SEC Gets Black Eye Over Madoff Scandal
The Kansas City Star

The Bernard Madoff scandal is not only another blow to trust and confidence on Wall Street, but another knock on the reputation of the Securities and Exchange Commission — supposedly the cop on the financial-markets beat.

Earlier this year, SEC Chairman Christopher Cox famously said Bear Stearns was in reasonably good shape three days before the firm went belly-up.

Now Cox has blasted his career regulators for failing to unearth the alleged $50 billion Ponzi scheme that Madoff is accused of running with his investment firm, Bernard L. Madoff Investment Securities LLC.

Remarkably, the Madoff operation had been subjected to several SEC inquiries over the years, most recently in 2007.

But Cox, in a blistering rebuke of his own staffers, says they never sought a formal commission-endorsed investigation, which — given the SEC's power of subpoena — would have forced Madoff to produce critical information about his operation.

Officials say Madoff kept more than one set of books.

Bush Administration Created Executive Pay Loophole
Filed by John Byrne

The Bush Administration inserted an eleventh-hour provision into the $750 billion bailout bill to protect executive bonuses, a single sentence that will torpedo efforts to reduce bonuses even as companies slash tens of thousands of jobs and use taxpayer money to gobble up other companies at fire-sale prices.

Pressured by constituents who worried that companies would take government aid and continue to pay their executives eye-popping bonuses, Congress inserted a provision that would penalize companies who took taxpayer money and shelled out outsized bonuses.

But at the last minute, Bush officials insisted on a one-sentence provision that stopped the measure in its tracks, according to congressional aides who spoke to the Washington Post.

The change stipulated that the sanction would only apply to firms that sold mortgage backed securities to the government at auction, which the Bush Treasury Department said would be the method they'd use to infuse troubled companies with bailout cash.

"Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts" who spoke to Post reporter Amit Paley. "In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives."

"The flimsy executive-compensation restrictions in the original bill are now all but gone," Sen. Charles Grassley, a Republican from Iowa and ranking member of the Senate Finance Committee, told Paley.

Job Market is Awful, Sharp Jump in Unemployment Shows the Economy is Rapidly Weakening
By John W. Schoen

Friday’s report showing the biggest monthly job loss in 34 years confirmed forecasters' worst fears that the decline in the U.S. economy accelerated in November, after the financial system seized up and consumers hunkered down. As the government scrambles to break the downward spiral, some economists are predicting the unemployment rate is headed substantially higher through next year.

Since the start of the recession in December 2007, the economy has lost 1.9 million jobs, lifting the number of Americans out of work to 2.7 million. At 6.7 percent, the jobless rate has now risen 2.3 percentage points since it bottomed in March 2007.

Most sectors of the economy are now losing jobs, including manufacturing, construction, financial firms, retailers, and the leisure and hospitality industries. Only government, education and health services managed to post job gains.

Friday’s report also slashed another 200,000 jobs from the numbers already reported for September and October — a sign that the economy was hit harder than first reported when the credit crunch deepened.

Economists, who had been expecting a loss of some 350,000 jobs last month, were stunned by the news, describing the report as “horrendous,” "horrific" and “eye-poppingly bad.”

“We’re scrambling around here for historical parallels,” said Robert Barbera, chief economist at ITG, an investment advisory firm.

More big job cuts are on the way, as companies slash costs to try to offset the expected drop in revenues. In just the past few weeks, major employers like AT&T Inc., DuPont, Citibank, JPMorgan Chase and Pratt & Whitney have announced steep job cuts.

"These numbers are shocking," said economist Joel Naroff, president of Naroff Economic Advisors. "Companies are sharply reacting to the economy's problems and slashing costs. They are not trying to ride it out."

Financial Bailout Still Faces Challenges: Paulson

BEIJING (Reuters) - The United States has made clear progress in steadying its financial system, thanks in part to a $700 billion bailout fund authorized by Congress, but the rehabilitation process still faces many challenges, Treasury Secretary Henry Paulson said on Friday.

"The very clear purpose of the TARP was to deal with the stability of our financial system. We have made real progress in dealing with financial stability, but there are going to be many months of challenges ahead," he told reporters after the fifth round of the Sino-American "Strategic Economic Dialogue."

Paulson has expressed opposition to using the Troubled Assets Relief Program to bail out the U.S. auto industry, but he said it would be wrong to allow one of Detroit's Big Three car makers to go under.

"The failure of one of the auto makers right now would not be a good thing. It would be a bad thing," he said.

Congress waits to Hear from Big Three Auto Makers This Week with Business Plan

WASHINGTON (CNN) -- Congressional Democrats are asking the Big Three automakers to submit a plan no later than December 2 for spending the $25 billion they have requested to rescue their companies, Senate Majority Leader Harry Reid said Thursday.

Congress probably would reconvene by December 8 to consider the proposal, which would be reviewed with an eye toward convincing the public that they would be well-served, the Nevada Democrat said.

"The key is accountability and viability," Reid said. "We want them to get their act together."

"Until they show us the plan, we cannot show them the money," added Democratic Speaker Nancy Pelosi at a news conference in the Capitol. Watch why the Big Three bailout is stalled »

Reid said that so far the companies have failed to convince Congress and the American people that this bailout would be their last.

The CEOs of General Motors Corp., Ford Motor Co. and Chrysler LLC spent two days on Capitol Hill this week seeking $25 billion in loans to solve a looming cash crisis that could lead to bankruptcy filings for GM and Chrysler later this year or early next year.

Reid said the automakers would submit the plan to Rep. Barney Frank, D-Massachusetts, and Sen. Christopher Dodd, D-Connecticut. Frank chairs the House Committee on Financial Services and Dodd heads the Senate Banking Committee.

Reid also told reporters that members of Congress from Michigan have come up with a bipartisan agreement for the auto companies -- "but it's their agreement."

There still is nothing on the table that could be approved by Congress or President Bush, he said.

"We're disappointed that those hopes have not been met," said Democratic Sen. Carl Levin of Michigan, who helped forge the agreement. But he said he was encouraged that the leadership was taking all steps needed to help the auto industry survive with bridge loans.

Frank defended the amount of time being spent on the automakers' request.

"We put through a bill putting $700 billion of taxpayers money at risk, although we hope to recover it," he said, referring to the stimulus fund approved for banks.

"There is widespread dissatisfaction -- not just in the Congress but in the country -- with what is perceived to be a failure of the recipients of those funds to carry out the intent that the Congress had."

He added, "There is a sense that we did not do a good enough job of safeguarding those funds. That's why we need to take time."

With Economy Souring, Illegal Immigrants Going Home
Alfonso Chardy | Miami Herald

Malaquias Gaspar left his farm village in southern Mexico when the economy soured in the mid-1990s. He headed north illegally and found the proverbial better opportunity in South Florida, where he made a decent living by picking fruit and building homes.

But the U.S. economic crisis has disrupted his life and the lives of countless other illegal immigrants who are now planning to leave or have already left.

Gaspar recently returned to Zimatlan de Alvarez in Oaxaca state, primarily to care for his ailing mother -- but also to plan for the future should the economy worsen in South Miami-Dade County, where his wife and four children remain.

''If we can't feed our children, we'll come back,'' said Gaspar, 40, as he sat at his family home -- upgraded with money he had sent from South Florida.

Gaspar is among millions of undocumented immigrants facing new challenges brought on by slim prospects for legalization, more aggressive federal enforcement and a worsening economy. Now, fewer immigrants are caught while trekking through the dangerous Sonoran Desert or risking their lives aboard makeshift boats in the Caribbean, indicating that fewer are trying. Those who make it through can find themselves on one of several daily federal charter flights that return deportees.

The ripple effects are already being felt. Communities in Latin America and the Caribbean report a reduction in remittances -- money sent home from the United States. That money is critical to the survival of families and the success of local civic projects. Border communities that once thrived as way stations for those heading north are now little more than ghost towns.

Auto Slump Hits Hard in Car-Mecca California
Dale Kasler | Sacramento Bee

The Saturn dealership, closed two weeks ago, is still jammed with cars; signs at the curb promote a red-tag sale. The Ford dealership, closed since June, sits empty, stripped clean.

These are terrible times for the auto industry, and the impact shows up at places such as the Elk Grove Auto Mall. Sales are down, staffing is down, and the loss of two dealerships hurts the survivors.

"It doesn't help the image of the auto mall to have two tenants gone," said David Johnson, general sales manager at Elk Grove Buick Pontiac GMC. "It doesn't help with consumer confidence."

Johnson has cut his sales staff in half, eliminating six jobs.

The crisis gripping Detroit's Big 3 automakers is worsening the downturn in California and Sacramento. As executives plead for a bailout, car sales are falling faster in California than elsewhere, and the effect is significant.

The industry's downfall is responsible for nearly 11 percent of California's job loss in the past year. It's robbed tens of millions of dollars from state and local treasuries. It's punched holes in business districts such as Florin Road, once a mecca for car lots. It's deprived the media of advertising revenue, and has affected corporate sponsorship of sports franchises such as the Kings.

Swiss Bank UBS Under Cloud for Secret Accounts
Martha Brannigan | Miami Herald

As the glitterati jet in for Art Basel Miami Beach, the Swiss banking giant UBS — the event's main sponsor — plans to fete a gaggle of elite clients, as in years past, with lavish parties at the swank Setai, Delano and Tides.

But a little more than a week before the start of this year's art festival, UBS remains under the cloud of a massive investigation into its alleged role in helping wealthy U.S. clients avoid paying taxes by sheltering their money in secret offshore accounts.

U.S. authorities are demanding the names of thousands of investors who counted on Swiss secrecy laws, and Swiss discretion, to keep their financial affairs private. One client, a part-time Lighthouse Point resident unmasked early in the probe, has been forced to pay $52 million in back taxes and penalties.

Some of the bankers' alleged deeds seem downright unbankerly: smuggling diamonds into the United States in a toothpaste tube; using encrypted computers to conduct transactions; lying to U.S. immigration agents that business trips were for nonbusiness purposes; slipping from hotel to hotel to elude detection.

It is all the more unseemly because UBS, one of the world's largest banks, has a distinguished history in Switzerland and has cultivated a corporate image as a patron of high culture, sponsoring tennis tournaments, yachting competitions and, of course, Art Basel.

But federal prosecutors say these events and others served as fertile turf where bankers could mingle with affluent Americans and persuade them to become bank clients.

22 US Banks Collapsed This Year

NEW YORK: As many as 22 American banks have collapsed this year so far, even as the banking giant Citigroup, led by Indian-American, Vikram Pandit, struggled this week to save itself from becoming number 23 in this fast growing long list.

On Friday, three US banks collapsed with two of them being in California and the third one in Georgia.

The two California banks which were shut down Friday are Downey Savings and Loan of Newport Beach and PFF Bank and Trust of Pomona. The 12.78 billion Downey, The Wall Street Journal, said is the third largest bank to fall this year. Topping the list is $307 billion Washington Mutual.

In Georgia the Community Bank of Loganville closed down.

With little signs of improvement, The Wall Street Journal said regulators expect more failures during the remaining part of this year and next year, as "rotting real estates and other loans continue to weigh down bank balance sheets."

The deposits and some of the assets of the two collapsed Californian banks were bought by US Bancorp, which now has emerged as one of the strongest US banks during the current financial turmoil. Deposits and assets of the Georgian bank was acquired by Bank of Essex from Virginia.

Among other banks, which collapsed this year - reflecting the deep trouble in which the US economy is in - include Franklin Bank (Houston), Security Pacific Bank (Los Angeles), Freedom Bank (Florida), Silver State Bank (Nevada), Columbian Bank and Trust (Kansas), First Priority Bank (Florida), First National Bank of Nevada, ANB Financial (Arkansas), IndyMac Bank (California).

The largest number of bank collapse has been reported from California.

Collapse of such a large number of American banks, despite a $700 billion bailout package reflects the deep turmoil of the US economy. From 2003 to 2007 only 10 US banks were reported to have collapsed. In 2008, the figure has already touched 22 and still more than a month to go.

Govt Pays Millions for Unapproved Drugs
By RICARDO ALONSO-ZALDIVAR and FRANK BASS
Associated Press

WASHINGTON – Taxpayers have shelled out at least $200 million since 2004 for medications that have never been reviewed by the government for safety and effectiveness but are still covered under Medicaid, an Associated Press analysis of federal data has found. Millions of private patients are taking such drugs, as well.

The availability of unapproved prescription drugs to the public may create a dangerous false sense of security. Dozens of deaths have been linked to them.

The medications date back decades, before the Food and Drug Administration tightened its review of drugs in the early 1960s. The FDA says it is trying to squeeze them from the market, but conflicting federal laws allow the Medicaid health program for low-income people to pay for them.

The AP analysis found that Medicaid paid nearly $198 million from 2004 to 2007 for more than 100 unapproved drugs, mostly for common conditions such as colds and pain. Data for 2008 were not available but unapproved drugs still are being sold. The AP checked the medications against FDA databases, using agency guidelines to determine if they were unapproved. The FDA says there may be thousands of such drugs on the market.

Medicaid officials acknowledge the problem, but say they need help from Congress to fix it. The FDA and Medicaid are part of the Health and Human Services Department, but the FDA has yet to compile a master list of unapproved drugs, and Medicaid — which may be the biggest purchaser — keeps paying.

Showdown Looming in Congress Over Automaker Rescue
By STEPHEN OHLEMACHER
Associated Press

WASHINGTON – Hardline opponents of an auto industry bailout branded the industry a "dinosaur" whose "day of reckoning" is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week's lame-duck session of Congress.

The companies are seeking $25 billion from the financial industry bailout for emergency loans, though supporters of the aid for General Motors Corp., Ford Motor Co. and Chrysler LLC have offered to reduce the size of the rescue to win backing in Congress.

Senate Democrats intended to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits; a vote was expected as early as Wednesday.

A White House alternative would let the car companies take $25 billion in loans previously approved to develop fuel-efficient vehicles and use the money for more immediate needs. Congressional Democrats oppose the White House plan as shortsighted.

Majority Democrats will need at least a dozen GOP votes in the Senate to prevent opponents from blocking their measure — assuming all Senate Democrats support it. Senate Republican Leader Mitch McConnell of Kentucky questioned whether there was sufficient Democratic support for an auto bailout in a statement released Sunday.

"The silence from the Democrat rank and file on this matter has been deafening," McConnell said.

So far two Republicans publicly have voiced support for the idea. Several others, including Minnesota Sen. Norm Coleman on Sunday, have indicated they might accept a rescue under strict conditions.

Circuit City Recently Filed for Bankruptcy

The electronics retail giant announced the other day that they will be closing 155 stores across the country. The company appears to remain hopeful, issuing the following statement on their Web site:

 “We are pleased to have obtained court approval for our first day motions, a critical first step in Circuit City’s reorganization process,” said James A. Marcum, vice chairman and acting president and chief executive officer of Circuit City Stores, Inc. “These approvals will help position us for a more successful holiday selling season and allow us to operate our business and serve our valued guests without interruption as we work to emerge from Chapter 11 as quickly as possible.”

Bailout Improv: Paulson Rolls Out New TARP
by Aaron Task

With the first half of the $700 billion TARP (Troubled Assets Relief Program) program nearly depleted, Treasury Secretary Hank Paulson spoke today to both defend the program, and announce some changes going forward.

Paulson's comments come amid criticism of his handling of the bailout and a political battle over whether the government should rescue U.S. automakers. Assuming the answer is "yes", the debate — starting as early as next week in a lame-duck session — will be over whether or not the funds come from the second $350 billion of TARP money, which requires Congressional authorization (however it's used.)

As for Paulson's defense of TARP: "As I assess where we are today, I believe we have taken the necessary steps to prevent a broad systemic event," Paulson said in prepared remarks. "Our system is stronger and more stable than just a few weeks ago. Although this is a major accomplishment, we have many challenges ahead of us."

Key changes to the program, which Paulson hopes will address the ongoing challenges of "a weak economy, especially the housing correction and lending contraction," include:

    * Paulson has effectively abandoned the idea of buying bad debt from banks. While this is a step in the right direction, it's an amazing 180-degree turn in a few short weeks.
    * Companies like American Express seeking TARP capital going forward may be required to raise private capital first. Again, this is an improvement but notably doesn't apply retroactively to the firms already enjoying government largess.

These changes appear smart, but the bottom line is the government is essentially making this bailout up as it goes along. "Since announcing the [injection of capital into big banks] we have been examining a wide range of ideas that can further strengthen the financial system and get lending going again to support the broader economy," Paulson said.

It's also clear that Paulson still doesn't have the answers ... and maybe not even a clue, which he unwittingly admitted today: "And to adequately reform our system, we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us," he said.

Huh? No wonder Paulson is counting down the days until he's "former Treasury Secretary."

US Jobless Rate Rises to Highest Level Since 1994
By: Adam Plowright

WASHINGTON (AFP) – The US October unemployment rate rose to its highest level since 1994, official data showed Friday, with analysts forecasting it to move even higher in Barack Obama's first year as president.

The Labor Department said the jobless rate rose to 6.5 percent as the world's largest economy shed 240,000 jobs during the month amid the credit squeeze and downturn.

"Employment has fallen by 1.2 million in the first 10 months. Over half of the decrease has occurred in the last three months," the department said in a statement.

The figures underlined the challenge for incoming US president Obama, who vowed Friday to tackle the economic crisis head-on and threw his support behind a new tax and spending stimulus package.

"One thing I can say with certainty is that we're going to need to see a stimulus package passed before or after inauguration," Obama said in his first post-election news conference, flanked by his team of economic advisers.

Analysts forecast that the jobless rate would climb above 7.0 percent next year after Obama's inauguration in January, with the peak seen about 7.5 percent in the middle to end of the year.

The US economy has shed jobs for 10 straight months in 2008 and the Labor Department revised losses in August and September sharply higher to 127,000 and 284,000 rather than the 73,000 and 159,000 estimated a month ago.

"(Job) losses should remain heavy for several more months," said economist Stephen Gallagher at investment bank Societe Generale in New York.

The data confirmed the severity of the economic downturn underway in the United States where months of turmoil on stock markets, tightening of credit and record-low consumer confidence have taken their toll.

The economy is widely seen as being in a recessionary cycle now and is forecast to contract over the whole of 2009.

President George W. Bush said in a statement that "monthly job report numbers ... reflect the difficult challenges confronting our economy" and he said existing government efforts would take time to materialize.

The White House has been wary of the idea of a second stimulus package after approving a 168-billion-dollar plan earlier this year and a 700-billion-dollar rescue program on October 3.

"The federal government has taken aggressive and decisive measures to address this situation," Bush said. "It will take time for these measures to have their full impact on an economy in which many Americans are struggling."

Democrats in Congress, fresh from electoral victories in Tuesday's election, are pushing for a new stimulus package, however, led by House of Representatives Speaker Nancy Pelosi.

Pelosi has called for the two-stage effort to involve a 60-100 billion dollar stimulus package in November, before the end of Bush's term on January 20.

"Most recent macroeconomic figures show a rapid pace of deterioration suggesting a deepening recession," said economist Amine Tazi at investment bank Natixis, commenting on the jobless data.

"The unemployment rate ... is likely to breach the 7.0 percent mark early next year," said Ian Shepherdson, an analyst at High Frequency Economics, who said the labor market report was "horrible in every way."

"It has already broken above the June '03 peak and the trend is rising almost vertically. Wages depressed too, up only 0.2 percent."

Given the turmoil, all eyes are on Obama's nomination for Treasury secretary, with Timothy Geithner, president of the Federal Reserve Bank of New York, on the list of possible candidates.

He has acted as an intermediary between the US Federal Reserve and the financial markets and played a key role in formulating measures to protect banks from the crisis.

Secret GOP Payoffs from Lobbyists for Freddie Mac to stop Regulation Legislation
By Pete Yost
Associated Press

WASHINGTON – Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.

In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.

Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.

In the midst of DCI's yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.

"If effective regulatory reform legislation ... is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole," the senators wrote in a letter that proved prescient.

Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents obtained by The Associated Press. The states and the senators targeted changed over time, but always stayed on the Republican side.

In the end, there was not enough Republican support for Hagel's bill to warrant bringing it up for a vote because Democrats also opposed it and the votes of some would be needed for passage. The measure died at the end of the 109th Congress.

McCain, R-Ariz., was not a target of the DCI campaign. He signed Hagel's letter and three weeks later signed on as a co-sponsor of the bill.

By the time McCain did so, however, DCI's effort had gone on for nine months and was on its way toward killing the bill.

McCain's campaign manager, Rick Davis, or his lobbying firm has taken more than $2 million from Fannie Mae and Freddie Mac dating to 2000. In December, Freddie Mac contributed $250,000 to last month's GOP convention.

Meeting G7, Bush Vows World Economic Fix
Bush Pledges Coordinated Response From World Leaders on Economic Crisis
By RACHEL MARTIN and JULIA HOPPOCK

After one of the worst weeks in the stock market's history, President Bush met foreign financial leaders today to hatch a plan to take on the international financial crisis. In a Rose Garden address following the meeting, Bush vowed to work together with world leaders to develop a unified response.

"All of us recognize that this is a serious global crisis and, therefore, requires a serious global response for the good of our people. We resolve to continue our strong efforts to return our economies to the path of stability and long-term growth," Bush said.

Bush was joined by financial leaders of the other G7 nations Japan, Germany, England, France, Italy and Canada as well as Treasury Secretary Henry Paulson and Secretary of State Condoleezza Rice.

While Bush did not discuss any strategies for resolving the economic crisis, he emphasized the need for global leaders to work together in order to avoid worsening the situation.

"As our nations confront challenges unique to our individual financial systems, we must continue to work collaboratively and ensure that our actions are coordinated," Bush said. "We must ensure the actions of one country do not contradict or undermine the actions of another. In our interconnected world, no nation will gain by driving down the fortunes of another. We're in this together. We will come through it together."

Bush also praised swift action taken by some G7 nations earlier in the week to enact a joint interest rate cut. In an historical coordinated policy action, central banks around the world, including the Federal Reserve and European Central Bank, lowered key rates in hopes of boosting liquidity and unfreezing the credit markets.

Bush tried to instill confidence that world leaders were doing everything they could to lessen the crisis, but warned it would take time.

"The benefits will not be realized overnight. But as these actions take effect, they will help restore stability to our markets and confidence to our financial institutions."

Iraq Stock Exchange Having a Banner Year

BAGHDAD (UPI) -- Iraq's small stock exchange is enjoying a prosperous year, even while markets founder in Australia, Europe, the United States and Asia.

Ninety-four companies are listed on the Iraq Stock Exchange, which has gained 25 percent this year, USA Today reported Monday.

The newspaper said trading volume is generally less than $1 million a day. The exchange still uses white boards to record transactions. But Iraqi investors are hoping increased security will begin to attract foreign dollars.

The market's bread and butter are wealthy Iraqis, many of whom live out of the country, the newspaper said. But, for some retired Iraqis the market has become a popular pastime.

"My wife asked me not to go anymore," Abdul Sattar Jubari, 61, a retired schoolteacher told USA Today. Nevertheless, he still goes. "It's become a habit, like smoking," he said.

Bush Speech Panicked the nation with the following:

“The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.”

“More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.”

“And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.”

How Did They Come Up With the $700Billion Figure?

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

What would happen if there was No Bailout?

By: David Phillips

September 29, 2008

As I am sure by now you are aware of what’s going on with financial institutions and the proposed $700 billion tax payer bailout, last week President Bush made a prime time speech to the nation to help explain what is being proposed and why.

The President’s speech was pretty general in its description of how we got to where we are today, Bush said, “Easy credit combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions.”

“Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.”

Then Bush proceeded to panic the nation with the following:

“The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.”

“More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.”

“And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.”

President Bush painted a gloom and doom picture, my guess for this, was to push the voting public to contact their congressional representatives to get a deal signed.

Bush says we must have a deal as soon as possible; the consequences are just too great, Wall Street must receive a check soon..

But why should anyone believe him since he has been wrong on so many issues and policies. Both President Bush and Congress have said that there will be time down the road to find out exactly what cause this meltdown.

Normally when Congress considers a spending bill this large there would be months of committee meetings before any vote would take place, but Bush expects us to take him at his word that the sky is falling and it’s falling now.

Former Presidential candidate Mike Huckabee was critical of President Bush's handling of the crisis. He said to lay the $700 billion obligation on the nation "in 24 hours" amounts to "holding the country hostage."

"I just think the American people ought to be screaming their lungs out, saying to Congress, not so fast. That's our money you're giving away," Huckabee said.

I honestly don’t know if a $700 billion bailout would make one bit of difference to the current situation these financial institutions are currently experiencing. I do know that nearly two million homes are currently facing an increase in their mortgage rates or soon will be in the coming months. But maybe a shake up on Wall St is what’s needed to prevent similar situations from arising in the future.

I do know that financial institutions on Wall St will see this as a message that if they are on the verge of a collapse, Uncle Sam will come to their rescue, and that is not a message that we should be sending to them.

Greed and deregulation on oversight is what brought this on, this is their own making, and maybe it is Wall St who should be sleeping in the beds that they themselves made and not the tax payer.

At the time of my writing this story Congress was still working on a bailout and both parties said that a deal was near, that is until John McCain road in on his White Jet to save the day. Now the GOP leadership who hours earlier said a deal was near, are now saying just the opposite.

McCain is flying out to Mississippi today for the first of three presidential debates, McCain wanted to cancel this debate, but has decided to go...Maybe with him gone Congress can come to some sort of a compromise, or maybe they can come to a decision that a deal could wait until cooler heads can prevail..

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

 E-Mail Questions or Comments: oneyoda@aol.com

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com

China Tells Their Banks to Stop Lending to the United States

HONG KONG (MarketWatch) -- Chinese regulators have asked domestic banks to stop lending to U.S. financial institutions in the interbank money markets to prevent possible losses during the financial crisis, the South China Morning Post reported Thursday. The China Banking Regulatory Commission's ban on interbank lending of all currencies applied to U.S. banks, but not to lenders from other countries, the report added, citing a source.

John McCain: The Deregulator

I don’t think anyone who wants to increase the burden of government regulation and higher taxes has any real understanding of economics and the economy and what is needed in order to ensure the future of this country.”
– John McCain [McCain Town Hall in Inez, Kentucky, 4/23/08]

McCain Supported A Banking Bill Because It Eliminated “The Tremendous Regulatory Burden Imposed On Financial Institutions.” While speaking in favor of bank deregulation on the floor of the senate, John McCain said, “This legislation takes a small but important step toward eliminating the tremendous regulatory burden imposed on financial institutions… One principal reason banks are unable to make loans is the bewildering array of statutory and regulatory restrictions and paperwork requirements imposed by Congress and the regulatory agencies. While a case can certainly be made that every law and regulation is intended to serve a laudable purpose, the aggregate effect of the rapidly increasing regulatory burden imposed on banks is to cause them to devote substantial time, energy and money to compliance rather than meeting the credit needs of the community.” [Congressional Record, 11/19/93; emphasis added]

Corporate Welfare: Tax Payers Left Holding the Bag

By: David Phillips

September 22, 2008

What is Corporate Welfare: Corporate welfare is a term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations or select corporations. The term was coined by Ralph Nader in 1966, and compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less needy of such treatment than the poor. (Source: Wikipedia)

Now on with the show

While Senator John McCain tour’s our country stumping and saying, “The Fundamentals of our Economy are Strong”, the rest of us have been bending over while our government dole’s out our tax dollars for corporate bailouts.

Last week in the wake of the collapse of American International Group (AIG) and Fannie Mae and Freddie Mac, President Bush from the White house Rose Garden made public, measures to bailout banks from billions of dollars in bad debts with our tax dollars.

Bush said that the recent failures of banking institutions will require "unprecedented action" that would bring the US government deeper into a variety of financial markets.

The actions that are being planned include emergency lending to banking institutions and a temporary freeze on short selling of stocks to fight downward pressure on share prices.

The plan will also try to unfreeze the credit markets by finding a way to take billions of dollars of bad mortgage-backed assets off the books of financial institutions and into the control of our government. That’s right Uncle Sam may soon become your mortgage holder.

President Bush called the moves "decisive" and necessary to "get our financial system moving again." Bush went on to say, "This is a pivotal moment for America's economy,". . . There will be ample opportunity to debate the origins of this problem. Now is the time to solve it." Meaning right after he leaves office will be the time to find out the cause of the collapse of our financial institutions.

Meanwhile over at the Treasury Department, Secretary Paulson told reporters, "I am convinced that this bold approach will cost American families far less than the alternative: a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion."

Paulson was asked what the costs to the American tax payers will be for this "bold" action, his answer:  We're talking hundreds of billions (of tax dollars). This needs to be big enough to make a real difference and get at the heart of the problem."

So how did all of this come about?

Deregulation under the Bush administration of financial and lending institutions and no government oversight of those who offered up sub-prime loans to people who could not afford them, which cause the collapse of the housing market, which led to the devaluation of properties, even those properties that were not involved in sub-prime loans and who are current on payments have suffered a loss in the value of their properties. Then all those loans were sold off to other financial institutions, who then resold them…A domino effect.

So now, you and I as well as every other tax payer are on the hook again for another bailout and according to the Treasury Dept. 126 other banks and financial institutions are currently on the edge of a collapse, which is why when Paulson was asked how much the bailouts will cost, he could only say hundreds of billions of dollars. Wall Street talking heads say it will cost at least a half a trillion to shore up these financial institutions.

All of these lending institutions brought this upon themselves, they wanted the government out of their business with the deregulation, and now it is the tax payer who is left holding the bag.

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com

Greenspan: Country Can't Afford McCain's Tax Cuts
By GLEN JOHNSON
Associated Press Writer

Alan Greenspan says the country can't afford tax cuts of the magnitude proposed by Republican presidential contender John McCain — at least not without a corresponding reduction in government spending.

"Unless we cut spending, no," the former Federal Reserve chairman said Friday when asked McCain's proposed tax cuts, pegged in some estimates at $3.3 trillion.

"I'm not in favor of financing tax cuts with borrowed money," Greenspan said during an interview with Bloomberg Television. "I always have tied tax cuts to spending."

McCain has said that he would offset his proposed cuts — including reducing the corporate tax rate and eliminating the Alternative Minimum Tax that has plagued middle-class families — by ending congressional pork-barrel spending, unnecessary government programs and overhauling entitlement programs such as Medicare and Social Security.

Democrats pounced on Greenspan's comments, in part because McCain professed last year that he was weaker on economics than foreign affairs and was reading Greenspan's memoir, "The Age of Turbulence," to educate himself.

"Obviously he needs to go back to that book and study it some more," Sen. Claire McCaskill, D-Mo., said during a conference call arranged by the campaign of Democratic nominee Barack Obama.

McCaskill said eliminating congressional earmark spending — estimated at $17 billion annually — cannot offset McCain's proposed tax cuts.

"That's a huge amount of money, but it's not even a drop in the bucket to pay for $3.5 trillion in tax cuts," she said. "So, every time he throws up earmarks and he's asked how he's going to pay for it, he knows he's being disingenuous, he knows he's not being forthcoming."

McCain campaign officials dispute the $3.3 trillion figure, saying it assumes eliminating 2003 tax cuts made by the Bush administration and then cutting from that higher level. They say McCain is proposing tax cuts worth $600 billion from current levels.

"John McCain opposed President Bush's tax cuts in 2003, because they didn't include the necessary spending controls. Sen. McCain's proposed job-growing tax cuts are modest in comparison to his plans to slow the exploding growth of federal expenditures — meaning that contrary to Chairman Greenspan's assertions, this relief isn't proposed on borrowed money," said McCain spokesman Tucker Bounds.

War Profiteers are Stealing our Tax Dollars

By: David Phillips

August 18, 2008

According to a new report from the Congressional Budget Office (CBO) by the end of this year the Bush administration will have spent more than $100 Billion dollars on private firms working in Iraq since the invasion started in 2003. This total does not include corporations who have received billions of our tax dollars who are not in Iraq.

The United States has relied more heavily on contractors in Iraq than in any other war to provide services ranging from food service to guarding diplomats. About 20 percent of funding for operations in Iraq has gone to contractors, the report said.

Currently, there are at least 190,000 contractors in Iraq and neighboring countries, a ratio of about one contractor per U.S. service member, the report says.

Sen. Kent Conrad, D-N.D., chairman of the Budget Committee, which requested the CBO review, said the use of contractors "restricts accountability and oversight; opens the door to corruption and abuse; and, in some instances, may significantly increase the cost to American taxpayers."

In May, an internal audit from the Defense Department's inspector general showed about $8 billion paid to U.S. and Iraqi contractors, found that nearly every transaction failed to comply with federal laws or regulations aimed at preventing fraud.

Below is a short list, a very short list, of companies who are fleecing American tax dollars:

·         Halliburton-The first name that comes to everyone’s mind here is Halliburton. According to MSN Money, Halliburton’s KBR, Inc. division bilked government agencies to the tune of $17.2 billion in Iraq war-related revenue from 2003-2006 alone.

·         Veritas Capital Fund/DynCorp-At first blush, a private equity fund (and not, say, Exxon-Mobil) being the number 2 profiteer in the Iraq war might sound strange. However, the cleverly run fund has raked in $1.44 billion through its DynCorp subsidiary.

·         Washington Group International- The Washington Group International has parlayed its expertise the repair, restore, and maintenance of high-output oil fields into $931 million in Iraq-related revenue from 2003-2006.

·         Fluor-Fluor scored a monster $1.1 billion contract in 2004 to build, service, and manage water/sewage systems in Iraq.

·         Parsons-Few Iraq contractors have come under fire as much as Parsons, who reportedly mismanaged the construction a police academy so poorly that human waste dripped from its ceilings. Far from being an isolated incident, reports from federal government auditor’s revealed lackluster work on 13 of the 14 Iraq projects entrusted to Parsons. Unfortunately, that hasn’t stopped the Pasadena-based firm from making off with $540 million in U.S. government funds for the poorly executed reconstruction projects at Iraq’s healthcare centers and fire stations.

·         L3 Communications-L3 Communications has carved out a neat $359 million slice of Iraq’s security screening needs as of fiscal 2006. The New York-based company has been charged with overseeing the screening and training of law enforcement personnel for the growing all-Iraqi security force, as well as replacing equipment in the field. Linguistics is another one of L3’s specialties, one that is heavily relied upon to interface with native speaking Sunni and Shia forces.

·         L3 Communications has also purchased Titan, a corporate intelligence company with a $1 billion Iraq contract. Prior to being acquired by L3, Titan plead guilty to international bribery charges (a felony) and paid a record-breaking $28.5 million under the Foreign Corrupt Practices Act.

·         HSBC Bank-Already the third largest financial institution on the planet, HSBC has seen its fortunes brighten beyond its wildest dreams since the start of combat. It has purchased a controlling stake (70%) of the newly created Iraqi national bank, Dar es Salaam Investment Bank, which, though small, has already amassed assets of $91 million.

The above list of war profiteers are not supplying the goods that they have been contracted to provide. According to numerous reports by both our government and independent watch dog groups these companies and many others are promising one thing and delivering another.

The Pentagon and those that have awarded the contracts (many no-bid contracts) have had carte blanche because Bush and the Republican controlled congress that Bush enjoyed, removed almost all oversight. In fact the latest Pentagon Inspector General had recently quit after only a few months on the job because he did not have adequate personnel to oversee the voluminous task that was before him.

This corruption must stop; most of the problems Americans are now confronted with are directly related to the failed War policies installed by Bush and the GOP.

Bush and the GOP have created a tax dollar siphoning machine with almost zero oversight and McCain wants to continue these policies.

Americans must demand oversight on every tax dollar spent on any program, period.

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

 E-Mail Questions or Comments: oneyoda@aol.com

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com

Banks Borrow More From Fed Emergency Fund

WASHINGTON (AP) -- Banks borrowed slightly more over the past week from the Federal Reserve's emergency lending program, while Wall Street firms did not draw any loans for a second straight week.

The Fed reported Thursday that commercial banks averaged $17.70 billion in daily borrowing over the past week. That compared with a daily average of $17.37 billion in the previous week.

Investment houses, however, again did not take out any loans, possibly indicating that pressures on these institutions for short-term credit may be easing.

The Fed, in the broadest expansion of its lending powers, granted investment houses the privilege of getting direct loans from the Fed's emergency loan program back in March. That's when Fed Chairman Ben Bernanke and his colleagues were scrambling to calm turbulent financial markets worried about rising losses from billions of dollars of bad loans on home mortgages.

The action was taken after a run on Bear Stearns, which pushed the country's fifth-largest investment bank to the brink of collapse. It was eventually taken over by JPMorgan Chase & Co. (JPM, Fortune 500) in a deal in which the Fed provided significant financial backing.

The Fed recently extended the privilege of borrowing by investment banks into 2009, as the central bank continues to try to calm financial markets that have been roiled by the most severe credit crunch in decades. Originally, the borrowing privilege was scheduled to last only until mid-September.

The Fed also has said that it will allow troubled mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) the privilege of borrowing from the central bank's emergency loan program. There was no indication in the report released Thursday that the 2 institutions had done so.

For the week ending Aug. 13, the $17.70 billion in average daily borrowings by commercial banks represented an increase of $329 million from the average for the week ending Aug. 6.

WalMart Warns Employees about Voting for Obama

By: David Phillips

August 11, 2008

Wal-Mart, America’s largest discount retail chain recently held meetings run by its Human Resources department warning it’s employee’s that if Obama is elected Democrats would likely change federal law to make it easier for workers to unionize companies -- including Wal-Mart.

According to a recent front page Wall Street News article, thousands of Wal-Mart managers and department heads have been attending meetings where the retail giant warned that a Democrat in the White House would be bad for business and would lead to more unions.

Several Wal-Mart employees who attended meetings in seven states said, Wal-Mart executives claimed that employees at unionized stores would have to pay hefty union dues while getting nothing in return, and may have to go on strike without compensation. Also, unionization could mean fewer jobs as labor costs rise.

"The meeting leader said, 'I am not telling you how to vote, but if the Democrats win, this bill will pass and you won't have a vote on whether you want a union,'" said a Wal-Mart customer-service supervisor from Missouri. "I am not a stupid person. They were telling me how to vote," she said.

David Tovar, a Wal-Mart spokesman, told the WSJ, “If anyone representing Wal-Mart gave the impression we were telling associates how to vote, they were wrong and acting without approval.” Tovar added, however, that Wal-Mart feels a responsibility to “educate” employees about the dangers of unionization.

It’s quite clear that Wal-Mart is pressuring its employees on who they should vote for, which should be illegal. Federal election rules permit companies to advocate for specific political candidates to its executives, stockholders and salaried managers, but not to hourly employees. While store managers are on salary, department supervisors are hourly workers.

At the heart of Wal-Marts worries is a piece of legislation called the Employee Free Choice Act (EFCA) pushed by unions and most Democratic lawmakers, which would likely boost union membership through a “card check” system.

The EFCA was put together by Labor Unions and Democrats in response to Corporate America’s hostile opposition to Unions. The AFL-CIO and other Unions in the United States have said that the EFCA will be their number one agenda after this Novembers election should Obama win.

The Bill came to a vote until last year where it sailed through the House, but Senate Republicans filibustered the Bill and it has since been taken off the agenda for the time being. President Bush said last year that he would have vetoed the bill had it reached his desk. Supporters of the Bill said they would reintroduce it when the new congress convenes.

Democrats and Union members are hoping for large gains in both the House and Senate this November to extend their control of congress which would make the passage of the EFCA much easier.

Sen. Obama who co-sponsored the EFCA, which is also known as “card check,” has said several times he would sign it into law if elected president. Sen. John McCain, the likely Republican presidential nominee, opposes the Employee Free Choice Act and voted against it last year.

Wal-Mart was stretching the envelope when they spoke to their employees about who they should vote for, but that’s about all, unless you want to consider how unethical it was for them to do so. But ethics and corporations are seldom synonymous. 

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

 E-Mail Questions or Comments: oneyoda@aol.com

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com

Drilling in ANWR and Offshore: What You Don’t Know.

By: David Phillips

August 4, 2008

The Republican Party in Washington is saying that with the costs of gas so high, we must now drill offshore and in the Arctic National Wildlife Refuge (ANWR) in order to lower the costs at the pumps.

This will NOT do anything to lower the prices at the pumps until at least the year 2018 if at all. The ten year estimate is from President Bush.

Guy Caruso of the Energy Information Administration recently said, "It would be a relatively small effect, because it would take such a long time to bring those supplies on." Caruso went on to say, "lifting the offshore drilling moratorium would have a minor impact on production and prices: The projections in the (Outer Continental Shelf) indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030."

That’s right 2030, before more offshore drilling would have any “significant impact” on oil prices.

Bush has said ten years the EIA has said at least twenty years, even McCain himself before his flip flop for more offshore drilling said that it would be years before there would be any help at the pumps, but McCain did say that it would give “Psychological” help at the pumps.

Now McCain says he is being told by the experts that it would only be six months to two years. Why is McCain saying this lie over and over again? Maybe this will answer my question for you, in the month of July of this year, McCain received $1.1 million dollars in campaign donations from oil corporations and their employees, McCain made his flip flop for offshore drilling at the beginning of July. The prior month, the month of June, McCain received less than $200,000 from oil corporations and their employees.

Republicans in Washington do NOT want the prices to drop at the pumps. The Republicans in Washington want to turn America’s high prices on oil into an issue to campaign on at the expense of you, me and every other working stiff in our country.

Republicans voted against a bill that would force Oil corps to drill the oil from the 68 million acres of leased land they now hold. Many of those leases contain oil.

Republicans voted against the release of the Strategic Oil Reserves that would have a short term effect of lowering the prices by as much as 20 cents.

Republicans voted against closing the Enron loophole (Oil Speculation. To put back regulation) again. Closing the Enron Loophole would drop the cost of crude by as much as 50 percent.

All of the above were shot down by the Republicans in the last three weeks. The Democrats in Washington have now made three different moves to help you, me and everyone else in our country, and the Republicans in Washington stopped all the attempts by Democrats to lower prices.

The following week the Republican Party in Washington voted against everything that was on the agenda and said that they would not consider anything else until they get an up or down vote on offshore drilling and more drilling in Alaska.

Well, now Congress is on their five week vacation, and the prices at the pumps will be higher because Republicans wanted to hold their breath and stomp their feet like children while everyone else suffers through high prices.

The 68 million acres of public land that oil corporations now hold include 33 million acres of offshore leases and 20 million acres of leases in Alaska.

Critics of the offshore drilling plan noted that the recently released data by the Energy Department shows that U.S. EXPORTS of finished petroleum products, including gasoline, diesel fuel and jet fuel, soared to 1.592 million barrels per day in May. The exports set a record for the month and were up 31 percent from a year ago. In May, U.S. oil companies shipped 183,000 barrels of gasoline a day out of the country, even as Americans saw prices at the pump steadily rise.

I’ll leave you with three questions to ask yourself:

1)    Why does the cost of oil that we drill here, cost the same as the oil that we buy from the Saudi’s and import here to the US?

2)    Why is it that much of the oil we drill here, we sell to other countries and not keep it for American consumers and lower the prices at the pumps?

3)    Why should we expect any change on this Fleecing of America, if Exxon could drill offshore even more than they do now?

Feel free to send your answers to the Santa Ynez Valley Journal or drop me an e-mail with your answers or thoughts.

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

 E-Mail Questions or Comments: oneyoda@aol.com

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com

FDIC Shutters Two More Regional Banks
July 26, 2008

CARSON CITY, NEV. (AP) -- The 28 branches of 1st National Bank of Nevada and First Heritage Bank N.A., operating in Nevada, Arizona and California, were closed late Friday by federal regulators.

The banks, owned by Scottsdale, Ariz.-based First National Bank Holding Co., were scheduled to reopen on Monday as Mutual of Omaha Bank branches, the Federal Deposit Insurance Corp. said.

The FDIC said the takeover of the failed banks was the least costly resolution and all depositors -- including those with funds in excess of FDIC insurance limits -- will switch to Mutual of Omaha with "the full amount of their deposits."

The FDIC also said accountholders can access their funds during the weekend by writing checks or using ATM or debit cards. As of June 30, the closed banks had total assets of $3.6 billion. That's down from $4.1 billion six months earlier.

Most of the assets are in 1st National, while First Heritage accounts for $254 million. Calls to 1st National were referred by a receptionist to Joe Martony, an executive vice president in Scottsdale, Ariz. Martony didn't return repeated calls to his office.

In Nevada, 1st National has 10 branches and employs about 350 people. Five of its branches are in Las Vegas, three are in the Reno-Sparks area, one is in Carson City and one is in Laughlin. Notices of the closure were being posted late Friday.

Fifteen 1st National branches are in Arizona, while Newport Beach-based First Heritage has three branches in Southern California. Bill Uffelman of the Nevada Bankers Association said Friday the FDIC action "is a reflection of the times for the banks. It's a poor economy."

Uffelman cautioned against the sort of consumer concern that prompted many customers of IndyMac Bank branches to wait for hours in line to withdraw funds across Southern California last week after that bank was seized by federal regulators.

All FDIC-insured bank deposits are guaranteed by the FDIC up to $100,000, he noted. Gov. Jim Gibbons said the bank takeover will be closely monitored in Nevada "to ensure there's minimal disruption to business and that employees' jobs are protected as much as possible."

Arizona Gov. Janet Napolitano spokeswoman Shilo Mitchell said in a statement that the FDIC's takeover of 1st National is not indicative of the overall banking climate in Arizona.

"It's very important that Arizonans know that their deposits are secure," said Felecia Rotellini, superintendent of Arizona Department of Financial Institutions. "They are well-managed and the 1st National Bank of Arizona issues should not cause any panic in Arizona."

The FDIC action comes two weeks after after the agency took control of IndyMac bank, a Pasadena, Calif.-base mortgage lender with $19 billion in deposits. A total of seven banks have failed this year as the credit crunch and housing correction continue to take a toll on the economy.

With Warning, G.M. Takes Wide Cost Cuts
By BILL VLASIC

DETROIT — With concern growing among investors about a possible bankruptcy filing, General Motors on Tuesday announced sweeping cost cuts and other measures to bolster its tenuous cash position.

But even as G.M. unveiled plans to increase its liquidity by $15 billion, the automaker warned of more tough times ahead.

The broad cutbacks included a 20 percent reduction in payroll for salaried workers, elimination of health care for older white-collar retirees, and suspension of G.M.’s annual stock dividend of $1 a share.

G.M.’s chairman, Rick Wagoner, said the sharp downturn in the American auto market forced “difficult decisions” to protect the company’s future.

“I’m determined and highly confident that G.M. will be a survivor,” Mr. Wagoner said in an interview. “We can do what we need to do.”

Rising gas prices and a weak economy have driven G.M.’s United States sales down 16 percent this year and crippled the market for its big pickups and sport utility vehicles.

The steep fall in sales is eating into G.M.’s cash reserves at the rate of more than $1 billion a month, according to some analysts, provoking fears on Wall Street that the company will run out of money before the market rebounds.

Paulson Braces Public For Months Of Tough Times
Treasury sectretary says problems in the banking system are a "manageable situation" - but that it will take time to work through them.
July 20, 2008

WASHINGTON (AP) -- Treasury Secretary Henry Paulson sought to reassure an anxious public Sunday that the banking system is sound, while also bracing people for more troubled times ahead.

"I think it's going to be months that we're working our way through this period - clearly months," he said.

Paulson said the number of troubled banks will increase as they struggle to cope with big losses on bad mortgages. The government this month took over IndyMac (IDMC) after a run led it to become the largest regulated thrift to fail.

"Of course the list is going to grow longer given the stresses we have in the marketplace, given the housing correction. But again, it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation," he said in broadcast interviews.

Paulson used appearances on the Sunday talk shows to tell people that deposits up to $100,000 are fully insured. He said no one has lost a single penny on an insured deposit in the 75 years that the Federal Deposit Insurance Corporation has operated.

"We're going through a challenging time with our economy. This is a tough time. The three big issues we're facing right now are, first, the housing correction which is at the heart of the slowdown; secondly, turmoil of the capital markets; and thirdly, the high oil prices, which are going to prolong the slowdown," he said.

"But remember, our economy has got very strong long-term fundamentals, solid fundamentals. And you know, your policy-makers here, regulators, we're being very vigilant."

Paulson said he hoped Congress soon would approve his plan to help shore up Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), the government-sponsored mortgage companies

"I'm very optimistic that we're going to get what we need from Congress here, because Congress understands how important these institutions are," Paulson said.

The House plans to vote Wednesday on a housing bill that is expected to include a rescue for Fannie Mae and Freddie Mac. The companies' shares have plummeted because of fears about their financial stability. Fannie Mae and Freddie Mac are private, but they were created by Congress to encourage homeownership by buying mortgages from banks. The two hold or guarantee more than $5 trillion in home loans -- almost half of the nation's total.

"Our first priority today is the stability of the capital markets, the stability of the system. And these institutions have investors all around the world ... and those investors need to know that we in the United States of America understand the importance of these institutions to our capital markets and to our economy and to our housing market," he added.

Paulson acknowledged the U.S. is continuing to lose jobs, though he said the $168 billion economic relief plan approved this year has created jobs that would not otherwise exist. The plan included tax rebates for people and tax breaks for businesses.

Democratic leaders, including presidential candidate Barack Obama, are pushing for a second, smaller, economic installment. Paulson said he did not want to speculate about that idea.

"I'm focused on this stimulus package. It's made a difference in the second quarter. It's going to make a difference in the third quarter. We need to watch this very carefully," he said.

Congress Urges Oil Speculation Crackdown
Lawmakers Say Urgent Action Is Needed To Curb Speculation Driving Historic Fuel Prices

WASHINGTON-(CBS/ AP) Lawmakers continue to blame large investors for their role in propping up oil prices, pointing out Monday that speculation in crude futures has nearly doubled since 2000.

Pension funds, Wall Street banks and other large investors that have no intention of taking delivery of fuel have increasingly pumped money into contracts for oil and other commodities as a hedge against inflation when the dollar falls.

After more than a half dozen hearings in Congress on the issue, Democratic House lawmakers said they intend to tighten restrictions on pension funds, investment banks and other large investors that they blame for driving up fuel prices.

Many Republicans, analysts and regulators, however, say soaring oil prices are a reflection of macro-economic factors, including the falling dollar, unrest in the Middle East and increased demand from countries like China and India.

But Saudi Arabia and other OPEC countries say there is no shortage of oil and instead blame financial speculation.

Oil prices rose $1.38 to settle at $136.66 a barrel Monday on the New York Mercantile Exchange on disappointment over Saudi Arabia's modest production increase and concerns that output from Nigeria will decline.

Saudi Arabia said Sunday it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May. But that pledge at the meeting held in the Saudi city of Jeddah fell far short of U.S. hopes for a larger increase.

"Make no mistake about it, the excessive speculation in commodity markets is having a devastating effect at the gas pump that is rippling through our entire economy," said Rep. Bart Stupak, D-Mich., who chaired the hearing of a House Energy and Commerce subcommittee.

Why Do Higher-Education Costs Rise More Rapidly Than Prices in General?
by Robert B. Archibald and David H. Feldman
June 2008

The idea for this article dawned on us over a year ago, when we first read David Longanecker’s article, “A Tale of Two Pities: The Story of Higher Education Finance in America,” in the January/February 2006 issue of Change. Longanecker describes a standoff between state legislators and representatives of state-supported colleges and universities. The legislators argue that they are doing their share in funding higher education by pointing to data showing that appropriations per student to colleges and universities have grown more rapidly than the inflation rate. Meanwhile, representatives of state-supported colleges and universities argue that, on the contrary, state legislators are letting them down. They point to data showing that state appropriations are a declining percentage of college and university revenues.

Both are right. And it does not take a rocket scientist to understand how this can be so: Costs per student in public colleges and universities have risen much faster than the price of goods and services in the indices we use to measure inflation. But, then, why do costs in higher education rise more rapidly than the overall inflation rate?

The study of costs in any industry, higher education included, should focus on two questions: First, what are the characteristics that drive costs in that particular industry? Second, what are the factors that make those costs similar to costs in other industries? The majority of the studies of cost pressures in higher education address the first question. They produce lists of the special features of colleges and universities that have increased costs. The question that most of them (except studies of “cost disease,” described below) ignore is whether any of the processes they describe also are underway in other industries—or alternatively, whether there are any strong forces affecting costs in higher education common to other industries in the economy.

Robert Archibald is Chancellor Professor of Economics at the College of William and Mary, where he has been chair of the economics department, director of the Thomas Jefferson Program in Public Policy, and interim dean of the Faculty of Arts and Sciences. David Feldman is University Professor for Teaching Excellence in the department of economics at William and Mary; he also teaches in the Thomas Jefferson Program in Public Policy. The two authors are working on a book about the cost of higher education.

Oil Rises More Than $11 To Record High
Some analysts forecast price could hit $150 a barrel by Fourth of July
The Associated Press

NEW YORK - Oil prices made their biggest single-day leap ever Friday — clearing $139, dragging the Dow Jones industrials down nearly 400 points and raising the once-unthinkable prospect of $150 oil and even higher gas prices by the Fourth of July.

The meteoric rise of nearly $11 for the day piled atop an increase of almost $5.50 the day before, taking oil futures more than 13 percent higher in just two days, easily a record on the New York Mercantile Exchange.

And those weren't the only stunning numbers of the day: The government also reported the nation's unemployment rate zoomed to 5.5 percent in May, a monthly rise of half a percentage point, the biggest in 22 years.

Oil surged higher after Morgan Stanley analyst Ole Slorer predicted strong demand in Asia and tight supplies in the Western Hemisphere could drive prices to $150 by Independence Day, when millions of Americans take to the roads.

That means no end in sight for spiraling gas prices, already above $4 per gallon in much of the country.

Even longtime market observers were shocked by the magnitude and speed of oil's rally.

"We're into unchartered territory, and somewhat off the map as far as historical precedents are concerned," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

Besides the jump in the unemployment rate, the Labor Department said employers had cut 49,000 jobs in May, the fifth straight month of nationwide losses. Job losses for the year reached 324,000.

The White House said President Bush was considering further plans to help energize the economy, already teetering on the edge of recession and crippled by a tumbling housing market and other factors.

On Wall Street, the Dow plunged 394.64 points, more than 3 percent, to close at 12,209.81, the biggest drop in more than 15 months in both percentage and points terms.

Wall Street had managed to shrug off oil's advance on Thursday but succumbed to extreme anxiety Friday.

The stock market's great concern of late has been whether consumers would curb their spending on non-essentials as they were forced to pay more for gas and other staples.

The previously unthinkable idea of $150 oil, and gasoline that will keep climbing above $4, made it clear to investors that consumers would be forced to be even more conservative than they have been in recent months.

Before Thursday, oil had receded nearly $13 a barrel from its highs, a respite from its nearly record-every-day march. But the end of the week sent it right back up again.

Food Shortages and Rising Costs

By David Phillips

May 19, 2008

Rising costs for food around the world and shortages of food in several nations have many worried how they will feed their families.

Food riots have broken out in Bangladesh, Egypt, Burkina Faso, Mauritania, Mozambique and Senegal. Rising prices have hit poor countries like Peru (and even developed countries like Italy and the United States).

Why is this happening?

Several problems have come together all at the same time, or as some might say, “a perfect Storm.” They include soaring petroleum prices, which increase the cost of fertilizers, transport and food processing; rising demand for meat and dairy in China and India, resulting in increased costs for grain, used for cattle feed; and the ever-rising demand for raw materials to make biofuels.

The global market has driven the growing demand for grains and a shortage of supply. Wheat inventories, for example, have reached a 30-year low. In one year inventories in the European Union have plummeted from 14 million to one million tons. The fact is that arable land cannot be increased at will. Over the past three decades, the amount of arable land worldwide has stagnated at about 1.5 billion hectares (3.7 billion acres) while the world’s population has increased.

World Bank President Robert Zoellick said, "While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs and it is getting more and more difficult every day.”

The United States uses corn to make ethanol and as we increase the amount of ethanol requirements less corn is available for consumption. 

A couple of years ago the United States Congress passed The Energy Policy Act of 2005 which requires that increasing amounts of ethanol be used in the United States to dilute gasoline. The law called for 4 billion gallons of ethanol to be used in 2006, 6.1 billion gallons in 2009, and 7.5 billion gallons by 2012.

Global inventories of grains are nearing historic lows, while twenty percent of the U.S. corn crop this coming year will be used for ethanol production.

Meanwhile wheat, rice and soybean prices have reached all-time highs and corn prices have jumped to a 12-year high.

"Congress needs to revisit these food-for-fuel policies. We really shouldn't be pitting our fuel needs against hunger and the environment," said Scott Faber, vice president of foreign affairs for the Grocery Manufacturers Association. "I don't think any member of Congress would have voted for this legislation if they had known that the prices of corn would jump like this."

How long will these shortages last?

Michael Schmitz, an agricultural economist and professor, used databases to forecast how far trends would last when global conditions change like they have recently. The professor says that the current shortages and price hikes are not a phenomenon that will end in a few months -- or even in a few years. Schmitz predicts: "This could continue for two or three decades."

There are many contributing factors that come into play in this “perfect Storm”, droughts caused by Global Climate Change, a growing world population, energy costs, Wars. More land is being used for residential and industrial uses around the world and less is being used for agriculture and there is a lack of cooperation and some denial among many of the world’s leaders.

Riots have already broken out in parts of the world because of food shortages, these shortages will be getting worse before they get better according to most experts. We will see many more riots in the months and years to come if our world leaders do not start to take this crisis seriously.

If you think going to war for oil like we have is bad, wait until millions of people start rioting because they are hungry.

David Phillips is a Vietnam Era Veteran, a Democratic Party Activist, and David is also the Publisher and Editor of the online political magazine YodasWorld.org

 E-Mail Questions or Comments: oneyoda@aol.com

You can also read David’s weekly column in the Santa Ynez Valley Journal or you can go to their web site: www.Syvjournal.com 

Oil Leaps After Bush's Saudi Trip
By James Quinn
Wall Street Correspondent

The price of oil soared to yet another record high as President George W. Bush's second trip to Saudi Arabia in four months appeared to deliver a token victory in the battle for increased oil output.

In New York, oil for June delivery touched a new high of $127.82 a barrel, spurred by investment bank Goldman Sachs predicting an average price per barrel of $141 in the latter half of the year.

Early indications from President Bush's meeting with King Abdullah of Saudi Arabia suggested he received largely the same reception as on his visit in January.

advertisementWhite House aides, including US National Security Adviser Stephen Hadley, said immediately after the meeting that King Abdullah again pledged to keep pumping as much oil as needed to meet demand but said that he saw no unmet current demand.

However, Saudi oil minister Ali al-Naimi later said that on May 10, the kingdom had increased oil output by 300,000 barrels on the request of "about 50 customers worldwide".

The rise will bring Saudi's production in June to 9.45m barrels a day, and does not appear to have been granted in direct response to President Bush's visit. "In the future, if the need appears, Saudi Arabia has no objection to producing more,"

Mr Al-Naimi said. However, it is understood that during his meeting with Mr Al-Naimi and the King, President Bush was warned increased production was unlikely to lead to lower US energy prices.

Ahead of his visit, President Bush had hoped that as the world's largest supplier of oil, accounting for about 10pc of global output, King Abdullah might be persuaded to act as a catalyst to encourage others in the OPEC cartel to also pump more oil.

However Mr Al-Naimi said the decision to increase production by a further 300,000 barrels was purely in response to other OPEC nations decreasing their own production.

The US leader is keen to reduce the cost of oil due to America's heavy reliance on petrol, with both the public and businesses feeling the pinch as a result of ever higher prices at the pump.

Meanwhile oil analysts at Goldman Sachs provided little comfort, forecasting that the average price of a barrel of US crude oil will average $141 in the second half of 2008, against its earlier forecast of $107.

Goldman also raised its average price projection for 2009 to $148 a barrel.

Gas To Hit $7 A Gallon
By Marty Jerome

Both Qatar's oil minister and the head of OPEC can see oil hitting $200 a barrel before the end of the year and one analyst says gas could reach $7 a gallon within four years. That could mean cataclysm for the global economy.

The world got a little relief today when BP reopened its North Sea pipeline. But the price of gas is averaging $3.60 a gallon and the price of oil is flirting with $120 a barrel with no relief in sight. Market forces don't seem to be functioning in their normal order. OPEC controls only about half of the world's oil supply. Ordinarily, when prices spike skyward, the world's non-cartel spigots open wide. Why isn't this happening and who's to blame?

Oil Companies. Admittedly, obscenely compensated oil executives are laying low these days. Big Oil is rolling in profits. The Bush Administration's tax subsidies to oil companies, which were intended to prod exploration, should infuriate commuters. And yet the profit margins of oil giants are only slightly higher than the average for the S&P 500. And much of the wealth from these companies is pumped back into the economy in dividends, employment, capital spending and the like. Big Oil shouldn't get a walk (and windfall profit taxes make more sense than ever). But it's only a small part of the problem.

China and India. It seems to be a global fact that an automobile signals your arrival into the middle class. Without question, demand for oil in these countries is putting an inexorable upward push on gas prices. This isn't going to change in your lifetime, and it should sound the alarm for North Americans and Europeans that their middle-class lives will be threatened unless they develop alternative forms of energy -- fast. But the increasing demand for oil in China and India is a long-term trajectory. It doesn't explain recent spikes. And in the short term, it's self correcting. As oil prices spike, economies slow and the demand for oil eases. So does its price.

Ben Bernanke. Oil is currently priced in U.S. dollars. The Federal Reserve has feverishly tried to calm credit markets in recent months with lower interest rates, which are a kind of Valium for bankers. As interest rates drop, so does the value of the dollar. So it takes more dollars to buy a barrel of oil. Without question, the credit crisis is a more pressing concern than high gas prices. Credit, after all, is the life blood of an economy. It is widely expected that tomorrow the Feds will reduce interest rates again. But many analysts believe this is the last cut we'll see for a while. Fighting inflation -- including rising gasoline prices -- is becoming a priority. When interest rates begin inching up again, it will be bad news if you're taking out a car loan, good news at the pump. In the meantime, just be glad you don't have Ben Bernanke's job.

Speculators. It's never a good omen when fear swallows reason on the trading floor. But this seems to explain part of what's happening with the price of oil. Or maybe it's just greed. Whatever. The good news is that these speculative frenzies tend to end quickly. And ultimately, it's traders' fingers that get burned, not consumers.

Suppliers. Here's the mysterious missing piece in high gas prices: Saudi Arabia, Kuwait, Qatar and other OPEC members try to keep supplies tight and prices high. But England, Norway, Russia and other non-OPEC countries open the spigots to take advantage of high prices. This usually brings prices down. But supply disruptions have become rife -- even with OPEC countries, such as Nigeria, thanks to an insurgency that keeps shutting down its pipeline. Norway's production has dropped by 25 percent since its peak in 2001. Britain's has dropped by 43 percent. Alaska's Prudhoe Bay has dropped by 65 percent from its peak. Russia's is down and so is Mexico's. It's enough to make you think speculators are on to something. When does fear resemble reason?

Bush Worst President In US History

President George W Bush is the most unpopular president in modern American history, according to a new poll.

A CNN/Opinion Research Corp survey showed 71% of Americans disapprove of how Mr Bush is handling his job as president.

No US president has had a higher disapproval rating in any CNN or Gallup Poll and it is the first time such a rating has broken the 70% mark.

Keating Holland, CNN’s polling director, told the news network: “Bush’s approval rating, which stands at 28% in our new poll, remains better than the all-time lows set by Harry Truman and Richard Nixon (22% and 24%, respectively), but even those two presidents never got a disapproval rating in the 70s.

“The previous all-time record in CNN or Gallup polling was set by Truman, 67% disapproval in January 1952.”

In August 1974, just before President Nixon’s resignation, his disapproval rating stood at 66%.

The poll also showed support for the Iraq war has never been lower, with 68% opposing the war and just 30% in favour.

U.S. May Need To Change Ethanol Policy To Meet Food Demand, Obama Says

Barack Obama said the U.S. may need to revise its ethanol policy in light of rising food costs, a stance which might hurt him in agricultural states. "What I've said is my top priority is making sure people are able to get enough to eat," he said.

"We have rising food prices around the United States. In other countries, we're seeing riots because of the lack of food supply, so this is something we're going to have to deal with," Obama said. His stance is similar to that of McCain and Clinton.

The EPA requires ethanol, a renewable energy source, to be blended into U.S. gasoline, a mandate backed by President Bush and the senators who represent farming states. Some scientists say food-based biofuels should be halted during the food crisis.

Oil Prices Hit Intraday Record Near 120 Dollars
April 28, 2008

SINGAPORE (AFP) — World oil prices hit an intraday record near 120 dollars a barrel on Monday after the shutdown of a major North Sea pipeline added to supply worries, analysts said.

New York's main oil futures contract, light sweet crude for delivery in June, touched 119.93 dollars a barrel in electronic deals and was later trading in Asia 86 cents higher at 119.38 dollars.

The contract closed 2.46 dollars higher at 118.52 dollars a barrel on Friday at the New York Mercantile Exchange.

Brent North Sea crude for June delivery rose 72 cents to 117.06 dollars a barrel after a rise of 2.00 dollars to 116.34 dollars on Friday, when the contract hit a record intraday peak of 117.56 dollars.

Over the past two weeks oil has crashed through a series of records, sparking international concern. Prices were boosted by the weaker US dollar, supply worries and the OPEC cartel's reluctance to increase output, dealers said.

David Johnson, an oil analyst at Macquarie Research in Hong Kong, said that prices could breach the psychologically important 120-dollar level later Monday.

"Supply worries have pushed oil prices higher since Friday, and will remain the dominant influence on prices in the near term," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.

Britain on Sunday shut down a North Sea pipeline which supplies 40 percent of its oil and gas, sparking panic-buying of petrol after a strike at a major refinery.

The start of a two-day walkout by around 1,200 workers at the Grangemouth refinery, west of Edinburgh, in Scotland, forced the neighbouring Forties pipeline to close down at the same time, operator BP said.

The pipeline brings more than 700,000 barrels of crude oil ashore every day and supplies Britain and international markets. It cannot function without power and steam from Grangemouth.

Prices rallied on Friday as the Grangemouth plant was shut down ahead of the strike, which is over pensions.

The disruptions in crude supplies are "potentially quite significant", said Moore. "The loss of crude oil from Scotland is quite material in the context of the oil market."

Alan Duncan, the British Conservative party's industry spokesman, warned that the closure would hit world oil prices.

"The interdependence of our North Sea oil production and the refinery... has implications for global oil prices," he told Sky News television.

"So world oil prices have gone up and we're going to see local oil prices and petrol prices going up."

In Africa's biggest crude producer, Nigeria, the most prominent armed group in the southern oil-producing region on Friday sabotaged a supply pipeline belonging to Anglo-Dutch energy giant Shell.

Shell spokesman Tony Okonedo confirmed the attack but said he could not comment on the extent of the damage.

Several supply pipelines owned by Shell and Chevron have been destroyed in recent weeks.

Royal Dutch Shell is the largest oil operator in Nigeria, accounting for about half of the country's 2.1 million barrels per day output. The company has seen a wave of attacks on its facilities in recent months.

Violence in the Niger Delta has reduced Nigeria's total production by a quarter in the past two years.

Food Crisis: UN To Reveal Battle Plan
by Denis Rousseau

 
United Nations Secretary General Ban Ki-moon was set Monday to lead a concerted effort by 27 key UN agencies to tackle the growing crisis caused by a worldwide sharp rise in basic foodstuff prices.

The UN was scheduled at a two-day conference in the Swiss capital Bern to reveal a battle plan of emergency measures, while exploring other longer-term measures to solve the world's food crisis.

This will involve adjudicating between advocates of protectionism and those who favour opening up markets, as well as between supporters of biofuels and opponents thereof.

Rising populations, strong demand from developing countries, increased cultivation of crops for biofuels and increasing floods and droughts have sent food prices soaring across the globe.

"The world food crisis and the solutions that the United Nations can provide will be at the centre of discussions," said the UN. The talks hosted by Ban will take place behind closed doors at the Universal Postal Union headquarters in Bern, lasting all day Monday and Tuesday morning.

Results of the deliberations are expected Tuesday when Ban Ki-moon gives a press conference flanked by Josette Sheeran, Executive Director of the UN's World Food Programme, World Bank President Robert Zoellick, Jacques Diouf, head of the Food and Agriculture Organisation (FAO), and Lennart Bage, President of the International Fund for Agriculture Development.

The FAO has warned that sharp rises in cereal prices have left 37 poor countries in an emergency situation sparking food riots.

Ban Ki-moon called in Vienna on Friday for immediate concerted action to resolve the global food crisis.

"In the short term, we must address all the humanitarian crises which have been impacting poorest of poor pople in the world," he said.

The World Food Programme had made an urgent appeal for additional 755 million dollars (485 million euros) to fill the gap.

But in the medium to longer term, "the international community and its leaders in particular should sit down together on an urgent basis and address how we can first of all improve the economic system, the distribution systems, as well as how we can promote new production of agricultural products".

"The steeply rising price of food has developed into a real global crisis," Ban told journalists in Vienna.

"The United Nations is very much concerned, as all other members of the international community are. We must take immediate action in a concerted way throughout the international community."

Ban estimated that around 100 million of the world's poorest who previously did not require help now can not afford to buy food.

The World Trade Organisation, whose Director-General Pascal Lamy will also attend the Bern talks, says the food crisis reinforces the need to open up world markets.

"Agricultural subsidies by rich countries have destroyed the agriculture of poor countries," a spokesman told AFP. "A more open system will be less subject to distortion."

The UN Conference on Trade and Development (UNCTAD) is also seeking a rapid conclusion to current world negotiations in the framework of the Doha Round.

The head of the International Labour Organisation (ILO), Juan Somavia, has warned against the danger of seeking only temporary solutions to the latest crisis, saying this would only mean a return to the original problem in a world in which globalisation would not benefit the world at large.

Dominique Strauss-Kahn,head of the International Monetary Fund (IMF), has criticised protectionism and the use of foodstuffs to make biofuels, and called for a reform of world coordination of agricultural policy.

ECONOMY -- STATES TAKE THE LEAD IN POVERTY REDUCTION

A recent report released by two prominent poverty-reduction groups highlights the efforts of more than a dozen states to reduce poverty and lift Americans into the economic mainstream.

The report's lead author, Jodie Levin-Epstein of the Center for Law and Social Policy, explains that there are many new factors forcing state lawmakers to take action, including "growing income inequality, a general economic insecurity, and the realization that to stay globally competitive we need a workforce that is skilled and agile. ... These add up to a new political awareness that we can not allow poverty -- and a lack of economic opportunities for people in poverty -- to continue to be largely ignored."

Connecticut, Delaware and Vermont have pledged to cut child poverty by 50 percent in the next 10 years; Michigan will be holding its first statewide child poverty summit this fall; Minnesota has commissioned a legislative group to end poverty in the state by 2020; and Colorado and Iowa have established legislative caucuses devoted to eradicating poverty around the state.

As the economic downturn intensifies, poverty is gaining traction in the 2008 presidential race, with all three remaining contenders pledging to take action if elected. On the Democratic side, Sen. Hillary Clinton (D-NY) and Barack Obama (D-IL) have called for naming a high-level poverty point person. Sen. John McCain (R-AZ) has pledged to make the "eradication of poverty a top priority."

The Center for American Progress has developed a strategy to cut poverty in half in the next 10 years.

Democrat Blames Weak Economy On Iraq War
By WILL LESTER
Associated Press

 
The growing cost to the United States of fighting the war in Iraq "is not only linked to our economic skid, but is a leading cause of it," a Democratic congressman said Saturday.

Rep. John Yarmuth of Kentucky linked the costly, unpopular war with the growing economic troubles — some say recession — in this country.

Yarmuth said in the Democrats' weekly radio address that the testimony this week of Gen. David Petraeus and Ambassador Ryan Crocker about the Iraq war served as reminder of the billions of dollars being poured into Iraq as the U.S. economy struggles.

"General Petraeus and Ambassador Crocker failed to offer a plan to change direction in Iraq and redeploy our troops," Yarmuth said. "Instead, they offered more of the same, with U.S. troops and taxpayers paying the price."

The U.S. government has spent "more than half-a-trillion dollars" in support of the war effort, while that money could be spent on pressing needs in this country, he said.

In February, an Associated Press-Ipsos poll found that pulling out of Iraq was the most named remedy for fixing U.S. economic problems.

Forty-eight percent of those surveyed said a withdrawal would help the country's economic problems "a great deal" and 20 percent more said it would help somewhat. Some 43 percent said increasing government spending on health care, education and housing programs would help a great deal; 36 percent named cutting taxes.

"Across America, our roads and bridges are crumbling and are in desperate need of repair, yet taxpayer dollars are being squandered on an Iraqi government that is riddled with waste, fraud and corruption," Yarmuth said.

He said "the cost of one month in Iraq could extend the Children's Health Insurance Program, which the president vetoed, to 10 million children of working families for a full year."

He noted that Congress has passed an economic stimulus package to send millions of Americans up to $1,200 that could provide a boost to the economy.

But Yarmuth isn't satisfied.

"We know we must do more," he said, adding that Democrats are pushing for a second economic stimulus package to aid workers, their families and businesses.

The White House said the first economic stimulus package should be given a chance to work before a second is passed.

American Airlines Cancels Flights While Investigations Continue

American Airlines had to cancel another 595 flights on Friday, bringing the week's total to 3,079 amid a safety inspection crackdown.

Safety inspections have also grounded hundreds of United, Southwest, Delta, Alaska and Midwest Airlines flights in the wake of a scandal over skipped aircraft inspections.

Federal investigators have started to question federal safety administrators over what is being described as the cosy relationship between them and airline bosses.

Last week, whistle-blowers detailed conduct by higher-ranking FAA officials that permitted Southwest Airlines to avoid aircraft inspections, allowing some to fly with cracks in the aircraft wings and fuselage.

Gas Prices Set Record, Oil Moves Higher
By ADAM SCHRECK
AP Business Writer

NEW YORK — Gas and diesel pump prices jumped to yet another record Friday, piling on the costs for motorists as well as consumers reliant on trucks, trains and ships that deliver goods to market.

Retail gasoline rose 0.8 cents to a national average of $3.365 a gallon, although drivers in California could expect to pay nearly 30 cents more for regular and over $4 a gallon for higher grades, according to AAA and the Oil Price Information Service.

The increase marks the latest in a series of retail gasoline records in recent weeks, and leaves drivers paying 56 cents more a gallon now than they did a year ago. And there may be more to come.

"We do think prices, particularly for self-serve regular, are going to continue to go up," AAA fuel price analyst Geoff Sundstrom said.

Oil prices also edged higher in a late-day push, but remained more than $2 below an all-time high set earlier in the week. Light, sweet crude for May delivery rose 3 cents to settle at $110.14 on the New York Mercantile Exchange.

Analysts expect gasoline prices will continue to set records as more drivers take to the roads as summer approaches and refineries complete their conversion to more expensive summer-grade fuel. It is unclear how high prices will go, however, because a bigger fuel bill could convince some drivers to cut back.

For more information, you can go to the Internal Revenue Services' website at www.irs.gov

Last month, the New York Times reported that the banking and housing crises had moved "from Wall Street to Main Street" and was beginning to affect "communities that seemed insulated."

Now the country's economic crisis is taking a toll on the Mortgage Bankers Association (MBA). Last year, the MBA was "thrilled to sign a contract to buy a fancy new headquarters building in downtown Washington." Since then, however, the group "has fallen on tough times as many of the subprime mortgages dispensed by some of its members proved dicey."

The MBA is now finding it "harder than it imagined to pay its own mortgage," forced to make cuts to "expenses across the board." Roll Call reports that members of Congress have also become "vulnerable to the financial woes" of the banking sector.

Drake Pacific Well Expected To Produce Over 100 bbl/d

Drake Pacific Enterprises Ltd. (DPE) has completed preliminary production testing on the previously announced Swan Hills oil discovery.

DPE ran a multi-day swabbing program that has produced an average rate in excess of 240 Bbld; however, as pressure continues to build on a daily basis the company must wait for stable pressure or 14 days from completion to begin production. Production should commence before April 10th.

DPE expects that the well will have an initial production rate over 100 Bbld (Net 70 Bbld plus royalties). As DPE's current production is approximately 130 Boe a day, this discovery will have a significant impact on oil reserves, production, and cash flow.

The company plans to drill a second well at Swan Hills as part of the 2008 Fall drilling program.

DPE and its partners (DPE net working interest of 22% to 57%) have also completed construction of a pipeline to allow the reactivation of both oil and gas wells in the Sousa area.

Total gross production from these two wells was approximately 130 Boe per day (35% oil) at the time of shut-in. Production is expected to begin within weeks.

In addition to the ongoing programs at Sousa and Swan Hills, DPE plans an aggressive program this spring with new drills at Retlaw (oil & gas) and Suffield (oil).

Weapons Cost Overruns
With domestic programs being cut, Pentagon spending and delays are slap in the face

A new federal audit shows that the Defense Department’s weapons acquisitions are, for the sixth year in a row, billions over budget and years behind schedule.

The report released Monday by the Government Accountability Office, the investigative arm of Congress, shows that the $1.6 trillion the government has spent on ships, aircraft, weapons systems and satellites is $295 billion over budget. And the delivery of these items is two years behind, on average, the GAO says.

For example, the GAO cites the Navy’s $5.2 billion Littoral Combat Ship project. The cost of the first two ships is expected to be more than twice the $472 million budgeted.

Such cost overruns and delivery delays have been documented in the GAO’s analyses of selected weapons acquisitions in each of the past six years. Yet, GAO auditors say, the Defense Department has yet to make marked improvements.

“It’s not getting better by any means,” Michael Sullivan, director of the GAO’s acquisition and sourcing team, told The Washington Post. In fact, Sullivan said, the process is “taking longer and costing more.” Part of the problem is that there are more projects than there is money, Sullivan said. And many of the technologies are not ready to go into production, and the systems take too long to design, develop and produce.

Certainly, our military needs the best equipment and weapons the nation can provide. But the Pentagon should get a handle on its spending by working harder to stay within its budget and setting budget projections that are more realistic.

Who's A Dropout?
The country needs a consistent -- and fair -- way to count who doesn't graduate.

For too long, high schools and states have played hide-the-dropout, artificially inflating their graduation rates. In many places, a teenager practically has to show up at the principal's office and shout "I'm a dropout!" to get counted as one. Considering that the dropout rate is, even by sunny estimates, distressingly high, U.S. Education Secretary Margaret Spellings is right to plan a standardized method of reporting nationwide. The public won't demand change when it cannot clearly see the problem.

This is one subject, though, that calls for delicate handling -- not the bludgeon-likeapproach of the rest of the No Child Left Behind Act. Depending on who's doing the counting and how, the dropout rate in the Los Angeles Unified School District is somewhere between 25% and 55%. Spellings can do more harm than good if she devises rules that make schools look unrealistically bad. A case in point is the study released last week by the Editorial Projects in Education Research Center, which placed the city's dropout rate at 55%.

The study over-counts dropouts by failing to take into account that 27% of L.A. Unified's students move each academic year; those who move out of the district are considered dropouts even though many may be attending school in a neighboring city. In addition, the district rightly requires about 20% of its ninth-graders to repeat the grade to bring their work up to high school level, but the study counts anyone who doesn't take a diploma within the traditional four years as a dropout. So much for students who need an extra year to pass the exit exam or who earn an equivalency degree.

The only way to count dropouts with reasonable accuracy is with a student identification system, something that California has promised for years but never delivered. If Spellings is committed to meaningful dropout figures, she will require -- and fight to fund -- student identification throughout the nation. An important side benefit of student tracking: It allows states to measure actual student progress year to year, a better way of holding schools accountable under the federal act than the current process.

When Spellings talks about giving the public comparative figures, she should consider whether those comparisons will hold up to scrutiny. Will states like California, which has a high school exit exam, be counted the same as states with lower expectations? After all, it's not too hard to boost graduation rates, if that's what the U.S. Education Department wants. Just let the students warm classroom seats for four years, then hand them a diploma, whether or not they can read. Such shenanigans were the main impetus for the school accountability movement in the first place.

Instead of narrowly defining high school graduation as four years or you're out, Spellings should encourage schools to move away from structures that no longer hold meaning for many students, especially immigrants who struggle to learn English at the same time they're trying to graspalgebra. Who said high school has to consist of the traditional three years and 10 months? Spellings ought to reward schools that innovate with a second, remedial "superfreshman" year, or that launch post-senior classes to help older students pass the exit exam, rather than labeling these schools as failures on the dropout front.

Spellings deserves praise for insisting that schools break down their dropout numbers to reflect which groups -- black, Latino, impoverished -- leave school in the greatest numbers. She seems to possess a sincere passion for improving the educational lot of poor and minority students. After years of ignoring its vanished students, Los Angeles Unified is finally paying attention. As the district tries to turn this situation around, the question is whether the federal government will be its ally or an impediment.

Bush Seeks Financial Regulation Overhaul
By MARTIN CRUTSINGER
AP Economics Writer

The Bush administration is proposing a sweeping overhaul of the way the government regulates the nation's financial services industry from banks and securities firms to mortgage brokers and insurance companies.

The plan would give major new powers to the Federal Reserve, according to a 22-page executive summary obtained by The Associated Press.

The Fed would be given broad authority to oversee financial market stability. That would include new powers to examine the books of any institution deemed to represent a potential threat to the proper functioning of the overall financial system.

The proposal, which will be outlined Monday in a speech by Treasury Secretary Henry Paulson, is certain to set off heated debates within different sectors of the financial services industry and in Congress, where some Democrats are likely to complain that the proposal does not go far enough to crack down on abuses.

The administration divided its recommendations into short-term goals that could be adopted quickly, intermediate recommendations and an "optimal" regulatory framework, which contains a radical restructuring of how the government supervises banks and other financial institutions.

The recommendations are the product of a yearlong review that was begun in an effort to modernize the government's regulatory structure so that the country's financial services industries could better compete in a fast-changing global economy.

The plan also seeks to address problems that have been brought to light in recent months since a severe credit crisis began roiling financial markets last August.

That crisis has already claimed as its biggest victim Bear Stearns, the nation's fifth-largest investment bank, which came to the brink of collapse before a government-arranged purchase by JP Morgan Chase & Co.

"I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years," Paulson will say in the remarks he will deliver on Monday.

But the plan does seek to address problems highlighted by the current crisis in which the Fed in an unprecedented move has begun making direct loans to securities firms in an effort to shore up a system badly shaken by billions of dollars of losses stemming from sour mortgage loans.

The proposal would allow the Fed, in its new role as "market stability regulator," to dispatch examiners to check the books not just of commercial banks but of all segments of the financial services industry.

The administration proposal would also consolidate the current scheme of bank regulation by shutting down the Office of Thrift Supervision and transferring its functions to the Office of the Comptroller of the Currency, which regulates nationally chartered banks.

The plan recommends that the Securities and Exchange Commission, which regulates stock trading, be merged with the Commodity Futures Trading Commission, which regulates futures trades for oil, grains and various other commodities.

The plan would create a national regulator for the insurance industry, which is now largely governed by the states, and would create a Mortgage Origination Commission to try to address the abuses exposed in the current tidal wave of mortgage defaults.

The role Federal Reserve Chairman Ben Bernanke and his colleagues have been playing to shore up the financial system would be formalized in the administration plan by giving Fed officials greater power to detect where threats might be lurking in the system.

The proposal is certain to generate intense scrutiny in Congress and within the financial services industry, where past efforts to change how regulation is handled have met with fierce resistance.

Many Democrats in Congress are already pushing tougher proposals that would impose much stricter regulation in an effort to crack down on abuses exposed by the current credit crisis.

Sen. Charles Schumer, D-N.Y., said he believed Paulson's plan offered some valid suggestions.

"In broad outlines, we agree with large parts of Secretary Paulson's plan," Schumer, chairman of the Joint Economic Committee, said in a statement. "He is on the money when he calls for a more unified regulatory structure, although we would prefer a single regulator to the three he proposes."

Under Paulson's approach, the long-term goal would be to designate the Fed as market stability regulator and to have a financial regulator who would focus on financial institutions that operate with government guarantees such as providing deposit insurance.

The administration plan, which was first reported by The New York Times on its Web site Friday night, also proposes a business conduct regulator who would be in charge of overseeing consumer protection issues.

The initial reaction from the securities industry was also positive.

"Treasury has delivered a thoughtful and sweeping plan which should provoke intense discussion, debate and potential legislative changes," said Tim Ryan, president of the Securities Industry and Financial Markets Association.

"Our present regulatory framework was born of Depression-era events and is not well suited for today's environment where billions of dollars race across the globe with the click of a mouse," Ryan said in a statement.

Despite the millions of dollars that have been set aside to help victims of Hurricane Katrina rebuild, "tens of thousands of homeowners are still waiting for their government rebuilding checks, and many complain they can't even get their calls returned."

However, the AP reports that ICF International, the company charged with distributing $7.5 billion in federal relief money, "has posted strong profits, gone public, landed additional multimillion-dollar government contracts -- and recently secured a potentially big raise from the state of Louisiana."

ICF works with Road Home, a state-run, federally-funded program to compensate homeowners. "As of last month, 56,000 applicants -- nearly 40% of the qualified total -- had yet to receive a cent. Plagued by cost overruns and delays, Road Home is expected to cost federal taxpayers $10 billion and has become a glaring symbol of frustration in post-Katrina New Orleans."

Yet ICF remains in the government's good graces: just this week, the Environmental Protection Agency awarded the company a $42 million contract "to support its clean air markets division."

Bush Administration Defends Economic Policy
By Paula Wolfson
White House

The Bush administration is defending its handling of the U.S. economy at a time of growing public unease. VOA's Paula Wolfson reports during a series of interviews on American television Treasury Secretary Henry Paulson stressed the government will do what it takes to maintain stability in the financial system.

The White House is waging an all-out effort to ease election year fears about the economy.

Polls show it is the number-one issue on the minds of most Americans, and from the president on down administration figures are seeking to reassure the public.

They stress the fundamentals of the economy are sound, and steps are being taken to ensure the current slowdown is temporary. A stimulus package of tax rebates and small business incentives has been signed into law.

And on Friday, the U.S. central bank helped strengthen a major investment firm facing collapse. The firm - Bear Stearns - was caught up in the crisis in the home mortgage market.

On CNN's Late Edition program, Treasury Secretary Paulson said the action taken by the Federal Reserve was warranted.

"Our number-one priority with everything we are doing in the economic arena is to minimize instability, minimize spill over into the real economy, and I think that is pretty clear from the actions you have seen the government take," said Paulson.

Paulson said officials are continuing to keep a close watch on the turmoil on the financial markets, but declined to say if the government would step in again to rescue an investment firm.

Instead, he tried to keep the focus on the positive. During an appearance on ABC's This Week program, he expressed confidence that the financial markets would work their way out of the current crisis.

"Our financial institutions - our banks and investment banks - are very strong and I am convinced that they are going to come out of this situation very strong," he said. "Our markets are resilient, flexible. I am quite confident we are going to work our way through this situation."

But top Democrats in Congress are less sure about the prospects for a speedy recovery, and they are putting the blame for the nation's economic woes squarely on the Bush White House.
 
House Speaker Nancy Pelosi told This Week the Bush administration waited too long to take action.

"I think that much of what the administration has done has been too late," said Nancy Pelosi.

Pelosi noted that Democrats are already working on a second economic-stimulus package. President Bush has said he wants to give the current plan a chance to work before taking further measures.

The president meets with his advisory panel on financial markets on Monday. Among those taking part in the discussions will be Paulson and Federal Reserve Chairman Ben Bernanke.

Fed Chief Warns Anew on Foreclosures
By PETER S. GOODMAN

Ben S. Bernanke, the Federal Reserve chairman, added fresh warnings on Friday about a gathering wave of home foreclosures bearing down on American communities, while pledging new regulations to limit the impact and crack down on predatory mortgage lending.

“Mortgage delinquency and foreclosure rates have increased substantially over the past year and a half,” Mr. Bernanke said during a speech in Washington. “Behind these disturbing statistics are families facing personal and financial hardship and neighborhoods that may be destabilized by clusters of foreclosures.”

“These realities challenge to find ways to prevent unnecessary foreclosures,” and “ensure a regulatory environment that promotes responsible lending,” he added.

The chairman’s words before the annual meeting of the National Community Reinvestment Coalition were perhaps most notable for what they left unsaid: At a time of grave concern about a recession that many economists believe has already begun, Mr. Bernanke offered no clues as to whether another cut in interest rates is in the offing when Fed governors convene on Tuesday.

Nor did Mr. Bernanke touch on intensifying fears about the global credit shortage spawned by the unraveling of American mortgage markets. The severity of that crisis was brought home with stunning clarity by the morning’s news that Bear Stearns, the venerable Wall Street investment bank, was leaning on emergency financing from JPMorgan Chase and the New York Federal Reserve.

That news triggered a fierce sell off on Wall Street, where the Dow Jones industrial average was down about 170 points shortly before 1 p.m.

Even before the public distress call from Bear Stearns, markets had already assumed the Fed would drop the federal funds rate by at least half a point and probably three-fourths of a point at next week’s meeting.

In aggressively lowering the rate on what banks charge each other for overnight loans in recent months, the Fed has been seeking to stir economic activity: Lower rates make it easier for banks to get their hands on cash, which traditionally makes them more likely to lend, giving businesses the wherewithal to invest and hire workers.

But lower interest rates also tend to increase inflation, because more easily flowing money leads to more buying, which pushes prices up.

As it has dropped rates, the Fed has acknowledged longer-term concerns that this easing could ultimately worsen inflation, even while concluding that the immediate threats to the economy — tight credit, plummeting home prices and a deteriorating jobs market — demand freer credit at once.

Data released by the government on Friday morning appeared to give the Fed a little extra room to tilt further toward stimulating the economy while worrying less about inflation: The Consumer Price Index showed that inflation was essentially flat in February. That lent some credence to the argument that as the economy slows, this will diminish demand for goods, and that will automatically apply the brakes to price increases.

Many analysts, however, argue that the February figure was an aberration. Gasoline and food prices have been rising sharply, and this should be reflected in the data for March, removing whatever cushion Friday’s numbers appeared to provide.

None of this occupied Mr. Bernanke’s time at the podium in Washington. Instead, the Fed chairman focused on the widening crisis in American real estate, while advertising the merits of a set of proposed new regulations he introduced in December.

Those proposals include barring lenders from making loans that borrowers cannot reasonably be expected to repay, and demanding that lenders verify the incomes of borrowers rather than rely on their assurances.

The Fed also proposed barring lenders from marketing their mortgages as “fixed rate,” without specifying the time the rate remains in place. That measure is a reaction to the growing number of homeowners who have landed in trouble after their low promotional rates expire, inflicting them with much higher monthly payments.

Some 1.5 million subprime mortgages with adjustable rates are set to adjust upward this year, Mr. Bernanke said.

The Fed will take public comment on these proposed measures through April 8 before issuing final rules.

In making his case for the changes, Mr. Bernanke noted that more than half of the roughly 1.5 million foreclosure proceedings initiated last year involved subprime mortgages — those extended to those with troubled credit, often in low-income areas.

“Far too much of the lending in recent years was neither responsible nor prudent,” he said. “The terms of some subprime mortgages permitted home buyers and investors to purchase properties beyond their means, often with little or no equity. In addition, abusive, unfair or deceptive lending practices led some borrowers into mortgages that they would not have chosen knowingly.”

But Mr. Bernanke noted that the mortgage crisis now extends far beyond subprime loans.

“In 2007, about 45 percent of foreclosures were on prime, near-prime, or government-backed mortgages,” he said.

ABC: No Question McCain Intervention Helped Airbus
Filed by David Edwards and Nick Juliano

Republican presidential candidate John McCain might be glad that he hasn't received a whole lot of attention since he officially locked up his party's nomination earlier this month, because most eyes are on the still-ongoing Democratic race.

But critics of the Arizona senator are starting to make waves about the Arizona senator's relationships with lobbyists with a European company, by charging that the results cost Americans jobs, according to ABC News.

European Aeronautic Defense and Space Co. and Northop Grumman Corp. were awarded a $35 billion Pentagon contract last month to build new Air Force tankers, instead of Boeing Co., and the Seattle-based company is formally challenging the agreement.

Boeing's complaint asks the Government Accountability Office to make sure the EADS contract is fair. McCain pushed for EADS to get the contract, and his campaign employs three former EADS lobbyists, although there is no specific evidence of impropriety, according to ABC.

"Mr. Clean has a bunch of lobbyists that work for a company that won that contract," House Democratic Caucus chairman Rep. Rahm Emanuel, D-Ill., told the network. "Some people claim the way the specs were written, it was all but certain that the company that his campaign lobbyists worked for couldn't but get that contract."

McCain defended the arrangement, saying none of the EADS lobbyists he now employs lobbied him about the companies contract, and he notes that he doesn't lack Boeing connections either, according to ABC:

But today in New Hampshire, McCain argued that his interest in opening up the bidding process was to benefit the taxpayer. He cited his 2004 congressional investigation of a previous Boeing tanker deal, which uncovered a procurement scandal. "The rather bizarre aspect of it is that I killed off a program that was going to cost the taxpayers an additional $6.2 billion, executives went to jail, CEOs were fired," McCain said.

"What Senator McCain said he has tried to do is make the process for bidding more open, transparent and competitive," explained ABC's Jake Tapper explained in a segment on the network. "In making that argument, McCain has benefited this consortium run largely by Airbus. It has benefited that company without question. Was Senator McCain trying to benefit that company? That's an open question but Boeing seems to think so. A lot of the Democrats in Congress seem to think that the deck was stacked against Boeing. "

Oil Surpasses $103 For First Time
By GILLIAN WONG

SINGAPORE (AP) — Oil prices surpassed $103 a barrel for the first time Friday as persistent weakness in the U.S. dollar and the prospect of lower interest rates attracted fresh money to the oil market.

Prices were supported by comments Thursday from Federal Reserve Chairman Ben Bernanke, who said the American economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation.

Investors chose to see the comments as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.

Lower U.S. interest rates tends to weaken the dollar, and crude futures offer a hedge against a falling dollar.

"Due to the weakening dollar and the rising fear of inflation, investors have put money into commodities, oil included," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"Commodities, as tangible assets, do not face as much inflationary threat as opposed to holding a currency," Shum said. "Even though the value of money is changing, the asset continues to have an intrinsic value."

Light, sweet crude for April delivery jumped to a new trading record of $103.05 a barrel in Asian electronic trading on the New York Mercantile Exchange before slipping back to $102.79 a barrel, up 20 cents, midafternoon in Singapore.

On Thursday, the contract jumped $2.95 to settle at a record $102.59 a barrel.

Shum warned that a price bubble was emerging in the crude futures market as investors ignored market fundamentals that have shown continuous increases in U.S. crude supply while several recent forecasters have lowered oil demand growth predictions for this year due to the slowing economy.

"We've seen seven straight weeks of builds in crude oil inventories. The oil market fundamentals are softening and yet we see record highs being set, day in and day out," Shum said.

Shum warned of the possibility of a sharp correction at some point, though unlikely in the near term.

"Right now, there's a lot of trading based on emotion — emotions are high and that could keep crude oil at elevated levels, but the market faces the risk of a price collapse."

The Japanese government on Friday urged the oil cartel OPEC to increase output to help ease record prices.

"The high crude prices are gradually damaging the global economy. This will damage the economies of oil-producing countries," Minister of Economy, Trade and Industry Akira Amari said.

The Organization of Petroleum Exporting Countries holds its next policy meeting on March 5. It is likely to decide to keep current production levels unchanged, or even cut production, according to reported comments by OPEC President Chakib Khelil.

Khelil noted that oil inventories were growing, and that the recent rally in oil prices has been driven by the U.S. dollar's weakness and speculative trades amid geopolitical risks.

$100 oil Won't Prompt Supply Hike - Opec
by Simon Webb
Reuters

Opec will not change its supply levels in response to fresh record high prices above $100, Qatar's oil minister said on Thursday.

"We will not just react to $100 oil," Oil Minister Abdullah Al-Attiyah told Reuters by telephone. "Opec will move when it sees physical demand for its oil."

US crude future hit a record of $101.32 on Wednesday on a surge of investor cash into commodities.

Concern that Opec will hold or even cut output when it meets on March 5 as well as uncertainty about Venezuelan and Nigerian supplies, helped send prices to triple digits.

The surge this week was due to speculation and international political tension, not due to any problem with the fundamentals of supply and demand, Attiyah said.

"The timing of this rise is very strange," Attiyah said. "The price is going the wrong way for the season. That shows it is related to speculation and politics. Companies are lowering their requests for oil in March as usual ... so it doesn't seem there is demand for more oil."

Attiyah said it was too early to say whether Opec should change its output policy at the March meeting.

"I cannot say if we will reduce supply or not, or what we will do," Attiyah said. "Who knows what the market will have done by then?"

Demand in the second quarter typically falls as the northern hemisphere winter ends. Refiners take advantage of the dip in demand to do maintenance.

Despite the expected drop in demand, high prices and supply uncertainty would make it difficult for oil to cut output, Libya's top oil official and Opec sources said this week.

Analysts have suggested that Opec members could trim supply quietly if needed to stop prices falling too far, but were unlikely to announce a formal reduction in its supply target at the meeting.

Opec kept its output steady at its previous meetings in December and February, despite calls from consumers for more oil to douse high prices.

Nigeria's oil output has been hit by militant attacks and fellow Opec member Venezuela is threatening to halt oil sales to the United States over a dispute with the world's biggest oil firm, Exxon Mobil. Attiyah declined to comment on the dispute and what Opec would do if Venezuela cut US sales.

Qatar is one of the smallest producers in the 13-member Opec. The group pumps about 40% of the world's oil.

In a hearing before the Senate Banking Committee last week, Federal Reserve Chairman Ben Bernanke said that "the country's economic outlook has deteriorated," predicting that the economy will continue to endure a "period of sluggish growth."

"The outlook for the economy has worsened in recent months, and the downside risks to growth have increased," he added. "More expensive and less available credit seems likely to continue to be a source of restraint on economic growth."

A new poll released last Thursday from the Pew Research Center finds that the American public's views of the economy have "plummeted since January." "Just 17% currently rate the nation's economy as excellent or good, down from 26% last month. ... A majority of Americans (53%) now say their financial situation is only fair or poor, up from 49% in January."

Plan Calling For Rebates Heads To Bush's Desk

WASHINGTON -- Congress, facing the prospect of an election-year recession, passed an emergency plan Thursday that rushes rebates of $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people.

President George W. Bush indicated he would sign the measure.

Passage in the House came by a 380-34 vote a few hours after Senate leaders ended a stalemate over the proposal. The $168 billion plan is intended to provide a boost for an economy battered by a housing downturn and a credit crunch.

The Senate's 81-16 vote capped more than a week of political maneuvering. The stalemate ended when majority Democrats dropped their demand that rescue proposal offer jobless benefits, heating aid for the poor and tax breaks for the home building and energy industries.

But Republican leaders agreed to add $300 rebates for older people and disabled veterans to the $161 billion measure that the House passed last month.

The Senate vote ends more than a week of political maneuvering on the plan, which is aimed at reviving the economy. The rebates would go to individuals making up to $75,000 a year, and to couples earning up to $150,000.

People who paid no income taxes but who earned at least $3,000 -- including through Social Security or veterans' disability benefits -- would get a $300 rebate.

The retreat by Senate Democrats came after House Speaker Nancy Pelosi sided with Republicans, and urged the Senate to stop its infighting and pass the stimulus plan.

Despite the fact that the newly approved bill won't land on Bush's desk until next week, officials at the U.S. Department of Treasury said they would begin the process to issue the rebate checks immediately.

Rebate checks could begin arriving in May. The rebates would be based on 2007 tax returns, which are not due until April 15.

Bush Proposes Record 3.1-Trillion-Dollar Budget
by Claire Gallen

 
US President George W. Bush on Monday unveiled a record 3.1-trillion-dollar budget for fiscal 2009 that widens the government deficit with an economic stimulus and expenditures for the war in Iraq.

The plan drew immediate fire from opposition Democrats, including the two leading presidential contenders.

Bush's spending plan, sent to Congress for the fiscal year starting October 1, forecasts heavy deficits for the government -- 410 billion dollars for the current year and 407 billion for the coming fiscal year.

The budget, an outline of spending plans that must be approved by Congress, is the first to exceed three trillion dollars.

Bush proposed 515.4 billion dollars in defense spending for the upcoming year, up from 479.5 billion in fiscal 2008.

The plan includes an additional 70 billion dollars dedicated for the "global war on terror," mainly for ongoing fighting in Iraq and Afghanistan.

Although that figure is lower than the amount in the current budget, White House spokeswoman Dana Perino said the wars in Iraq and Afghanistan would "certainly" cost more than what is in the budget.

Bush also budgeted over the current and upcoming year 145 billion dollars for the economic growth package the White House and Congress are working to pass to help revive flagging economic growth.

The document includes a five-year budget outline that would temporarily increase the deficit for 2008 and 2009 before paring it in subsequent years.

"The president's 2009 budget proposes to boost near-term economic growth, restrain spending, and reform entitlements, leading to a balanced budget by 2012 and a more fiscally prudent path for the long term," Bush said in his budget message.

The deficit, which had fallen to 1.2 percent of US economic output or gross domestic product (GDP), would jump to 2.9 percent of GDP in 2008 and ease to 2.7 percent in 2009.

Bush's $3 Trillion Budget Is US First

Bush Seeks to Preserve Legacy in Defense and Taxes With Final Budget That Hits $3 Trillion

By: MARTIN CRUTSINGER

In the nation's first-ever $3 trillion budget, President Bush seeks to seal his legacy of promoting a strong defense to fight terrorism and tax cuts to spur the economy. Democrats, who control Congress, are pledging fierce opposition to Bush's final spending plan — perhaps even until the next president takes office.

The 2009 spending plan sent to Congress on Monday will project huge budget deficits, around $400 billion for this year and next and more than double the 2007 deficit of $163 billion. But even those estimates could prove too low given the rapidly weakening economy and the total costs of the wars in Iraq and Afghanistan, which Bush does not include in his request for the budget year beginning Oct. 1.

Last year, when Democrats were newly in the majority, there were drawn-out veto struggles. This year's fights could be worse because it is an election year.

As in past years, Bush's biggest proposed increases are in national security. Defense spending is projected to rise by about 7 percent to $515 billion and homeland security money by almost 11 percent, with a big gain for border security. Details on the budget were obtained through interviews with administration officials, who spoke on condition of anonymity until the budget's release.

The bulk of government programs for which Congress sets annual spending levels would remain essentially frozen at current levels. The president does shower extra money on some favored programs in education and to bolster inspections of imported food.

Bush's spending proposal would achieve sizable savings by slowing the growth in the major health programs — Medicare for retirees and Medicaid for the poor. There the president will be asking for almost $200 billion in cuts over five years, about three times the savings he proposed last year.

There is no indication Congress is more inclined to go along with this year's bigger cuts; savings would come by freezing payment rates for most health-care providers for three years.

Paulson Warns Senate On Stimulus Delays
By Jeremy Grant
Financial Times

Hank Paulson, the US Treas-ury secretary, warned yesterday that adding direct spending measures to the $150bn economic stimulus package agreed last week would be "a slippery slope" that could derail the deal, urging the Senate to approve it quickly.

His comments highlight Bush administration concerns that signs of dissatisfaction from top Senate Democrats with elements of the deal - reached between the White House and House of Representatives - could at least delay the package.

"Once you start considering additions - the food stamps, unemployment insurance and so on - it's a slippery slope and there's a real danger that we're going to [get bogged] down and screech to a stop," Mr Paulson told CNN.

This week will be critical to maintaining the bipartisan momentum behind the package. The Senate's finance committee is expected to craft a bill that would allow congressional approval of an entire package by mid-February.

About $100bn (£50bn) in the package would go towards tax rebates to 117m families, with $50bn paying for incentives for business such as greater tax cuts for equipment purchases.

On Friday, Chuck Schumer, the New York senator, said unemployment benefits and food stamps would generate "more bang for the buck", and suggested that changes would be made.

Mr Paulson said the package had "good balance" aimed at giving money to the American people "and letting them decide, as opposed to putting it into programmes".

He conceded there were "strong constituencies" for direct spending measures. But he added: "The leaders of the House . . . were wise enough and decisive enough to recognise we need to keep this simple. And only by keeping it simple can we reach a quick agreement and get the money out where it can make a difference. I'm optimistic that the leaders in the Senate will do the same thing."

John Boehner, the Republican House leader, warned Democrats on Friday not to try to expand the package.

"We negotiated a solid bipartisan agreement that the White House will support. It would be irresponsible for Senate Democrats to load this bill up with pork and other spending," the Ohio Republican said.

On Thursday, the Senate banking committee holds a hearing into the stricken US housing market. Christopher Dodd, its chairman, wants congressional leaders to incorporate provisions that deal with the housing crisis in any stimulus bill they present to the White House.

The package agreed last week also provides for a 12-month increase in the size of mortgages provided by Fannie Mae and Freddie Mac, the home loans entities.

THE ECONOMIC STIMULUS PACKAGE, WILL IT HELP?

By: David Phillips

Yoda’s World

Last week, House Democrats and Republicans worked out a deal on an economic stimulus package for $150 Billion dollars in hopes of slowing the recession that most economy experts say we are heading into.

President Bush said, “The incentives in this package will lead to higher consumer spending and increased business investment this year.”

The $150 billion package would includes rebates for 116 million individuals who file tax returns, including people who don't make enough money to pay income taxes, and $50 billion in temporary tax breaks for businesses.

The rebates would range from $300 to $600 per individual, or $600 to $1,200 per couple, depending on their income level. The rebates phase out completely for those making more than $75,000, and couples making more than $150,000.

House Speaker Nancy Pelosi (D-CA) said, the stimulus package achieve’s “putting money in the hands of America's working families”. She went on to say, that the working families are the people "who need the money and will spend the money.”

Some of the other items include in the stimulus package would allow businesses to write off 50 percent of capital investments on the year the equipment is placed in service. Small businesses could immediately expense $250,000 of equipment purchases, doubling the current Section 179 expensing limit.

House Minority leader John Boehner (R-OH) said, the tax breaks "will give businesses incentives to create and build new jobs in our country."

The stimulus package also speaks to the housing crisis by increasing the size of mortgages insured by the Federal Housing Administration from $362,000 to $725,000. And it raises the limit on the size of mortgages that can be purchased by Fannie Mae and Freddie Mac from $417,000 to $625,000.

The House Democrats lost their fight to include expanded unemployment benefits and more money for Food Stamp programs in the stimulus package.

Sounds good, but is it enough, and will it work?

Michael Bloomberg has this to say about the package, "There's just one problem: It's not going to make much of a difference because we've already been running huge deficits…" Bloomberg went on to say, "If we spend all the money right now, and there is no recovery because of it, then we don't have a second hand to play."

Robert Greenstein, executive director of the Center for Budget and Public Priorities said, “The business tax cuts could lead 35 states to lose $4 billion in tax revenue because of linkages between federal and state tax codes, and it would compel states to slash services or increase taxes, either of which would "act as a drag on the economy."

Greenstein also said that an extension of unemployment benefits and an increase in food stamp program are two of the most effective ways to stimulate our economy.

The Bill now goes to the Senate

The House Stimulus package that has been agreed to by both the Republicans and the Democrats will now go to the Senate where Majority leader Harry Reid (D-NV) and the rest of the Senate will work on their version of a Stimulus package.

Senator Reid said the Senate hopes to have a stimulus package passed by February 18.

Treasury Secretary Henry Paulson said, “Within roughly 60 days (after enactment) more or less, we will be able to begin making payments.”

Economy experts across the country have mixed opinions on whether the stimulus package will have any impact on the recession, some say it’s too little too late, while others say it may help.

Maybe it will help, I hope it does, but to me, it sounds like we are sticking a finger in the dike. But when I do receive my check, I will be a responsible American and spend it in hopes of stimulating our economy.

YodasWorld.org 

With oil prices just down from their all-time high and many analysts fearing a recession, Exxon Mobil is planning to announce next week that it has broken its own record for "the most money ever made by a company in U.S. history."

Exxon Mobil, the world's largest oil company, is expected to rack in over $39 billion in 2007 profits, "which breaks down to the company earning about $75,000 a minute."

Exxon Mobil is by no means the only oil behemoth to turn high oil prices into record profits. Earlier this week, ConocoPhillips announced a 37 percent increase in fourth-quarter profit, "even as the third-largest U.S. oil company produced less crude and natural gas than a year earlier."

Oil Crisis As Barrels Go Missing From U.S. Reserves, According to Audit
Marcus Baram Reports:

How do you not notice when 308,000 barrels of oil go missing?

That's the question government auditors were asking after they looked into the Department of Energy's management of oil received for the Strategic Petroleum Reserve, a critical program to assure energy stability in the U.S. in case of an oil crisis.

To help add to the reserve, DOE receives a portion of the royalty oil that the Department of the Interior gets in return for allowing petroleum companies to drill on government lands and waters.

The department's Inspector General Gregory H. Friedman and his auditors found that in 28 percent of the oil transfers they examined, the amount received did not match the estimated amount to be shipped by the Interior Department's Minerals Management Service.

"To illustrate our findings regarding discrepancies, during a four-month period in Fiscal Year 2005, two Department contractors reported receiving 308,000 barrels of royalty oil less than the amount that MMS had scheduled for delivery to the market center. Yet, despite this significant shortfall, the Department took no action to resolve the discrepancy and to ensure that it had received all of the oil shipped by MMS," according to the audit.

Eventually, the auditors received documentation from MMS to explain reasons for the discrepancy, including "a decision by MMS to sell royalty oil rather than ship it to the Department," although 32,000 barrels could still not be accounted for in the above example.

Reached for comment, a spokeswoman for the department issued a statement. "We are confident that all royalty oil transferred to DOE was properly delivered to the SPR. However we recognize the need for enhanced controls and as such, we have followed the recommendations of the report and taken steps to strengthen the RIK program by collecting additional supporting documentation for oil receipts and increasing coordination with MMS to facilitate monthly confirmation of the quantity of oil transferred."

Last year, the Interior Department's MMS was investigated by the Government Accountability Office for losing track of billions of dollars in royalties. A GAO report in May 2007 determined that an increase in the royalty rates, which were among "the lowest government takes in the world," could potentially increase revenue by $4.5 billion over 20 years and help ensure "a fair rate of return for the American people from oil production on federally leased lands and waters."

China Trade Surplus Hits Record 262 Bln Dollars In 2007: State Media

China's trade surplus surged to a record 262.2 billion dollars last year, up 47.7 percent from 2006, the official Xinhua news agency said Friday, citing the customs administration.

Total foreign trade hit a record 2.17 trillion dollars, according to Xinhua.

The surplus, a source of huge concern for the United States and China's other major trading partners, stood at 177.47 billion dollars in 2006.

The United States and other critics have repeatedly criticised China for keeping its currency, the yuan, artificially high, which they argue gives Chinese exporters an unfair advantage and boosts the surplus.

In response, China has allowed the yuan to appreciate gradually, and faster in recent weeks, but has refused to scrap the controls completely.

The yuan hit another record high on Friday morning of 7.2672 yuan to the US dollar, which marked an appreciation of about 12 percent since the currency was de-pegged from the greenback in July 2005.

Premier Wen Jiabao and other Chinese leaders have said repeatedly that the yuan is not the sole, or even most important reason for the trade surplus, with many other factors making the nation's exports ultra-competitive.

Mexican Trucks Allowed Deep Into U.S. In Defiance Of Congress

Dave Montgomery | McClatchy Newspapers

Market Determines Oil Prices: Saudi Arabia
By Souhail Karam

RIYADH (Reuters) - Saudi Oil Minister Ali al-Naimi said on Sunday that the rise in oil prices to a record high had been determined by market forces.

"The market fixes the price of oil," Naimi told reporters at an energy conference in Riyadh when asked to comment on oil's surge to a record above $100 last week.

Naimi declined further comment on the price or what the Organization of the Petroleum Exporting Countries would decide at its next meeting on February 1 in Vienna. Saudi Arabia is the world's largest oil exporter and the most influential voice in OPEC.

U.S. crude hit a record of $100.09 a barrel on Thursday. High energy costs have caused concern among some members of OPEC about the potential impact on the global economy. But ministers say there is little they can do to tame the price, which is driven by political tension and speculators and not supply and demand fundamentals.

OPEC President and Algerian Energy and Mines Minister Chakib Khelil said on Saturday that the steady rise in prices was due to tension in Pakistan, escalating violence in Nigeria and a fall in oil inventories in the United States.

The world had sufficient oil supplies for now and no decision could be made to increase production before the next OPEC meeting, Algerian state news agency APS quoted Khelil as saying.

Libya's top oil official, Shokri Ghanem, said last week that the producer group could do little about $100 oil as most members were already pumping flat out.

OPEC, supplier of more than a third of the world's oil, decided to keep output steady at its last meeting in December, rejecting calls from consumer countries for more supply to ease high prices.

Psssttt...I Gotta good deal on Camels...

Bleak Hiring Expectations and Financial Outlook Contribute To Drop In Worker Sentiment
rasmussenreports.com

The Hudson Employment Index (SM) fell 8.9 points in November to a record low of 91.9. Growing concerns about hiring and signs of personal financial strain triggered the decline. In stark contrast, the Index registered 105.3 one year ago, more than 13 points above the current reading.

Hudson (NASDAQ: HHGP - news), a leading provider of permanent recruitment, contract professionals and talent management services worldwide, publishes the Hudson Employment Index, a monthly measure of U.S. worker confidence in the employment market.

The number of workers anticipating hiring at their companies fell three points to 25 percent in November. This marks the fewest workers to expect job growth in the history of the Hudson Employment Index. There was also a two-point jump to 17 percent among people expecting their employer to cut staff, the highest level for this response in nearly two years.

"Simply put, U.S. workers are worried that job growth is going to slow significantly in the coming months," said Robert Morgan, co-president of Recruitment and Talent Management, Hudson. "They remain concerned about finance-related issues, but that apprehension has boiled over so they are now seeing a more widespread problem."

Consistent with recent months, the work force continues to be troubled by the state of their finances, as just 34 percent claimed theirs were improving, down five points from October. In addition, 43 percent rated their financial situation favorably, compared to 47 percent in October. There was also a two-point increase to 17 percent in the number of workers who described their finances as "poor."

Results are not seasonally adjusted.

Dollar Hits New Low Against Euro Amid Warnings From Europe

The dollar hit a new record low against the euro on last Thursday, provoking more worries in the eurozone about the impact of the soaring European currency.

Europe's single currency stuck a record peak of 1.4875 dollars in Asian trading hours -- the highest level since the euro's creation in 1999.

Later in European trade, the euro stood at 1.4850 dollars, compared with 1.4854 in New York late on Wednesday. US markets were shut Thursday owing to the Thanksgiving national holiday.

The dollar also hit an all-time low against the Swiss franc, which is viewed as a haven in troubled times for the global economy. The US unit fell to a record low of 1.1005 Swiss francs.

Markets were still digesting Tuesday's downbeat US growth forecasts from the Federal Reserve. The economic expectations have weighed heavily on the dollar, despite the Fed insisting it has no plans to cut US interest rates again in the coming months.

"With investors still exploring the extent and duration of the US economic downturn, it is no surprise markets are not subscribing to the idea the Fed is reluctant to cut too far," said Gavin Friend, currency analyst at Commerzbank.

The Federal Open Market Committee slashed its base federal funds rate by a half-point to 4.75 percent on September 18. It was the central bank's first rate cut in four years.

That rate cut, and a subsequent quarter-point reduction to 4.50 percent on October 31, were taken to ease a credit crunch related to the US housing slump.

German Chancellor Angela Merkel said Thursday that the euro's record levels against other major currencies "naturally poses problems" for exporters, the traditional engine of German growth.

"We are happy of course to have a solid currency. But for exports it naturally poses problems," Merkel told television news channel N24.

Earlier Thursday, the German head of European plane maker Airbus, Thomas Enders, said the group might have to take new cost-cutting measures to counter the euro's rise against the dollar, which he said had "exceeded tolerable limits."

Airbus expects "enormous losses" from foreign exchange effects, Enders said.

The dollar was also suffering from growing speculation that overseas investors may diversify from the US unit and turn increasingly to the euro.

The euro has "benefited from heightening expectations that Gulf Arab states and Saudi Arabia will revalue their currencies and introduce a basket to replace the dollar peg," said NAB Capital strategist John Kyriakopoulos.

Saudi newspaper al-Riyadh reported that Saudi Arabia may have started considering a revaluation of its riyal against the dollar ahead of a meeting of heads of Gulf Arab states in early December.

Elsewhere, market participants were worried the greenback could go into free-fall against the Japanese unit, even to the 105-yen level, dealers said.

But they do not expect the Japanese central bank to intervene in the near term to rein in the stronger yen, which is hurting Japanese exporters.

"There is no longer any emotional attachment nor aversion against the yen's appreciation among Japanese politicians and corporate executives which we saw a few years ago," said Toru Umemoto, chief forex strategist at Barclays Capital.

The US central bank last Wednesday trimmed back its growth projections citing weakness in housing and tighter credit conditions.

The Fed projected growth next year in a range of 1.8 to 2.5 percent, down from a prior forecast of 2.5 to 2.75 percent.

In late European trade last Thursday, the euro changed hands at 1.4850 dollars, against 1.4854 late on Wednesday, at 161.10 yen (161.02), 0.7208 pounds (0.7190) and 1.6358 Swiss francs (1.6366).

The dollar stood at 108.49 yen (108.38) and 1.1016 Swiss francs (1.1016).

The pound was at 2.0600 dollars (2.0650).

No Weak Dollar Reference In OPEC Statement: OPEC Chief

RIYADH (AFP) — A final statement from OPEC leaders at their summit here will not express concern about the falling dollar despite efforts by Iran to include the weak US currency, the organisation's chief said Friday.

"Let me be clear: the dollar will not be in the final statement," Abdullah al-Badri told reporters after emerging from a meeting of ministers to prepare the statement, which will be issued by leaders at the end of a two-day summit on Sunday.

"It (the dollar) is an individual country issue," he added, meaning the subject would not be tackled at the level of OPEC, which groups 12 oil-producing countries.

Earlier, Iran's Foreign Minister Manouchehr Mottaki proposed that the final declaration by OPEC leaders, who arrive here Saturday, should express concern by member states about the fall of the dollar.

Reacting to the request, Saudi Foreign Minister Prince Saud al-Faisal warned that mentioning the falling dollar could lead to the "collapse" of the US currency.

"There are media people outside waiting to catch this point and they will add to it (exaggerate) and we may find that the dollar collapses," he said.

"This is a sensitive issue. It will cause the dollar to drop further, thus complicating the problems we are facing from the dollar's fall," he added.

The exchange between US foe Iran and Saudi Arabia, one of Washington's closest allies in the Middle East, was witnessed when a private meeting of ministers from the Organisation of Petroleum Exporting Countries was broadcast for 30 minutes on closed-circuit television in the media room.

The fall of the US dollar, which has declined by about 15 percent in 12 months, has affected the revenues of OPEC members because most of them price and sell their oil exports in the US currency.

Mottaki told reporters after the meeting that finance ministers would study how to prevent the falling dollar hitting the revenues of OPEC countries.

"It was decided that finance ministers of OPEC will study the issue and suggest mechanisms for the sake of preserving revenues of OPEC members," he said.

US Dollar Hits Record Low Against Euro
By Tali Arbel, AP Business Writer US Dollar Hits New Low Against Euro for 7th Straight Session; Canadian Dollar Hits 31-Yr. High

Mexico Trucks To Roll On U.S. Highways
By John Crawley

 
The Bush administration can proceed with a plan to open the U.S. border to long haul Mexican trucks as early as next week after an appeals court rejected a bid by labor, consumer and environmental interests to block the initiative.

The 9th Circuit Court of Appeals in San Francisco late on Friday denied an emergency petition sought by the Teamsters union, the Sierra Club and consumer group Public Citizen to halt the start of a one-year pilot program that was approved by Congress after years of legal and political wrangling.

The Transportation Department welcomed the decision and said in a statement that allowing more direct shipments from Mexico will benefit U.S. consumers.

The 1994 North American Free Trade Agreement approved broader access for ground shipments from both countries but the Clinton administration never complied with the trucking provision. A special tribunal ordered the Bush administration to do so in 2001.

"This is the wrong decision for working men and women," Jim Hoffa, president of the Teamsters, said in a statement after the court ruling. "We believe this program clearly breaks the law." The Teamsters represents truckers that would be affected by the change.

The emergency stay was sought on grounds the administration's pilot program had not satisfied the U.S. Congress' requirements on safety and other issues. But the appeals court ruled otherwise.

SAFETY ASPECTS

The administration plans to start the program on September 6. Transportation Department officials hope to receive final clearance early next week from the department's inspector general's office, which is reviewing its safety aspects, and finalize details with Mexican authorities.

The Mexican government must grant reciprocal access to U.S. trucks under NAFTA. That provision is not expected to be a problem, regulators said.

Mexican trucks operating in the United States have for years been restricted to U.S. points near certain large border crossings where their goods are transferred to trucks owned by U.S. firms.

Under the pilot program, Mexican long haul trucking companies that have met safety, licensing, and other U.S. requirements will be allowed to operate their rigs throughout the country. Proponents say this will reduce costs and speed up shipments.

Trucking regulators said in a court filing the goal is to gradually accommodate 100 Mexican trucking companies by the end of the pilot program, or roughly 540 large trucks.

But opponents said those figures do not reflect the number of companies that could seek access to U.S. roads if the pilot is successful, which they said raises safety concerns.

"This (pilot) program is basically a show trial. They haven't provided notice up front about who will participate. You just don't know what the program will look like," said Bonnie Robin-Vergeer, attorney for Public Citizen.

Public Citizen and the Teamsters still plan to proceed with a lawsuit they filed in federal court, challenging the Mexican truck program on broader grounds. That case will not likely be decided until next year.

Trucks from Canada have no operating restrictions in the United States.

Prices For Key Foods Are Rising Sharply

By Kevin G. Hall | McClatchy Newspapers

 

MIDLAND, Va. — The Labor Department's most recent inflation data showed that U.S. food prices rose by 4.2 percent for the 12 months ending in July, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.

2007 McClatchy Newspapers

Republican Senators Block Union Bill

WASHINGTON — Senate Republicans on Tuesday blocked a bill that would have allowed labor organizations to unionize workplaces without secret ballot elections.

Democrats were unable to get the 60 votes needed to force consideration of the Employee Free Choice Act, ending labor's chance to win its top legislative priority from Congress. The bill would have required employers to recognize unions after being presented union cards signed by a majority of eligible workers on their payrolls. Under current labor law, a company can demand a secret ballot election supervised by the federal government after being presented the union cards.

The final vote was 51-48. Both of Washington state's senators, Democrats Patty Murray and Maria Cantwell, voted for the measure.

Senate Minority Leader Mitch McConnell, R-Ky., had said for months that he would stop the legislation. The White House also made clear that the bill would be vetoed if it were to pass Congress.

The House approved the bill in March. Democrats and labor unions pressed for a vote in the Senate in hopes of rallying their voters in the 2008 elections.

The GOP also plans to use the vote for election-year campaigning. "Republicans will remind our constituents about the fact that Democrats proposed to strip workers of their voting rights," McConnell said.

World Millionaires' Club Numbers 9.5 Million  

 
The number of millionaires in the world increased by 8.3 percent in 2006, with about 9.5 million individuals now estimated to have more than a million dollars in financial assets, a report said last Wednesday.

The survey by financial services group Capgemini and US investment bank Merrill Lynch said strong global economic growth and gains on the stock market explained the expansion of the exclusive club of "High Net Worth Individuals" (HNWIs).

The financial assets owned by the group totalled 37.2 trillion dollars (27.7 trillion euros), an increase of 11.4 percent from 2005, with Singapore, India, Indonesia and Russia producing the greatest number of new millionaires.

"Real GDP and market capitalisation growth rates, two primary drivers of wealth generation, accelerated throughout 2006, which helped to increase the total number of HNWIs around the world as well as the amount of wealth they control," the report said.

The number of Ultra-HNWIs -- individuals with financial assets exceeding 30 million dollars -- increased by 11.3 percent in 2006, with the global population of this extremely affluent group now estimated at 94,970 people.

The financial assets of Ultra-HNWIs increased by 16.8 percent compared with 2005, the report said, illustrating a trend whereby wealth is increasingly concentrated in the hands of the already wealthy, the report said.

"Global wealth continued to consolidate in 2006, a trend we have reported for the past 11 years," the report said.

Capgemini and Merrill Lynch define a millionaire as someone with more than one million dollars in financial assets such as cash, equities, bonds or funds.

They do not include the value of an individual's primary residence or private collections of objects such as art, antiques or coins.

Making Less Than Dad Did
Report reveals that American men in their 30s earn less than their fathers did, as family income growth decelerates.
By David Ellis
CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- American men in their 30s are earning less than their father's generation did, challenging a long-held belief that each generation will be better off than the one that preceded it, according to a new study published Friday.

The report, the first in an ongoing 18-month study on economic mobility in the United States, also revealed that the income growth of the median American household is declining.

The study was produced by a handful of politically diverse think tanks including the Pew Charitable Trusts, the American Enterprise Institute, the Brookings Institute, the Heritage Foundation and the Urban Institute. It looked at income levels of American men in their 30s, which can be a good indicator of lifetime income.

Relying on Census Bureau figures, the study's authors found that after adjusting for inflation, men in their 30s in 2004 had a median income of about $35,000 per year, for a 12 percent drop compared with $40,000 per year for men in the same age group in 1974.

That stood in stark contrast to men in their 30s in 1994, who earned 5 percent more than their fathers did.

Similarly, American families, which experienced a 32 percent increase in income levels between 1964 and 1994, saw household income growth slow to 9 percent between 1974 and 2004, according to the report.

"There is clearly some story here that U.S. productivity gains are not trickling down to the median family," said John Morton, a co-author of the study and the managing director of economic policy initiatives at the Pew Charitable Trusts.

Even as male incomes have declined and household income growth has slowed, the nation's productivity has remained robust. While the two once kept pace with each other, U.S. productivity has quickly outpaced income growth since the mid-1970s, according to the report.

The study's authors, who plan to examine relative mobility, or the ability of Americans to move up or or down in social strata, said their report shows the canonical belief in an American meritocracy may be unraveling.

"The expectation that each generation will do better than their parents has become a fundamental part of what we call 'The American Dream,'" said Morton. "But this new analysis suggests this bedrock belief may be shifting under our feet."

HURRICANE CHIEF SAYS ADMINISTRATION IS WASTING MILLIONS ON PR CAMPAIGN:

National Hurricane Center director Bill Proenza said that the Bush administration is "spending millions of dollars on a publicity campaign that could be used to plug budget shortfalls hurricane forecasters are struggling with."

The National Oceanic and Atmospheric Administration (NOAA) is spending up to $4 million to publicize a 200th anniversary celebration while the agency has cut $700,000 from hurricane research, Proenza said. He told reporters, "No question about it, it is not justified. ... It is using appropriated funds for self promotion."

An NOAA spokesman defended the publicity campaign. "It's part of our responsibility to tell the American people what we do," the spokesman said. "It's inaccurate and unfair to just characterize this as some sort of self-celebration."

HOMELAND SECURITY -- WHITE HOUSE THREATENS TO VETO COUNTERTERRORISM BILL IF IT CONTAINS LABOR PROTECTIONS:

Last Wednesday, the Senate began debate on legislation that would strengthen homeland security by enacting recommendations of the 9/11 Commission. The legislation includes provisions that would let states delay adopting standardized drivers' licenses and means to better secure cargo entering the nation.

The bill, however, faces a rocky road ahead as the White House declared it would veto the bill if it contains language that would allow Transportation Security Administration (TSA) employees to unionize.

Led by Sen. Jim DeMint (R-SC), 36 conservative senators have pledged to sustain President Bush's veto, enough to prevent a congressional override. "Under the proposal, the security officers would not have the right to strike, and the union would not have the power to negotiate wages.

But it would be authorized to bargain on their behalf to establish work rules to govern overtime and temporary transfers, and to protect them if they file a grievance."

Currently the Department of Homeland Security, which houses TSA, has the unhappiest workers in the federal government. TSA employees are frequently required to work unscheduled overtime, suffer from a 30 percent illness and injury rate compared to 5 percent for all federal employees, and have an attrition rate 10 times higher than the federal average.

Unionizing bill advances; Cheney threatens veto

WASHINGTON (Reuters) - A bill to allow workers to form unions by signing up, instead of voting, advanced in the U.S. House of Representatives on Wednesday as the Bush administration threatened to veto it.

The Democratic-controlled House Education and Labor Committee voted along party lines, 26-19, to approve the bill, which would require employers to recognize unions after a majority of workers have signed pro-union cards or a petition.

Vice President Dick Cheney declared the administration's opposition to the measure earlier on Wednesday, saying secret ballots are needed to prevent possible worker intimidation.

"Our administration rejects any attempt to short-circuit the rights of workers," Cheney told the business-friendly National Association of Manufacturers. "We will defend their right to vote yes or no by secret ballot, and their right to fair bargaining."

He said President George W. Bush "will veto the bill" if it is sent to him.

To form a union under current law, a majority of workers must vote in favor of one in a government-supervised election. Sign-ups are permitted, but an employer can reject it and force a ballot, which often takes several weeks but can take months.

"Let the employees decide if they want an election or if a majority wants sign-up with no veto by the boss," committee Chairman George Miller, a California Democrat, said as the panel began drafting the legislation.

Backers of the bill, the Employee Free Choice Act, argue that the election process is inherently unfair because union organizers can be denied access to the workplace, while bosses can require workers to attend anti-union meetings.

They also cite studies showing that employers often fire workers illegally with little, if any, penalty in the months leading up to elections. The bill's opponents counter with charges of worker intimidation in organizing campaigns, which they say the bill would make worse.

The bill also would for the first time make labor law violators subject to civil penalties and require that unions and companies unable to reach agreement on a first contract submit to binding arbitration.

The bill is expected to reach the House floor next month where approval is likely, since more than half of the chamber's 435 members, including a handful of minority Republicans, have co-sponsored it. A similar measure is expected to be introduced in the Democratic-controlled Senate soon, but it's fate there is less certain.

A similar bill died in the last Congress.

ECONOMY -- CONGRESSMAN WHO COMPLAINED ABOUT FIVE-DAY WORK WEEK TELLS POOR AMERICANS TO WORK LONGER HOURS:

Rep. Jack Kingston (R-GA) made headlines last month after complaining about Congress' new schedule that requires members to work five days a week: "Keeping us up here eats away at families," Kingston told the Washington Post. "Marriages suffer.

The Democrats could care less about families -- that's what this says." Yet on Wednesday, Kingston offered this advice to Americans living in poverty: work longer hours.

During House debate over the minimum wage, Kingston said raising the minimum wage would do nothing for poor Americans. Instead, if people marry and work longer hours, "they would be out of poverty," he said.

"It's an economic fact." Kingston is wrong. The annual salary for full-time workers earning the federal minimum wage "still leaves a family of three about $6,000 short of the poverty threshold."

BUDGET: A New Day For Fiscal Discipline

During President Bush's six years in office, he and Congress have taken an inherited surplus and have transformed it into a mountain of debt. "The budget outlook for the next decade is bleak," according to the Center for Budget and Policy Priorities (CBPP).

The Congressional Budget Office projects that "if the President's tax cuts are made permanent and relief from the Alternative Minimum Tax is extended, deficits will average about $350 billion a year for the next ten years (2007-2016), even if the costs of the wars in Iraq and Afghanistan decline substantially in a few years."

CBPP found that legislation enacted over the last six years has increased the national debt by $2.3 trillion -- including $633 billion in interest payments alone. ("In 2006, the federal government spent $1 out of every $12 on interest payments, or $227 billion. That's more than we spend on education, housing, veterans’ care, and environmental protection, combined.")

Despite the grim picture, Bush practiced a bit of "me-tooism" this week as he promised to submit a plan to "balance the federal budget by 2012," despite the fact that he has "never proposed a balanced budget since it went into deficit, never vetoed a spending bill when Republicans controlled Congress and offered little sustained objection to earmarks until the issue gained political traction last year."

"That's shameless, even by local standards," writes the Washington Post's David Ignatius. Moreover, the President's bloated budgets have reflected skewed priorities and have not stimulated economic growth.

The House takes up the goal of bringing fiscal discipline back to Washington with bills establishing "pay-as-you-go" budgeting practices and bringing transparency to the earmarking process.

ECONOMY: End of the Boom

Dark economic clouds are gathering ahead. After six years of booming home prices, the great American housing bubble has finally popped, and the market is now on the verge of collapse.

Tens of millions of families who bought homes at bubble-inflated prices "now face the prospect of seeing their life savings disappear."

This development will have wide-ranging effects on the American economy. "Over the last few years," writes Princeton economist and New York Times columnist Paul Krugman, "most good U.S. economic news has been the result of soaring home prices."

With this engine of economic growth now broken down, America faces a potential future of "rapidly falling house prices, rising default and bankruptcy rates," lost jobs, fewer consumption, even a possible recession.

The dark clouds ahead may be a perfect storm hitting the U.S. economy.

White House cuts economic outlook
Bush advisers predict less growth for 2007, increase in inflation

Bloomberg News

WASHINGTON -- U.S. economic growth will slow in 2007 compared with this year, reflecting a weaker housing market, and inflation will increase, President Bush's economic advisers said Tuesday in their semiannual forecast.

Gross domestic product will grow 2.9 percent next year, down from 3.1 percent this year, and slower than the 3.6 percent growth forecast in June, the Council of Economic Advisers said.

Consumer prices are forecast to rise 2.6 percent next year, up from a 2.3 percent increase this year. That's less than the June 8 forecast for a 3.0 percent inflation rate and is still within historic averages, said Edward Lazear, chairman of the council.

"The updated forecast projects somewhat slower economic growth" than was predicted in June, the council said in a joint statement with the Treasury and the Office of Management and Budget. "The revisions reflect a slower-than-expected housing sector while growth in other parts of the economy remains strong."

The administration's GDP forecast for next year is more optimistic than private sector estimates. The Nov. 10 median forecast issued by the Blue Chip Economic Indicators was for 2.5 percent growth in 2007 and 3.3 percent this year.

"All the signs are for continued strong growth," Lazear said.

The higher inflation forecast for next year "is not especially significant" when energy prices are down from their peak, he said.

Federal Reserve policymakers said last month that inflation is a bigger worry than the slowing economy. The Fed has left its target interest rate at 5.25 percent at the last three policy meetings after raising the rate 17 times since June 2004 to curb inflation.

Lazear said the housing market "has been hit harder than most of us expected," though it hasn't triggered widespread layoffs in the construction industry.

"I don't believe it's going to transmit to the rest of the economy," he said. The slump could bottom out in the next quarter or two, but that's "still up for grabs."

The president's chief economist said it would be "unnecessary and unwise" for an incoming Democratic Congress to consider tax increases next year, and he urged lawmakers in 2007 to focus on slowing the rate of growth in entitlement programs, such as Medicare or Social Security.

A tax increase "is very risky, and we don't want to endanger the kind of growth we've had in the last couple of years," Lazear said.

The forecast projects payroll growth to average 129,000 jobs per month next year, down from a 151,000 average increase this year and little changed from the 5-month-old forecast.

ECONOMY -- REPORT: U.S. MIDDLE CLASS 'IN WORSE SHAPE THAN EVER':

An American Progress report released last week shows that the "typical double-income family in the United States is worse off financially than ever," Reuters reports.

"Middle-class families are struggling to pay for a home, health insurance, transportation and their children's college with wages that have not kept pace with higher prices," the report states.

Despite five years of economic recovery, "average job growth is one-fifth that of previous business cycles and wages are flat when inflation is factored into the equation."

At the same time, the cost of families’ top five expenditures -- medical care, housing, food, household operations, and cars -- have risen more than twice as fast as the cost of the bottom five items.

To pay for these necessary expenditures, middle class families are borrowing record amounts of money, leaving them unable to put away hardly any cash for a rainy day.

Families took on a record amount of debt, equivalent to 126.4 percent of disposable income in the first quarter of 2006.

TAXES -- CONGRESS SET TO ALLOW MIDDLE CLASS AND SMALL BUSINESS TAX DEDUCTIONS TO EXPIRE:

Barring last minute action by an already-overbooked Congress, a set of tax write-offs for college tuition, retirement savings, teacher's school supplies, and state sales tax will be left to the lame-duck session or fail to renew, affecting almost 20 million Americans.

The small business R&D tax credit, an effective federal policy that has been used to promote private, job-generating research in the United States, expired last year and is also unlikely to be extended before the election. 

"Waiting [until the lame duck session to extend these breaks] will create headaches and hardship for tens of millions of taxpayers,” said Senate Finance Committee Chairman Chuck Grassley (R-IA).

These credits help 3.6 million students pay for college, allow people in states without income taxes to deduct their sales tax, and aid over 5 million Americans in saving for retirement.

EDUCATION -- TACKLING FUNDING DISPARITIES IN AMERICA'S SCHOOLS:

A new Thomas B. Fordham Institute report tackles one of the "most pressing problems in American education": the funding disparity between schools in rich and poor districts.

The Education Trust reports that "36 states have a funding gap between high poverty and low poverty districts that averages almost $900 per student."

Faced with current policies that "consistently fail to solve problems," the report -- which has drawn support from a bipartisan group of experts and former government officials -- concludes that the "entire financing system needs to be modernized if the problems of inequity and antiquity are to be solved."

It proposes a plan for government at all levels to allocate funds to schools on a "per-student basis" according to each student's needs, and not by staffing levels or special program needs or "political jockeying," as is currently done.

The funding would follow students to whichever public school they choose to attend.

The proposal has received support from 75 signatories, including former Education Secretary Rod Paige and American Progress President and CEO John D. Podesta and Director of Education Policy Cynthia Brown. Sign up here to add your name to the solution.

TAXES -- PAPER DEBUNKS ADMINISTRATION CLAIM THAT TAX CUTS PAY FOR THEMSELVES:

"Part of our strategy to cut our deficit in half is to continue to grown this economy," President Bush said Wednesday.

"Tax relief has helped a growing economy, which means more tax revenue for the federal treasury."

But asked on Wednesday if reductions in capital gains and dividend income "paid for themselves,"  Treasury Secretary John Snow "acknowledged that they don't."

Also, Snow "conceded...that the much-touted tax cuts for capital gains and dividend income don't drive today's strong economy."

A fact-check by Knight-Ridder found that Bush's claim that tax reductions lead to higher tax revenue is "just not true.

A host of studies, some of them written by economists who served in the Bush administration, have concluded that tax reductions mean less money for the Treasury."

Douglas Holtz-Eakin, who formerly served as chief economist for Bush's Council of Economy Advisers, was asked if "the president's 2001 and 2003 tax cuts generated enough additional revenue to pay for themselves." "No," answered Holtz-Eakin.

CONGRESS -- HASTERT THINKS AMERICA'S MIDDLE CLASS DOESN'T PAY TAXES:

In a House session last week , House Speaker Dennis Hastert (R-IL) claimed that "if you earn $40,000 a year and have a family of two children, you don't pay any taxes.

So you probably, if you don't pay any taxes, you are not going to get a very big tax cut." Hastert's attempt to justify conservatives' huge tax cuts for the rich doesn't hold water.

While someone with a $40,000 salary and a family of four paid little or no federal income taxes last year, Hastert ignored the other taxes paid by all Americans -- payroll taxes, gas taxes, sales taxes, etc.

For example, a family whose entire $40,000 in salary came from wages directly paid $3,060 (7.65 percent of $40,000) in federal payroll taxes last year. (Note: The employer also pays an equal amount on behalf of the family, but most economists "believe that the portion of the payroll tax paid by the employer is borne by the worker.")

Hastert, who earns a hefty $212,010 a year salary, doesn't seem to understand that families across America are facing higher health care costs, mortgage payments, and gas prices. And yes, they also have to pay their taxes.

ENERGY -- BUSH HYPOCRISY ON STRATEGIC PETROLEUM RESERVE REVEALED:

Last week, President Bush announced his administration will temporarily stop filling the Strategic Petroleum Oil Reserve to help increase the supply of oil in an effort to drive down high gas prices.

"By deferring deposits until the fall, we'll leave a little more oil on the market. Every little bit helps," said Bush.

 When President Clinton made a similar move in 2000, then-Gov. George W. Bush attacked him, stating that the "Strategic Reserve should not be used as an attempt to drive down oil prices right before an election. It should not be used for short-term political gain at the cost of long-term national security."

The administration had previously reiterated that limiting the oil flow into the Strategic Reserve would weaken the nation.

When asked in March 2004 whether the administration would consider stop filling the Reserve, former White House Press Secretary Scott McClellan said, "[T]apping the Strategic Petroleum Reserve solely for political purposes to lower prices would reduce our protection and weaken -- and weaken us while we're at war."

Just two weeks ago, Energy Secretary Sam Bodman was arguing that that the Reserve should not be tapped to lower gas prices, but should instead by reserved for emergency purposes.

Bowing to political pressure, the administration has taken an appropriate action to demonstrate some national leadership on an issue causing pain for many Americans, but in the process, its hypocrisy has been revealed.

ECONOMY -- AMERICAN DREAM HARDER TO REACH:

A majority of Americans continue to believe that it is possible to start out poor, work hard, and become rich.

But the likelihood of that happening is declining. A new American Progress report by Tom Hertz of American University finds that children from low-income families have only a one percent chance of reaching the top five percent of the income distribution, versus children of the rich who have about a 22 percent chance.

Race also inhibits intergenerational mobility. Low-income African-American children are nearly twice as likely to remain poor as adults than are white children whose parents had identical incomes.

Additionally, household incomes are now less stabile, especially for middle class families. Households that saw their incomes decline by $20,000 or more rose from 13 percent in 1990-91 to over 16 percent in 2003-04. (Find out more about the state of economic mobility in the United States here.)

INTERNATIONAL RELATIONS -- RUSSIAN-IRAN MISSILE DEAL SHOULD BE CAUSE FOR ALARM:

Los Angeles Times columnist Rosa Brooks suggests a war between Iran and Israel could be provoked by the $700-million Russian deal this week to sell Tor air defense missile systems to Iran.

The Russian-Iran missile deal "significantly increases the risk of a regional war."

Meanwhile, the rhetoric between Iran and Israel has escalated and has "become increasingly bellicose." Brooks writes.

"Russian leaders continue to mouth the usual diplomatic platitudes about democracy and global cooperation, but Russia is actually playing a complex double game.

Last Tuesday, Russia launched a spy satellite for Israel, which the Israelis can use to monitor Iran's nuclear facilities.

On the same day, Russian leaders confirmed their opposition to any U.N. Security Council effort to impose sanctions against Iran, and their intention to go through with the lucrative sale of 29 Tor M1 air defense missile systems to Iran."

A regional conflict may draw the U.S. into the conflict, perhaps damaging American global influence.

"Andrei Piontkovsky, a Russian political analyst, suggests that Russia's oil and gas oligarchs wouldn't shed any tears over a war in the Middle East, especially if it's a war that ensnares the U.S. and keeps oil prices high."

IRAQ -- ADMINISTRATION ABANDONS IRAQ'S RECONSTRUCTION:

On Feb. 28, the Bush administration announced it would not be providing any significant additional funding for Iraqi reconstruction projects, with the exception of prisons.

Yesterday, Daniel Speckhard, the head of the U.S.-led program to rebuild Iraq told the Iraqi government that it "can no longer count on U.S. funds and must rely on its own revenues and other foreign aid."

As the United States turns its back on Iraq's reconstruction, it leaves behind a legacy of waste, mismanagement, and misplaced priorities.

"There was insufficient systematic planning for human capital management in Iraq before and during the U.S.-directed stabilization and reconstruction operations," noted Iraq's Special Inspector General Stuart Bowen. "Of the 136 water projects first envisioned, only 49, or 36 percent, will be completed. And only 300 of the 425 electrical projects will be completed."

Anthony Cordesman at the Center for Strategic and International Studies called the U.S. reconstruction effort "a dismal failure. It hasn't met any of its goals. It's left a legacy of half-built projects, built to U.S. standards, which Iraq doesn't have the capability to maintain."

BUDGET -- TREASURY REPORT PAINTS BLEAKER FINANCIAL PICTURE:

CongressDaily reported today, "A little-noticed Treasury Department report sent to congressional leaders in December paints a bleaker picture of the nation's finances than is widely accepted and is beginning to attract attention as lawmakers prepare for election-year budget battles."

The report puts the fiscal year 2005 deficit at $760 billion by "using generally accepted accounting principles that private businesses must use to present their finances."

 The larger figure contrasts strongly with the $319 billion figure typically cited.

According to the report, standard deficit calculations give "a potentially unrealistic and misleading picture of the federal government’s overall performance, financial condition, and future fiscal outlook."

Rep. Jim Cooper (D-TN) complained that Congress was not sufficiently notified about the report. "We got more notification on the NSA domestic surveillance thing," Cooper said.

ECONOMY -- GAS PRICES SET TO RISE, OIL INDUSTRY HIRES LOBBYISTS:

The average price per gallon of gas in the U.S. today is $2.25, near the pre-Katrina high. Enjoy it while you can. Consumer Affairs reports, "Oil industry expert Trilby Lundberg warns gasoline price declines are for the most part over and she expects the cost of a gallon of gasoline to head up through the spring and summer."

Oil companies have shown record-breaking profits in recent months; ExxonMobil last quarter earned $4.9 million every hour.

Nevertheless, the industry has refused to rejected bipartisan calls for voluntary price restraints, and are gearing up its lobbying efforts to fight legislation that would impose a "windfall profits" tax.

The Hill reports that, "The American Petroleum Institute has hired Ernst & Young [a powerful lobbying firm] as Congress considers increasing the taxes oil and gas companies pay in light of record profits."

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