The Voice of the White House

Washington, D.C., March 15, 2007: “For some comic relief, let’s consider the breathless statement carried by an awed American media about the alleged “terrorist leader” who had “confessed” to every terrorist action since the bombing of the USS Maine. Not even the True Believers in the White House have gone for this whopper. This is a typical Karl Rove ploy to take the heat off of him, his precious Georgie and Alberto the Wetback that is now erupting. Like the “liquid bombs,” the “bombing of the Sears Tower (in Chicago) and the hilarious “duct tape” follies, our Spiritually Inspired leaders are rapidly descending into slapstick. Oh, and let’s not forget the periodic “bin Laden tapes” that the CIA people make up in Texas and have a shelf-life of about ten minutes. These thieves have been stealing billions of dollars of American taxpayer’s money and one might think they could be a little more adult in their hysterical fabrications. Next, we will read, that the DoD has located a prisoner who has confessed to shooting Abraham Lincoln!”

The rise (and fall) of the Rove Reich

March 13, 2007

by Mike Whitney

Online Journal

Politics is the art of destroying one’s enemies and rewarding one’s friends. By this standard, the

Bush regime is the most capable administration in American history. Bush and his fellows have shown time and again that they have sharp elbows and can be cold-blooded political street fighters.

The “Swift-boating” of John Kerry, Dan Rather and Joseph Wilson are just a few of the more familiar examples. Each was singled out as a potential rival by high-ranking members of the administration and summarily drawn-and-quartered by assassins in the far-right media.

The unexpected sacking of eight *S attorneys is another example of the administration’s astonishing proficiency at destroying its enemies, although the attorneys in question were not the “real targets” per se. The purpose of the firings was to use the justice system to conduct personal attacks on members of the Democratic leadership, either by indicting them prior to elections or challenging the results of recent balloting. The intention was to strengthen the “one party” system of Karl Rove’s dreams.

This, of course, is a much more serious charge than “outing” a CIA agent (Valerie Plame) or

slandering a decorated veteran. (John Kerry) It is a direct attack on the two-party system and the foundations of democratic government.

Paul Krugman gives a good explanation of how this works in his latest column, “Department of Injustice.” Krugman recalls how New Jersey’s US attorney “issued subpoenas in connection with allegations of corruption on the part of Democratic Senator Bob Menendez, two months before the 20-06 election.” The news of the subpoenas was quickly leaked to local news media, It was a deliberate and obvious attempt to manipulate the upcoming election by putting Menendez under a cloud of criminal indictment. If it had worked, Republicans would have held the majority in the Senate and the same trends in authoritarian legislation would have persisted for the next two years.

Congressional investigations last week indicate that other US attorneys have experienced similar “politically motivated” meddling designed to crush the Democratic Party by decapitating the leadership. It’s clear that the administration’s maneuverings are an essential part of their strategy to maintain a permanent GOP “lock on power.”

This is serious business. Watergate pales in comparison. Karl Rove is actively sabotaging the democratic process by stacking the US Attorneys office with Bush foot soldiers.

Attorney General Alberto Gonzales has denied charges that politics played any part in the recent firings, but Krugman proves otherwise. Since Bush took office in 2000, US attorneys across the nation have investigated 298 Democrats, but only 67 Republicans. Clearly the office is being used to carry out personal vendettas to remove Democrats from power and fortify a one party system: the Rove Reich.

Krugman also adds this revealing detadil from the Rovian chronicle, which further strengthens his theory: “Let us not forget that Karl Rove’s candidates have a history of benefiting from conveniently times federal investigations. Last year Molly Ivins reminded her readers of a curious pattern during Mr. Rove’s time in Texas. “In election years, there always aeemed to be an F.B.I. investigation of some sitting Democrat, either announced or leaked to the press. After the election was over, the allegations often vanished.”

Over the years, Rove has perfected the politics of personal destruction and transformed it into an art form. It’s clear now that the Gonzales 8 were tossed overboard because they clung to their standards and refused to become political henchmen for the gangsters at 1600 Pennsylvania Avenue. We can assume that the new appointees are neither true conservatives nor traditional Republicans but, rather, party loyalists who will faithfully execute directives from the Bush Politburo.

Alas, the Bush regime is not in the business of governing at all, but politics. And, once again, they’ve proved that they’re damned good at it.

Financial News

China may sell U.S. bonds

Move to diversify could raise rates

March 10, 2007

by William Sluis

Chicago Tribune

In a move that speaks to China's growing significance in the global economy, its government said Friday it will look for more aggressive ways to invest sizable portions of its massive $1 trillion currency reserves.

The new Chinese pool of money, expected to total $200 billion to $300 billion, would instantly create one of the world's most powerful investment funds, analysts said.

With much of China's $1 trillion in reserves currently invested in ultrasafe U.S. Treasury debt, a significant shift out of the American bond market could have an impact on American consumers. Interest rates would rise, making it more expensive to borrow money for a home mortgage or car loan or to pay credit card debt.

Chinese officials said they planned to form a government investment firm to manage some of its holdings, an indication that China has tired of earning small and predictable returns and wants to look elsewhere.

"It's entirely possible that they are ready to diversify their investment portfolio," said economist John Silvia of Wachovia Corp., who predicts that any changes would not come quickly.

The Chinese have been threatening for several years to look in new places for safeguarding their ample reserves.

For Americans, "this will be a challenge, no doubt about it," Silvia said. "It likely will mean higher mortgage rates and a weaker dollar. But these effects could take 5 or 10 years to be fully felt."

Huge holdings of Treasury bonds by both China and Japan have been taken for granted by Americans for the last decade. Their involvement in debt markets has helped to hold down long-term interest rates, especially for mortgages.

While some analysts viewed the Chinese announcement with alarm, Chicago economist William Hummer said Americans should welcome the move.

"Our government has been demanding for months that the Chinese take steps to boost their currency, which is too cheap and is creating inflation," said Hummer, of Wayne Hummer Investments.

He said diversification of Chinese assets around the globe will do little harm here. If the dollar weakens a bit against the Chinese yuan, so much the better, Hummer said. It might slow the torrent of goods coming into this country, making American factories more competitive.

"Moving this huge reserve of currency elsewhere around the globe will be good for world financial markets, without doing any meaningful harm in this country," he said.

China's currency reserves are the world's largest, and they continue to grow rapidly because the country has an enormous trade surplus. If the reserves continue to expand at a rapid rate the money placed in the new investment fund might be replaced without a need to sell American holdings.

Describing the new agency as the State Foreign Exchange Investment Co., China said it will place hundreds of billions of dollars in "strategic assets," namely mines, oil fields and entire companies around the globe.

The government of Singapore has a similar investment vehicle, known as Temasek Holdings, which manages about $84 billion in assets, and which Chinese officials cited as a model.

"Unlike other governments that hold their reserves in gold or the currencies of other countries, this announcement indicates the Chinese may decide to buy stocks in companies or commodities," said Chicago investment manager Marshall Front.

Wherever they place their money, he said, they will act slowly. "The Chinese will move at a measured pace because they certainly wouldn't want to disrupt their big investments in this country," said Front, of Front Barnett Associates. "Any rapid or concerted selling could diminish the value of those holdings."

One reason the Chinese must move slowly is that "the United States is their top market. Stability is their No. 1 goal," said Todd Lee, head of the Greater China Group at Global Insight in Lexington, Mass.

Over the past 21 months the Chinese have allowed their currency to decline by about 7 percent against the dollar, partly to satisfy U.S. demands, he said.

"They have begun to move a bit faster in strengthening the yuan, but they don't want to create any ripples," Lee said.

Less than two weeks ago a steep sell-off in Chinese stocks triggered a global sell-off in equities, including a brief 540-point drop in the Dow Jones industrial average. Global markets still are recovering from that setback.

In 2005 a Chinese firm tried to acquire a major U.S. oil company, Unocal Corp., but was unsuccessful. At the time members of Congress expressed concerns that the loss of such a strategic resource could be dangerous.

Congress must aid subprime victims: consumer group

March 14, 2007

Reuters

WASHINGTON (Reuters) - Homeowners with subprime mortgages struggling under payments need federal government help to ease them through the crisis, a leading consumer advocacy group said on Wednesday.

Fresh data on increased mortgage delinquencies and the collapse of several mortgage lenders have increased attention on subprime loans offered to borrowers with damaged or sketchy credit histories.

As many as 1.5 million Americans could lose their homes as the subprime market shakes out, the National Community Reinvestment Coalition (NCRC) said, and so Congress should step in to protect those troubled homeowners.

The group, which represents hundreds of low-income housing advocates across the country, said Congress should immediately step in to aid subprime borrowers.

"As this crisis worsens, mortgage tsunamis will ravage working-class neighborhoods across this country," John Taylor, NCRC's president, said in a statement.

The group said that it would outline details of its proposal in a conference call late Thursday morning.

On Tuesday, two top Democratic lawmakers said that they were mulling legislation to tighten subprime lending rules and aid borrowers now in distress.

In the U.S. Senate, Banking Committee Chairman Christopher Dodd said he may offer a bill to protect consumers who were "victimized" by subprime mortgages they can no longer afford.

Meanwhile, the chairman of the U.S. House Financial Services Committee said he planned legislation that would restrict overly risky mortgages now that the subprime market is in turmoil.

Rep. Barney Frank, a Massachusetts Democrat, also said he did not think the subprime mortgage problems posed any broad threat to the U.S. banking system at this time.

Bad Loans Put Wall St. in a Swoon

March 14, 2007

by Vikas Bajaj

New York Times

Stocks fell broadly and sharply yesterday afternoon after a report on mortgage defaults indicated that the troubled housing market will weaken further before showing signs of improvement.

Though default and foreclosure rates have only recently begun rising from historic lows, the report from the Mortgage Bankers Association unnerved investors because it showed that a record number of homes entered the foreclosure process in the fourth quarter. It also indicated that problems that had previously been limited to economically weak areas were cropping up in more vibrant places like California.

With shares of financial companies leading the way, the Dow Jones industrial average dropped 242.66 points, or 1.97 percent, to 12,075.96, and the Standard and Poor’s 500-stock index fell 28.65 poimts, or 2.04 percent to 1,337.95. The fallout continued in Asia, with shares declining 1 percent to 3 percent in the major markets in mid-day trading today.

The slide echoed a sell-off two weeks ago driven in part by concerns about mortgages made to borrowers with weak, or subprime, credit and by a 9 percent drop in the Shanghai market. The S.& P. and Dow indexes are now down more than 5 percent since Feb. 20.

Yesterday’s report by the mortgage bankers found that about 0.54 percent of all home loans entered foreclosure in the fourth quarter, the highest ever in the 37-year history of the survey. The problems were most heavily concentrated among subprime mortgages, but the default rates also increased on loans made to prime borrowers and on loans that are part of government programs.

“It’s a measurable weakening in credit quality across the board,” said Mark Zandi, chief economist at Moody’s Economy.com

The rise in delinquencies will further strain the housing market, he said, because more houses will be put up for sale as foreclosures end in auctions, driving down home prices, which in turn will make it harder for struggling homeowners to refinance or sell their properties.

“This has a long way to play out,” he said, “because it now has this self-reinforcing quality that is seemingly kicking in and will extend the housing correction.”

Delinquency and foreclosure rates were highest in states like Ohio and Indiana, which are suffering from the loss of high-paying manufacturing jobs, and Louisiana and Mississippi on the Gulf Coast, where a slow pace of reconstruction has worsened the pain from hurricane damage.

But defaults were growing, albeit from a low base, even in relatively prosperous California, the nation’s most populous state and home to some of its most heated housing markets until recently. About 2.03 percent of subprime mortgages in California entered foreclosure, which is more than the 1.83 percent of loans that were already in foreclosure there during the third quarter. Homes typically stay in foreclosure for several months.

Around the country, big states like Massachusetts, Colorado, George and Texas also had high and rising forclosure rates. The state statistics are not seasonally adjusted, unlike the national data.

The center of the country is exhibiting an “early warning sign of an infection that will quickly enough get to the coasts,” said Edweard Leamer, an ecnomist at the University of California, Los Angeles. Both Mr. Leamer and Mr. Zandi noted that they did not expect the mortgage problems to presage a recession as long as the job market remained healthy.

Still, the mounting troubles of subprime lenders have been raising fears of a broader financial fallout. New Century Financial, one of the biggest subprime lenders, said yesterday that the Securities and Exchange Commission and a federal grand jury were seeking documents in investigations into trading in its shares and accounting errors. New Century stopped making loans last week after Wall Street banks closed off its financing.

Another subprime company, Accredited Home Lenders, said that it was facing a cash squeeze because of margin calls from its banks and was considering “strategic alternatives.” Shares in the company fell 65.2 percent, to $3.97.

Residential Capital, the mortgage division of GMAC, reported an operating loss of $651 million for the fourth quarter, in contrast to a profit of $118 million a year ago, because of rising losses and reserves for future losses in its subprime business. General Motors will inject $1 billion into GMAC as a result.

According to the mortgage bankers’ survey, 6.14 percent of all home loand were past due or in forclosure in the fourth quarter, up from 5.72 percent. The portion of subprime loans, which are given largely to poor and minority borrowers, past due or in foreclosure rose to 17.86 percent, from 16.42 percent.

The default rates are at their highest since 2002 and early 2003, when the economy was a lot weaker than it is today and unemployment was hovering close to 6 percent. By comparison, at the end of last year the unemployment rate was 4.5 percent.

Senator Christopher Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee, said the government might have to step in to provide aid to struggling homeowners. ‘The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit,”  Mr. Dodd told reporters after a speech at the National League of Cities, according to Bloomberg News.

Douglas G. Duncan, the chief economist of the Mortgage Bankers Association, said default rates were rising and would probably peak at the end of 2007 because about half the mortgages today were issued less than three years ago and borrowers are most vulnerable during the third and fourth years of their loans.

Other industry experts add that the current rise in defaults is also a function of looser lending practices in the last two or three years. Many lenders made loans without requiring down payments or verifying borrower’s incomes with tax statements or pay stubs. Some borrowers- though it is hard to say precisely how many- may also have experienced payment shock from the resetting of adjustable-rate mortgages.

Furthermore, the slowing housing market has made it harder for borrowers to sell their properties or refinance, because their homes may be worth less than the outstanding balance on their loans.

Dozens of small companies that specialized in subprime lending have gone out of business or stopped making loans. Other companies like Countrywide Financial, the nation’s largest mortgage lender, are tightening standards.

In an appearance on CNBC, Angelo Mozilo, the chief extecutive of Countrywide, said investors were overreacting to the subprime problems. “This is now becoming a liquidity crisis, an unnecessary one,” he said. “There’s been a rush to judgement.”

A top executive at Goldman Sachs, which was among the investment banks that financed subprime lenders, said credit problems appeared to be safely confined to the subprime category.

“I can’t predict the future, but as we sit here today, we really have not seen any contagion to the credit markets,” David A. Viniar, Goldman’s chief financial officer, said during a conference call with analysts and journalists about the firm’s record quarterly profits.

But investors pushed Goldman shares down 1.8 percent, to $199.03.

The New Orleans Disaster: Bush strikes again!

Bush friend delivered faulty pumps to New Orleans

March 14, 2007

AP

A company with close connections to the family of President George W. Bush installed faulty pumps at New Orleans levees and the Army Corps of Engineers, under pressure from the White House, ignored warnings that the pumps would fail during a storm.

The company, owned by a former business partner of former Florida Gov. Jeb Bush -- the President's brother -- is just the latest politically-connected government contractor to deliver failed equipment or flawed services.

Reports The Associated Press:

The Army Corps of Engineers, rushing to meet President Bush's promise to protect New Orleans by the start of the 2006 hurricane season, installed defective flood-control pumps last year despite warnings from its own expert that the equipment would fail during a storm, according to documents obtained by The Associated Press.

The 2006 hurricane season turned out to be mild, and the new pumps were never pressed into action. But the Corps and the politically connected manufacturer of the equipment are still struggling to get the 34 heavy-duty pumps working properly.

The pumps are now being pulled out and overhauled because of excessive vibration, Corps officials said. Other problems have included overheated engines, broken hoses and blown gaskets, according to the documents obtained by the AP.

Col. Jeffrey Bedey, who is overseeing levee reconstruction, insisted the pumps would have worked last year and the city was never in danger. Bedey gave assurances that the pumps should be ready for the coming hurricane season, which begins June 1.

The Corps said it decided to press ahead with installation, and then fix the machinery while it was in place, on the theory that some pumping capacity was better than none. And it defended the manufacturer, which was under time pressure.

"Let me give you the scenario: You have four months to build something that nobody has ever built before, and if you don't, the city floods and the Corps, which already has a black eye, could basically be dissolved. How many people would put up with a second flooding?" said Randy Persica, the Corps' resident engineer for New Orleans' three major drainage canals.

The 34 pumps- installed in the drainage canals that take water from this bowl-shaped, below-sea-level city and deposit it in Lake Ponchartrain- represented a new ring of protection that was added to New Orleans' flood defenses after Katrina. The city also relies on miles of levees and hundreds of other pumps in various locations.

The drainage-canal pumps were custom-designed and built under a $26.6 million contract awarded after competitive bidding to Moving Water Industries Corp. of Deerfield Beach, Fla. It was founded in 1926 and supplies flood-control and irrigation pumps all over the world.

MWI is owned by J. David Eller and his sons. Eller was once a business partner of former Florida Gov. Jeb Bush in a venture called Bush-El that marketed MWI pumps. And Eller has donated about $128,000 to politicians, the vast majority of it to the Republican Party, since 1996, according to the Center for Responsive Politics.

MWI has run into trouble before. The U.S. Justice Department sued the company in 2002, accusing it of fraudulently helping Nigeria obtain $74 million in taxpayer-backed loans for overpriced and unnecessary water-pump equipment. The case has yet to be resolved.

Because of the trouble with the New Orleans pumps, the Corps has withheld 20 percent of the MWI contract, including an incentive of up to $4 million that the company could have collected if it delivered the equipment in time for the 2006 hurricane season.

Misgivings about the pumps were chronicled in a May 2006 memo provided to the AP by Matt McBride, a mechanical engineer and flooded-out Katrina victim who, like many in New Orleans, has been closely watching the rebuilding of the city's flood defenses.

The memo was written by Maria Garzino, a Corps mechanical engineer overseeing quality assurance at an MWI test site in Florida. The Corps confirmed the authenticity of the 72-page memo, which details many of the mechanical problems and criticizes the testing procedures used.

About a dozen of the 34 pumps on order were already in place in New Orleans when Garzino wrote her report, according to Bedey.

In her memo, Garzino told corps officials that the equipment being installed was defective. She warned that the pumps would break down "should they be tasked to run, under normal use, as would be required in the event of a hurricane."

The pumps, 60 inches in diameter and capable of moving 200 cubic feet of water per second, are run by pressurized hydraulic oil. The supercharged oil cranks up a hydraulic motor, which in turn spins water-moving propellers.

The pumps failed less strenuous testing that the original contract called for, according to the memo. Originally, each of the 34 pumps was to be “load tested” – made to pump water- but that requirement for all the pumps was dropped, the memo said.

Of eight pumps that were load tested, one was turned on for a few minutes and another was run at one-third of operating pressure, the memo said. Three of the other load-tested pumps "experienced catastrophic failure," Garzino wrote.

The memo does not spell out what would have happened if the pumps had failed in a storm. But the Corps has acknowledged that parts of New Orleans could be hit with serious flooding if the floodgate pumps could not keep up.

Garzino, a Corps employee with the agency's Los Angeles district, was one of many personnel brought in after Katrina. Her memo was sent to Col. Lewis Setliff III, head of a task force assigned to rebuild the flood defenses.

Setliff did not return a call for comment. Garzino declined to discuss the memo.

MWI vice president Dana Eller said Garzino's conclusions about the pumps were premature. "She was there when we turned on the switch," he said. "If you put your garden hose on and it's leaking a bit, you'd tighten the garden hose. So that's what we did."

Bedey said some of what Garzino wrote was alarming and "caused me to ask a series of questions" about the reliability of the pumps. But he said they would have pumped water if they had been needed last hurricane season.

Just in case, the Corps brought in numerous portable pumps last year and plans to do the same thing this year, officials said.

In the meantime, the Corps has paid MWI $4.5 million for six additional pumps and will use them to troubleshoot the defective ones, Bedey said. Four of those pumps were run on Saturday for more than an hour, and the corps said there were no problems with the test. They were turned on again Tuesday in a demonstration for reporters.

"The design is no different. There is no reason to see any differences in performance than what we saw here today," Bedey said Tuesday of the original 34 pumps.

The Corps said MWI has paid for all other expenses incurred in fixing the pumps- shipping them back and forth from a facility in Gray, La, and installing and reinstalling them.

After Katrina, Congress gave the Corps $5.7 billion to make New Orleans safe from hurricanes. The Corps rushed to fix broken levees and floodwalls and make good on Bush's promise that the city would be protected "better than pre-Katrina by June 1."

Katrina's storm surge caused water on Lake Pontchartrain to back up into the city's drainage canals. The canal walls gave way, and about 80 percent of New Orleans flooded. Nearly 1,600 people in Louisiana died in the storm and its aftermath.

After the storm, the Corps decided to install floodgates at the mouths of the major canals. While that would keep water from Lake Pontchartrain from backing up in the canals, it would also prevent water pumped out of the city from flowing into the lake.

So the Corps installed pumps behind the floodgates to move water into the lake when the gates were closed. Each pump is designed to push about 200 cubic feet of water a second.

"We didn't have the luxury to go through a two-, three-year design and planning phase," Bedey said. "We had to get closure structures in place."

The Wailing Wall

Cheney: Iraq withdrawal may harm Israel!

March 12, 2007

Jerusalem Post

US Vice President Dick Cheney told the AIPAC annual conference in Washington on Monday afternoon that "President Bush is committed to the two-state vision, but will only agree to a peace accord that acknowledges Israel's right to exist, as well as the denunciation of all violence and terror."

In addition, Cheney said that a possible withdrawal of US forces from Iraq before goals for a stable Iraqi government were completed could damage Israel.

The vice president stated that such a withdrawal would "give extremists the taste of victory" and that they would act to overthrow any moderate forces in the region.

He predicted "disaster" and "chaos" in the Middle East with either al-Qaida or Iran emerging dominant from a bloody sectarian battle and compromising regional security if US troops withdrew from Iraq before their mission is completed.

Of particular concern, he said, would be a powerful and possibly nuclear-armed Iran, criticizing as inconsistent some lawmakers who are pressing for tougher action on Iran but opposing Bush's Iraq plan.

"It is simply not consistent for anyone to demand aggressive action against the menace posed by the Iranian regime while at the same time acquiescing in a retreat from Iraq that would leave our worst enemies dramatically emboldened and Israel's best friend, the United States, dangerously weakened," Cheney said.

Cheney also challenged lawmakers to prove their support for US troops and for battling terrorism by approving the Bush administration's requests for financing military action in Iraq and Afghanistan.

Naked, drunk, surrounded by sex toys - it's the Israeli ambassador!

Israel recalls 'naked ambassador'

March 13, 2007

by Rory Carroll

BBC News

Israel has recalled its ambassador to El Salvador after he was found drunk and naked apart from bondage gear.

Reports say he was able to identify himself to police only after a rubber ball had been removed from his mouth.

A foreign ministry official described Ambassador Tzuriel Refael's behaviour as an unprecedented embarrassment.

The incident, which happened two weeks ago, has renewed calls for a radical overhaul of the way Israel appoints and promotes its diplomats.

San Salvador was Mr Refael's first post as ambassador. He was promoted in 2006 from a technical position in the ministry which had involved several foreign postings.

He was being recalled, although he had not broken any laws, foreign ministry spokeswoman Zehavit Ben-Hillel told reporters.

She confirmed that lurid reports of the incident in the Israeli press were accurate.

"We're talking about behaviour that is unbecoming of a diplomat," she said.

Israel has been rocked by a recent series of misconduct and corruption scandals, shaking public confidence in the political leadership.

Haaretz website reports that police found Mr Refael in the Israeli embassy compound where he had been found bound, gagged and naked apart from sado-masochistic sex accessories.

In 2006, Israel's diplomatic service was criticised by the public watchdog for its appointments system.

The state comptroller's report singled out the foreign ministry appointments committee for its inadequate examination of candidates and lack of transparency.

http://news.bbc.co.uk/2/hi/middle_east/6441461.stm