to €5 billion in a series of three bailouts. With KfW itself gradually running out of cash, the federal government has now contributed another €1.9 billion.
The state of North Rhine-Westphalia has injected €1 billion into WestLB, another state-owned bank, as well as providing the ailing bank with another €3 billion in loan guarantees. The situation is even worse in Saxony, where the state has issued €2.73 billion in loan guarantees to Sachsen LB, that state's Landesbank, as Germany's state-backed regional banks are known. The other state-owned banks are providing another €14 billion in guarantees. Hamburg-based HSH Nordbank urgently needs €1 billion in fresh capital, while BayernLB last week reported a €1.9 billion write-down as a result of subprime exposure. BayernLB announced Tuesday that the bank's chief executive, Werner Schmidt, will be stepping down as of March 1 as a result of the crisis.
The situation for Germany's public banks has become so dramatic that it threatens to topple what has been one of the key pillars of the country's banking system. The state-owned banks are supposed to bail each other out when necessary, but the problem is that many are in trouble themselves and hardly in a position to help their peers. And things could get even worse.
If an industry giant like WestLB were forced to its knees -- which almost happened two weeks ago -- at least two other state-owned banks and a dozen savings and loan associations would crumple along with it. The member banks of the German Savings Banks Finance Group (Sparkassen-Finanzgruppe) are closely interlinked, and they are required to vouch for each other -- as long as they are in a position to do so, that is. The failure of a major state-owned bank like WestLB would also inevitably affect corporate customers, even forcing some into bankruptcy.
DER SPIEGEL
Graphic: The federal government's rescue measures for IKB (click to enlarge)
It is a nightmare scenario that the government financial supervisory authority now believes is increasingly likely. Germany's public-sector banks speculated far more heavily than private banks in American subprime mortgage securities. Now these banks' beleaguered executives are calling on the government to bail them out from a disaster of their own making.
It is a paradoxical situation, because the government, responding to pressure from Brussels, was required to withdraw its guarantee of protection for state-owned banks as of July 2005. Since then, it has only been liable for risks incurred before that date.
The consequences of the change were devastating for the public-sector banks, which suddenly found their business model pulled out from under their feet. In the days of government backing, they were able to borrow money at lower rates, which in turn allowed them to offer loans at lower rates than their private competitors. But that advantage ended in 2005.
Hard up for funds, many of the public-sector banks began speculating with high-risk securities. According to a former bank executive, many "literally stocked up on these investments" shortly before the cut-off date. Others even continued to do so after the cut-off date. Lacking a functioning business model, they turned to what was essentially gambling -- and lost.
The hard-hit German banks are now trying desperately to save their skins. The situation is most dramatic at Düsseldorf-based IKB, the first German bank that was almost driven into bankruptcy by the US real estate crisis. Last week, once again, IKB's equity capital vanished into thin air. Jochen Sanio, president of Germany's banking supervisory agency BaFin, threatened to close the bank on Friday unless it could raise €1.5 billion ($2.2 billion). But KfW, IKB's biggest shareholder, was no longer able to bail out the Düsseldorf bank without jeopardizing its official mission, namely supporting small and mid-sized businesses.
DPA
IKB has received several state bailouts.
In the end, the federal government and private banks came up with the funds for the bailout. For Finance Minister Peer Steinbrück, it was critical that IKB not be allowed to go under. The bankruptcy of a bank with such a high credit rating would trigger an unprecedented loss of confidence in the German financial market. In addition, a number of other banks had deposits at IKB worth a total of €18 billion.
"The issue here is ultimately about choosing the lesser evil, and about what is less damaging to the economy," Steinbrück explained at last Wednesday's meeting of the KfW supervisory board, shortly before the board decided to bail out the bank once again. Last Friday, the finance ministry justified the financial injection in a letter to the budget committee of the German parliament, the Bundestag: "Otherwise, we could have seen massive effects on the banking sector, with corresponding effects on the real economy."
A short time earlier, it had been WestLB that was almost ruined by the US subprime mortgage crisis. In a crisis meeting two weeks ago, the two savings and loan associations in North Rhine-Westphalia that own half of WestLB had to admit that they were unable to come up with €1 billion in fresh capital for the ailing bank. They insisted that it was up to the state to cover another €3 billion in risks.
But the state refused, arguing that the savings banks had declined to pledge their shares in WestLB to the state in return for its assumption of the risk, just as they had refused to bring in a private investor. The two sides became embroiled in heated negotiations, until Axel Weber, the head of the German central bank, the Bundesbank, intervened.
Weber proved to be persuasive. Köln-Bonner Sparkasse, a savings bank, had €340 million in deposits with WestLB, which it would be forced to write off if the bank went under. In other words, Weber argued, a WestLB failure would deeply jeopardize Köln-Bonner Sparkasse, as well as at least three other savings banks in North Rhine-Westphalia.
If that happened, the corporate customers of the affected banks could end up without access to their money for weeks, possibly even months. Despite the fact that the customers' deposits are in fact guaranteed, any bank insolvency is preceded by a moratorium on all bank transactions. This, Weber argued, would only lead to further bankruptcies, especially since the remaining savings banks in North Rhine-Westphalia, as their association presidents conceded, would have trouble satisfying the regional economy's liquidity requirements, because they already have a total of €43 billion in WestLB loans on their books. Furthermore, many of these banks also invested in American subprime mortgage securities, which they too would have to write off. The Westphalia-Lippe savings bank association, for instance, invested €100 million in the securities that triggered the worldwide financial crisis.
The officials involved painted grim scenarios. What would happen if customers were to withdraw their deposits from the savings banks en masse? And what if the insolvency of WestLB led to difficulties at two other state-owned banks, HSH Nordbank and BayernLB? How would that affect Bavaria and Hamburg, where the banks are headquartered? Would the public-sector banking system even be capable of surviving the failure of three state-owned banks? Could this in fact lead to the collapse of the entire economy, which would affect growth rates, unemployment and, ultimately, the well-being of society for many years to come? In the end, the participants were so drained that they agreed to a compromise.
Six months ago, BaFin president Jochen Sanio was heavily criticized when he warned of the "worst financial crisis since 1931." But now many politicians are convinced that the situation is far more serious than they had assumed until now.
In an effort to confront the crisis head-on, Jürgen Rüttgers, the governor of North Rhine-Westphalia, has urged Finance Minister Steinbrück to set up a round table of all the parties involved so they can discuss the issue and reach some kind of solution.
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The federal states could still restructure the state-owned banking sector -- by allowing private minority shareholders, for example, or by merging their banks. If a crash does occur, third parties will be dictating the conditions. There will be fire sales, as was the case in Saxony, at significantly less-favorable prices.
But Steinbrück is hesitant. He recently told advisors that if he gives in to Rüttgers' demands, he could end up being "stuck" with the problems. There are also growing calls for the federal government to bail out the states and help them solve their problems. But this is something Steinbrück is apparently unwilling to consider.
The minister also has other things on his agenda -- his fellow SPD member Matthäus-Maier's contract, for example, which will not be extended, but also isn't set to expire until mid-2009. That's when someone else will take over at the helm of KfW -- and that person will be nominated by Angela Merkel's Christian Democrats.
Translated from the German by Christopher Sultan
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