Saturday, March 17, 2007

Subprime woes continue to damp sentiment

Subprime woes continue to damp sentiment
By Christopher Brown-Humes
Copyright The Financial Times Limited 2007
Published: March 17 2007 02:00 | Last updated: March 17 2007 02:00

Financial markets rounded off another turbulent week on a steadier note yesterday, but fears that the crisis in the US subprime mortgage market could disrupt the global economy persisted.

Concerns about the subprime market - loans taken out by homeowners with poor credit histories - lay behind a sharp mid-week sell-off when Wall Street, Asian and European equity markets all recorded their second biggest one-day falls of the year.

Sentiment improved later in the week, although economic data released yesterday was not sufficiently reassuring to prevent further modest market falls.

A sharp rise in subprime mortgage arrears and default rates - as well as the increasing financial woes of the lenders involved in this segment of the market - triggered the mid-week rout.

Alan Greenspan, former chairman of the US Federal Reserve, warned on Thursday that rising subprime defaults could spill overinto other areas of theeconomy.

Stephen Roach, chief economist at Morgan Stanley, added his voice to the concerns yesterday, warning: "Subprime is today's dotcom - the pin that pricks a much larger bubble."

He said the crisis could hit US consumer spending as well as "the US economy,a US-centric global economy, and world financialmarkets".

Subprime woes threw a new spotlight on the US economy - in particular the outlook for growth and inflation. Data yesterday showed stronger-than-expected growth in industrial production in February, but also slightly weaker-than-expected consumer confidence in March.

Consumer price inflation, while in line with expectations, was interpreted as giving the US Federal Reserve little scope to cut interest rates in the near future.

Core inflation fell to 0.2 per cent in February from 0.3 per cent in January, but the annual rate remained at 2.7 per cent.

"Core inflation remains above the Fed's - specifically Mr Bernanke's - comfort zone and is likely to continue doing so for some months to come," said Gabriel Stein at Lombard Street Research.

However, he said the Fed needed to be forward-looking and consider cutting US interest rates early in the third quarter.

Wall Street fell yesterday, led by energy shares. The Dow Jones Industrial Average lost 0.40 per cent for a weekly loss of 1.35 per cent. The S&P 500 index fell 0.4 per cent, for a weekly drop of 1.1 per cent. Europe also ended the day lower, with the FTSE Eurofirst 300 index falling 0.1 per cent to 1,454.89. It closed the week down 2.3 per cent.

In Japan, the Nikkei 225 Average closed down 0.7 per cent at 16,744.15, leaving it 2.4 per cent lower on the week. All the main markets are down on the year.

The mid-week equity market sell-off was accompanied by a sharp rise in volatility, a rise in the Japanese yen, and a flight to safety that lead to yields on US Treasuries falling sharply.

But by the end of the week all these trends had at least partially unwound.

Yields on US 10-year Treasuries began the week at 4.59 per cent, but fell as low as 4.48 per cent at one point. By yesterday, they were back up to 4.55 per cent.

Volatility, as measured by the Vix index - also known as Wall Street's fear gauge - had fallen to 16.89 at one point yesterday, having spiked as high as 21.25 during trading on Wednesday when the Dow briefly fell below 12,000.

Concerns about a US slowdown also had an impact in currency markets where the dollar fell to its lowest level against the euro for three months.

This took the focus away from the Japanese yen, which has been at the centre of currency market turbulence in recent weeks, amid talk of an unwinding of the global carry trade.

This trade involves investors borrowing low-yielding currencies (such as the yen) to invest in higher yielding assets elsewhere.

Given the growth concerns, base metal prices proved remarkably resilient, with nickel prices hitting a series of new daily records this week.

China reassures markets on dollar

China reassures markets on dollar
By Richard McGregor in Beijing
Copyright The Financial Times Limited 2007
Published: March 16 2007 08:18 | Last updated: March 16 2007 20:14

China on Friday sought to reassure global currency markets that a new state investment agency set up to chase higher returns for its $1,000bn-plus in foreign exchanges reserves would not harm the value of the US dollar.

Wen Jiabao, premier, said at a press conference to close the National People’s Congress that investments by the agency “would not have any impact on US dollar-denominated assets”.

Mr Wen’s comments were reinforced by the People’s Bank of China, the central Bank, which said in a report issued hours later that it would not make “frequent, major adjustments to the structure of the reserves in response to market movements”.

Mr Wen gave no timetable for establishing the new agency or the proportion of the reserves it would manage. But his comments are significant because Chinese leaders have been cautious in their remarks on the reserves, especially regarding the US dollar, for fear of encouraging speculation that Beijing is reducing its holdings of the currency.

Mr Wen’s reassurance on the US dollar is also in China’s self-interest, since any dollar sell-off would leave huge capital losses for Beijing’s existing holdings.

The precise make-up of China’s holdings is a state secret, but about 75 per cent are believed to be held in dollar-denominated assets.

Mr Wen said: “I can assure you that by instituting such a foreign exchange reserve investment company, it will not have any adverse impact on US dollar- denominated assets.”

Chinese leaders have publicly canvassed a range of uses for the reserves, ranging from portfolio investments overseas to the purchase of so-called “strategic” resources and funding the local welfare system.

The government has announced that Lou Jiwei, the former vice-minister for finance, has been appointed to a position under the State Council, the cabinet, in apparent readiness to takeover the running of the new body.

But it has yet to give any detail about how the body would be run and its relationship to other bodies under the central bank which hold large tranches of shares in state-owned companies.

Mr Wen’s generalised reassurance on the US dollar is also in China’s self-interest, as any sell-off in the greenback would cause huge capitals losses for Beijing’s existing holdings.

The precise make-up of China’s holdings is now a state secret but about 75 per cent are believed to be held in US dollar, either in Treasury bonds, or other higher-yielding securities.

The holdings are managed by the State Administration of Foreign Exchange, an agency under the central bank, which will continue to oversee the bulk of the reserves even after the establishment of the new agency.

Friday, March 16, 2007

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It is the National DO NOT CALL list. It will only take a minute of your time. It blocks your number for five (5) years.

You must call from the cell phone number you are wanting to have blocked .
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Chicago Free Press Editorial - Help Make History

Chicago Free Press Editorial - Help Make History
Copyright by The Chicago Free Press
March 14, 2007

It’s shocking, really, that we could get civil unions in Illinois this year.

Who would have thought five years ago, even one year ago, that we could be talking about the Illinois legislature being comfortable enough with gay and lesbian rights to pass civil unions?

It’s amazing progress, even if it is not what we ultimately want, which is full marriage equality.

That said, there are good reasons why we should all do everything that we can to support our community leaders in getting a civil unions bill passed this spring.

First and foremost, if we can’t get marriage equality yet, civil unions mean real benefits for gay and lesbians families. With civil unions, those families would no longer have to worry about such things as hospital visitation rights, about being able to make medical decisions for each other, about health insurance benefits for partners and children, inheritance and a long list of other rights and privileges granted to married couples.

Ask those families if civil unions are better than nothing at all and the odds are you’ll get a quick affirmative response.
Civil unions also take us closer to full marriage equality. In Canada, gay and lesbian couples got civil unions first in some [arts of the country before Canada's highest court ruled that they deserved marriage equality. Most judges aren’t stupid—they can see what’s going on when you create parallel systems that attempt to give two groups of people the same legal standing while maintaining that it’s not. “Separate but equal” was struck down for that reason.

We will get marriage equality, and probably sooner than later. It may be that many states pass civil unions, as appears likely to happen soon, the U. S. Supreme Court will eventually be persuaded to resolve the whole thing with a common-sense ruling that puts an end to marriage inequality for us. Or for that matter, the anti-gay political forces, which appear to be losing power at a suddenly precipitous rate, may lose the ability to stop moves for marriages in Congress.

For now, anyway, we shouldn’t reject civil unions while we continue to work for marriage equality. While it is certainly not the end of our community’s quest for equal rights, it is progress.

It would also be a victory of significant proportions to have it pass in the Illinois legislature, right here in the heart of the country. Make no mistake—that would be a huge blow for the anti-gay charlatans, a far greater loss than a civil unions bill in a state such as New York or California.

So, yes, keep working for marriage equality, but pitch in for civil unions too. Write and call your state representatives and state senators this week—today—and urge them to vote yes on civil unions. Your voice is critical.

While you are at it, call state Representative Greg Harris’ office and pledge your support for his efforts to push both civil unions and marriage equality. And call Equality Illinois at 773-477-7173 and ask how you can help. They can also give you contact information for your legislators and talking points to use when you contact them.

This really matters, folks. We can make history right now. Being able one day to say you were part of this is the kind of stuff that gives “Pride” real meaning.

Brownback backs Pace remarks on gays

Brownback backs Pace remarks on gays
Copyright © 2007, Chicago Tribune and The Associated Press
Published March 16, 2007

WASHINGTON -- Republican presidential candidate Sam Brownback is backing the Pentagon's top general over his remarks that homosexuality is immoral.

The Kansas senator planned to send a letter to President Bush supporting Marine Gen. Peter Pace, who this week likened homosexuality to adultery and said the military should not condone it by allowing openly gay personnel to serve.

The chairman of the Joint Chiefs also said in an interview with the Chicago Tribune: "I believe that homosexual acts between individuals are immoral and that we should not condone immoral acts."

Lawmakers of both parties criticized the remarks, but Brownback's letter called the criticism "both unfair and unfortunate."

"We should not expect someone as qualified, accomplished and articulate as Gen. Pace to lack personal views on important moral issues," Brownback said.

Asked whether he agreed with Pace's comments, Brownback said: "I do not believe being a homosexual is immoral, but I do believe homosexual acts are. I'm a Catholic and the church has clear teachings on this."

There is no indication Pace's job is in jeopardy, but Brownback's letter to Bush said "personal moral beliefs" should not disqualify anyone from a leadership position in the military.

Pace said he supports the military's "don't ask, don't tell policy" in which gay service members must keep their sexual orientation private. Brownback on Thursday said the policy is "appropriate."

HPV common, but knowledge of it still is not - Young adults especially at risk of getting virus

HPV common, but knowledge of it still is not - Young adults especially at risk of getting virus
By Martha Irvine
Copyright © 2007, Chicago Tribune and The Associated Press
Published March 16, 2007

Nearly every working day, Dr. Elizabeth Poynor encounters anxious young women who come to her New York office with an HPV diagnosis.

The human papillomavirus is the most prevalent sexually transmitted disease--so common that researchers estimate most people will have some form of it in their lifetime. Young adults are especially at risk because they tend to be the most sexually active group.

Yet Poynor finds that most of her young patients, even if they have heard of a new vaccine aimed at preventing the worst kinds of HPV, know little about the virus and the harm it can do.

Many women find themselves scrambling to understand HPV after a routine Pap smear determines they have it. That, Poynor and others say, creates angst that could be avoided with more education.

"This is a very common problem, period," Poynor, a gynecological oncologist in private practice, says of HPV. "That's the first thing I try to tell my patients, to put their minds at ease."

There are many reasons HPV is so little known. Poynor thinks it's been overshadowed by higher-profile STDs, such as HIV and herpes. Others note that, when marketing its vaccine, pharmaceutical company Merck & Co. has focused on the potential for cervical cancer rather than the virus itself, which also can cause genital warts.

Then there's the gender divide. Both men and women can have high-risk HPV and low-risk types. But doctors say high-risk strains pose more problems for women, potentially leading not only to cervical cancer but to infertility.

Frequently, men are seen as the silent carriers who can unknowingly spread HPV to their sexual partners. And even when people know they have HPV, they often think condoms offer 100 percent protection; research has shown that they do not.

That was the case for one 24-year-old woman in San Francisco who recently learned she has one of the high-risk types of HPV. She was one of a few young women with HPV interviewed for this story, all of whom spoke on the condition of anonymity.

"I was scared, sad, disappointed and definitely ashamed. It seemed unfair that I should have it when I've had relatively few partners," says the woman, who's been sexually active for eight years and had four monogamous partners, including her current boyfriend of two years.

She knew little about HPV at the time. But when her doctor uttered the word "precancer," in reference to the abnormal cells found in her cervix, she frantically searched the Internet to educate herself.

Certainly, doctors say, having more sexual partners increases a person's chance of contracting HPV. But, they say, HPV also can be contracted from just one partner and even one sexual encounter.

While some women who have HPV think it's too late for them to be vaccinated against HPV, some doctors say it still would be worth it, because it shields against the worst four types.

"Even if a young woman has one type of high-risk HPV, there's nothing to say that she cannot be infected with the other three," says Dr. Tina Tan, an infectious disease specialist at Children's Memorial Hospital in Chicago.

Federal officials recently recommended that girls as young as 9 receive the HPV vaccine. Some parents remain reluctant, though, because they are worried that the vaccine could be considered a license to have sex.

Dr. Gary Rose, head of the Medical Institute for Sexual Health in Austin, Texas, says parents should reconsider, even if they're certain their daughters will wait until marriage to have sex.

"There are a couple of things you can't be sure of," he tells those parents. "One is the sexual history of the person your daughter marries." The other is the risk of abuse or rape.

Because the vaccine does not protect against all types of HPV, Poynor and Tan say regular Pap smears and early treatment remain keys to fighting the virus. They agree, too, that some protection from condoms is better than none.

A young woman from San Antonio who was diagnosed with HPV two years ago also calls educating men about their role in spreading HPV "crucial."

"I had to tell my boyfriend about it," says the 26-year-old professional, "and he still doesn't get what it is."

Home loans are more expensive for minorities

Home loans are more expensive for minorities
By Rebecca Knight in Boston
Copyright The Financial Times Limited 2007
Published: March 16 2007 02:00 | Last updated: March 16 2007 02:00

Mortgage lenders sell a -disproportionate share of high-cost, or subprime, home loans to blacks and other minorities in big cities across the US, according to two new reports.

A study conducted by the Woodcock Institute, aChicago-based organisation that promotes community development, and four other groups found that home loans are more expensive for minorities in Boston, Charlotte, Chicago, Los Angeles, New York City and Rochester, New York.

In these six cities, blacks were 3.8 times more likely to receive a higher-cost home loan than were white -borrowers, while Latinos were 3.6 times more likely than white borrowers to receive a higher-cost loan. Subprime loans - mortgages tailored to homebuyers with poor credit ratings - typically have interest rates at least 3 percentage points above regular mortgages.

Subprime loans have attracted heightened scrutiny in recent weeks as defaults on US mortgages have increased and banks that specialise in these products have imploded.

"It's the ugly geographic pattern that we've seen before," said Paul Collier, the director of litigation for Harvard Law School's clinical programme as well as a trial lawyer mostly representing lower-income clients. "Subprime lending is narrowly focused on neighbourhoods of colour."

The study focused on lending by Citigroup, Countrywide, GMAC, HSBC, JPMorgan Chase, Washington Mutual and Wells Fargo. These lenders were analysed because they are among the biggest financial institutions in the US and all originated a substantial volume of both subprime loans and lower-cost prime loans, according to the study. The banks that responded to requests for comment dismissed the study's findings. Each said it used automated tools to evaluate whether loans met investor guidelines. Those tools did not consider race, gender or ethnicity in determining the risk profile of a customer and, therefore, the interest rates available on any loan, according to -several banks.

A separate study on the subject showed that the trend is particularly pronounced in Boston. Jim Campen, an economics professor at University of Massachusetts Boston, found that high-income minorities were six to seven times more likely to have an expensive mortgage than high-income whites. Around 70 per cent of black and Latino borrowers in Greater Boston with incomes between $92,000 (£48,000, €70,000) and $152,000 took out mortgages with high interest rates in 2005, according to the study.

"This is just one manifestation of the great inequality of American society," said Prof Campen, a long-time analyst of mortgage lending to minorities.

"This is news because it's not just black people losing their homes; it's white investors on Wall Street losing their money."

He said that because blacks were historically more "wary of the banking system", they were especially vulnerable to the "aggressive marketing tactics" of subprime lenders. "They come knocking on your door, and bombard you with letters and phone calls," said Prof Campen.

There was also some evidence that blacks and Latinos did not know their credit rating, he said, so the lenders, which are often divisions of mainstream banks, made getting a loan much more convenient.

"Their motto is: 'When the banks say no, we'll say yes,' '' he said.

E-mails ‘implicate Rove’ in sackings

E-mails ‘implicate Rove’ in sackings
By Brooke Masters in New York
Copyright The Financial Times Limited 2007
Published: March 15 2007 20:35 | Last updated: March 15 2007 23:44

Congressional Democrats turned up the heat in their investigation of what they are calling a political purge of senior prosecutors amid allegations that Karl Rove, the top political aide to President George W. Bush, was involved in the early plans for a mass sacking of US attorneys.

According to internal White House e-mails reported by ABC News, Mr Rove first discussed getting rid of all 93 US attorneys in January 2005, putting him on the spot at the genesis of a plan that led to the firing of eight US attorneys late last year.

Alberto Gonzales, the attorney-general, who is now facing calls for his resignation, also seriously considered the mass removal plan, according to ABC’s version of another e-mail. The White House on Thursday night confirmed that Mr Gonzales had considered several options including firing 15-20 per cent of US attorneys.

The e-mails, which are due to be turned over to Congress on Friday, leaked out on a day when the Senate judiciary committee authorised subpoenas of five senior Justice Department officials, but put off a decision on whether to compel Mr Rove and Harriet Miers, the former White House counsel, to testify.

Tony Snow, White House spokesman, said Fred Fielding, who replaced Ms Miers, was considering whether to allow the White House aides to testify voluntarily.

Justice Department officials initially described the sackings as performance-related, but evidence has mounted that political considerations were a factor and some of the ousted prosecutors were involved in sensitive corruption probes.

John Conyers, who is leading the House investigation of the sackings, said: “The notion that the president’s top political adviser was so deeply embroiled in this decision is the final nail in the coffin of the administration’s contention that this was done for performance-related issues, and not politics of the lowest kind.”

Mr Rove defended the firings at a speech in Alabama, calling the controversy “all politics,” Dow Jones reported.

Mr Gonzales is facing pressure to resign from Democrats and a few Republicans, in part because these e-mails and Justice Department communications released earlier this week appeared to contradict Congressional testimony he and his aides gave about the sackings.

The e-mails called into question the department’s claim that it never intended to use the authority it received last year to install replacement US attorneys for long periods without Senate confirmation.

In a December e-mail, Kyle Sampson, the chief of staff to Mr Gonzales ousted on Monday, discusses using the new appointment authority to sidestep Senate objections to the selection of Tim Griffin, a protégé of Mr Rove, as top prosecutor in Arkansas.

Both the House and the Senate are considering legislation that would limit interim US attorneys to 120-day appointments.

Thursday, March 15, 2007

Medical marijuana bill passes IL Senate committee

Medical marijuana bill passes IL Senate committee
copyright by Gay Chicago Magazine
March 13, 2007

SPRINGFIELD, IL - Members of the Illinois Senate Public Health Committee recently passed a medical marijuana bill, 6-4, after receiving written and oral testimony from medical professionals, patients and policy experts.

S.B. 650, introduced by Sen. John Cullerton (D-Chicago) is one of about a dozen medical marijuana bills currently under consideration by state legislatures across the country. Medical marijuana policy experts said they expect the bill, which would protect from arrest seriously ill patients who use medical marijuana with a doctor’s recommendation, to go to the Senate floor for a full vote within a month.

Committee members heard testimony from multiple sclerosis patient and Illinois Drug Education and Legislative (IDEAL) Reform board member Julie Falco of Chicago. They also considered written testimony from several other patients and experts, including registered nurse and multiple sclerosis patient Gretchen Steele of Coulterville, and psychiatrist Dr. Zulima Hurtado of Round Lake Park, who argued that her experience treating patients indicated medical choices are best left between doctors and patients.

A registered nurse, Steele testified that medical marijuana was able to effectively and safely treat her symptoms when other more dangerous drugs failed.

“I can tell you from firsthand experience that marijuana works better to control the spasticity, neuropathic pain and tremors than do any of the myriad prescription medications that I currently take,” she wrote to the committee. “The fact that it is perfectly legal for my doctors to prescribe morphine, OxyCodone, diazepam, hydrocodone and other drugs that are not only highly addictive but have many unpleasant side effects, yet it remains illegal to recommend marijuana, is beyond reasoning.”

Although federal law makes patients who use doctor-recommended medical marijuana criminals, 11 states have effective laws protecting patients for whom serious research proves the medicine is safe and effective including those suffering from symptoms associated with life-threatening diseases such as cancer, HIV/AIDS, multiple sclerosis and hepatitis C.

“Today, committee members made a sensible, compassionate decision to square the state’s laws with the facts about medical marijuana,” said Karen O’Keefe, MPP assistant director of state policies. “Thanks to them, seriously ill patients here may soon be able to focus on fighting their debilitating symptoms, and not on the fear of arrest and jail for simply following their doctor’s treatment regimen.”

With more than 20,000 members and 100,000 e-mail subscribers nationwide, the Marijuana Policy Project is the largest marijuana policy reform organization in the United States. MPP believes that the best way to minimize the harm associated with marijuana is to regulate marijuana in a manner similar to alcohol.

For more information, visit

One marriage bill stalls, another has chance

One marriage bill stalls, another has chance
Copyright by Gay Chicago Magazine
March 13, 2007

SPRINGFIELD, IL - The Religious Freedom & Marriage Fairness Act (HB1615), sponsored by Reps. Greg Harris (D-Ravenswood), Constance Howard (D-Chicago), Sara Feigenholtz (D-Lakeview) and Harry Osterman (D-Edgewater), has been assigned to the House Human Services Committee because it did not have the necessary votes to pass this bill out of committee at this time – but they continue to educate legislators and their communities on the importance of equal marriage for LGBT Illinoisans.

A comprehensive Civil Union Act (HB1826) has also been introduced by Rep. Harris and is cosponsored by more than a dozen members of the Illinois House. This bill is assigned to the House Human Services Committee and a hearing and committee vote is scheduled for Wednesday, March 14, 8 a.m. in Room D-1, Stratton Building in Springfield.

This bill has an excellent chance of passing the committee on Wednesday and going to the full House of Representatives for consideration. For copies of the bills, list of their sponsors, list of committee members and schedules, visit

Financial Times Editorial Comment: Viacom v Google

Financial Times Editorial Comment: Viacom v Google
Copyright The Financial Times Limited 2007
Published: March 14 2007 21:25 | Last updated: March 14 2007 21:25

Viacom’s $1bn lawsuit against YouTube, and its parent Google, poses the central question of the digital age: how can old laws be applied to new technologies, in ways that balance the rights of copyright owners with the public interest.

It is high time America’s courts answered that question, as it applies to the internet’s newest new thing: websites such as YouTube and MySpace, which host the user-generated content of millions of people – not to mention reams of content that is actually owned by somebody else.

At the moment, such sites exist in a precarious state of legal limbo: no one knows for sure how America’s digital copyright law – written back in the dark ages of the internet era, 1998 – applies to them.

Much of what they do is clearly legal. Wednesday’s top videos on YouTube, for example, included a clip showing the mating of ladybirds and another demonstrating a toilet roll winding machine. No copyright violations there.

But it is common knowledge that much of the video content posted on YouTube and other such sites is unlicensed copyrighted material. Viacom says over 160,000 of its clips, from hit programmes such as The Daily Show with Jon Stewart or SpongeBob SquarePants, have been posted without permission. It says YouTube has demonstrated a “brazen disregard” for copyright law.

Unfortunately for Viacom, copyright law is simply not clear enough, at this stage, to be blatantly disregarded by the likes of YouTube. The 10-year-old Digital Millennium copyright act does not make clear whether user-generated content sites are liable for what users do with copyrighted content.

The law contains a “safe harbour” provision, designed mainly for internet service providers, that says the host site is not liable if it promptly takes down infringing content once notified by the copyright owner. But what happens if users just keep posting the content over and over again? Is it really legal for YouTube to make millions of dollars from advertising, when one of the main attractions of its site is all the pirated content?

No court has yet answered that question definitively, largely because most previous lawsuits testing the legality of user-generated sites have settled. Chances are the Viacom suit will also settle – both sides would probably risk too much by going to court. Viacom’s suit is probably just negotiation by another name: a way to step up pressure on YouTube and Google to pay a fair price for its content.

That would be a shame: digital behemoths can afford to face each other down, whether it is Microsoft facing down Google over its book digitisation project or Viacom v YouTube. But the YouTubes of the future cannot exist in such a tenuous legal environment. They need more clarity – or the next new new thing may never be born.

How a fiasco of easy home loans has tripped up America

How a fiasco of easy home loans has tripped up America
Reporting by Ben White, Rebecca Knight, Eoin Callan, Richard Beales, Saskia Scholtes and Michael MacKenzie
Copyright The Financial Times Limited 2007
Published: March 15 2007 19:20 | Last updated: March 15 2007 19:20

Frances Darden, a disabled mother of three from Boston’s Dorchester neighbourhood, long dreamt of owning her own home. Several banks turned her down for a mortgage because she did not earn enough. She was starting to give up hope.

But in September 2004, an advertisement in the local newspaper for a home buyers’ seminar caught her eye. “It was so appealing,” she recalls. “It said: ‘You can afford your dream home. Let’s make history’.”

Ms Darden, who is in her late 40s, went along to the presentation with her best friend. Soon afterwards she was looking at houses, through an estate agent from Champagne and Associates Real Estate and a mortgage broker from New England Merchants Corporation which were involved in the seminar. She says the agent encouraged her to buy a multi-family property, where she could become not only homeowner but landlady as well.

At that time, her monthly income was made up of not much more than $1,800 (£930, €1,360) in disability payments, a small amount of child support and a modest rent subsidy. Much to her surprise, Ms Darden was “pre-approved” for a loan worth $894,000. “When they told me, I couldn’t believe it. But they said: ‘We’re different from everyone else, we can help you.’ ”

Ms Darden put no money down. She says she was assured that her monthly repayments would be $5,000 and that rental income would fully cover those costs – and put money in her pocket to boot. As it turned out, the repayments were more than $7,500 a month. The annual interest rate was 11.7 per cent, nearly double the level a creditworthy borrower would be charged. By November the following year she had fallen hopelessly behind on her mortgage. One flat in the two-unit house she had bought was foreclosed on and sold. The other is soon to go to auction.

Ms Darden’s experience explains why the “subprime” mortgage industry in the US is facing such painful problems. The root of it all is simple enough: many home buyers with low credit scores nonetheless managed to land big home loans over the past couple of years.

Victoria Wagner, credit analyst at Standard & Poor’s, the ratings agency, says some subprime mortgage lenders dramatically lowered their standards amid “the so-called democratisation of credit”, granting loans that contained many levels of default risk. These included a lack of income documentation and no downpayment. Ms Wagner calls this kind of risky lending “unprecedented”.

Now buyers such as Ms Darden are falling behind or defaulting, as interest rates that started relatively low go higher and home prices in some parts of the US stop rising. So far the problem has remained largely contained within the subprime sector. It may stay there but concern is growing that difficulties could spread throughout the housing market and then, perhaps, the wider US economy.

The first way the subprime decline could impact on the housing market is if a flood of foreclosed homes came up for sale and pushed down prices in areas where the supply of homes is already high because demand has dropped off. “The big question is, how quickly will housing prices adjust lower as delinquency rates rise?” says Richard Gilhooly, senior fixed income strategist at BNP Paribas.

Analysts at Lehman Brothers project that mortgage defaults could reach $225bn during 2007 and 2008 and perhaps go as high as $300bn. “The risk that they impact the broad housing market and begin to weigh upon prime borrowers is very real,” they say.

Figures released this week by the Mortgage Bankers Association show that a final splurge of loans made recently is likely to be the poorest quality on record, with the proportion of mortgages in the initial stages of foreclosure at all-time highs and late payments and overall defaults reaching 5 per cent last quarter. Delinquency rates for subprime adjustable-rate mortgages, the riskiest kind, hit 14.4 per cent.

The numbers could get much worse because many who bought homes face “resets” in their mortgage payments; the low rates that tempted them in will revert to higher, market-determined rates. Lehman estimates that more than $900bn of mortgages will hit a reset in the next two years.

Many people facing resets will have banked on being able to refinance their loans. But that might not be possible if lenders continue tightening their approval standards. “The main concern is that lenders could pull back from extending credit to the reset borrowers,” the Lehman fixed-income analysts say.

Still, it is far from certain that the subprime ailments will infect the broader housing market. Steven Wieting, economist at Citigroup, suggests that the problems are likely to affect financial institutions and their investors – as indeed they already have – more than consumer sentiment and the economy at large.

But if the marginal buyer – someone able to buy a house only if conditions are right – is knocked back, that could at best slow a recovery in the housing market.

At worst, it could lead to recession. David Rosenberg, North American economist at Merrill Lynch and a perennial bear, says: “This housing downturn is far from over and the full impact across the economy has not been felt...As with most bubbles, this one started with loosening credit guidelines, excessive price appreciation, classic performance-chasing [and] speculative fervour, and now ends in lawsuits.”

Whatever the impact of the subprime fiasco on the wider economy, it is already deeply painful for many Americans. Ms Darden in Boston, for her part, recently filed for bankruptcy protection. An attorney from a legal aid clinic run by Harvard Law School is advising on how to start restoring her credit. That includes pursuing claims against those who arranged her purchase and the accompanying mortgage.

New England Merchants says the mortgage broker she used was an independent contractor with the company, an arrangement that has since been terminated. Calls to Champagne and Associates were not returned.

Ms Darden faces having to move soon from the home that two years ago she thought was hers for life. “I don’t wish this on my worst enemy,” she says. “I’ve spent many restless nights worrying about this. You work all your life, you save, you dream – and now it’s all gone.”

Chain reaction is a dread

One way the subprime shake-out could lead to systemic problems across the capital markets is if investors who had little idea they might own such mortgages suddenly discovered that they did. These holdings would probably be through complex structures called collateralised debt obligations – packages of asset-backed bonds.

Investors in CDOs – say, pension funds in Europe or Japan – may be inclined to act more quickly when they detect subprime exposure than would a group that was already well aware of the risks in their CDOs.

One problem is a lack of information. CDOs are rarely traded and difficult to value. As a result, buyers are often reliant on credit ratings to know when to sell. However, credit ratings regularly lag market prices, meaning that losses can be greater than necessary when the credit rating downgrade finally comes.

Josh Rosner, managing director at Graham Fisher & Co, an investment research firm, says: “Because many buyers of CDOs can only hold investment-grade assets, they may continue to hold deteriorating and increasingly illiquid assets as long as credit ratings have not been downgraded.”

This means that when these investors eventually sell, they may also be forced to accept large losses in a fast-moving market. The heavier the losses, the less likely investors are to want to return, a classic case of “risk aversion”.

Such risk aversion is already clear among the commercial and investment banks that had provided funding to subprime mortgage lenders. Those banks cut off credit lines to New Century Financial and Accredit Home Lenders, pushing both close to bankruptcy filings.

With equity investors in subprime (and even prime) mortgage lenders offloading their shares – “then asking questions later”, according to David Hendler, an analyst at CreditSights – some industry executives say the selling appears irrational and panic-driven, another signal of growing risk aversion.

Angelo Mozilo, chief executive of Countrywide Financial, a leading mortgage lender, said on television this week that investors were dumping shares of home loan groups with little regard for a lender’s actual fiscal health. “This is now becoming a liquidity crisis,” he declared, adding: “It’s going to get uglier.”

The ugliness could spread if lending standards to companies, hedge funds, private equity groups and others come under review. A broad tightening of credit requirements by lenders could have ramifications throughout the markets.

For many, such a rethink is overdue. The returns demanded by investors on risky assets such as junk bonds and emerging market debt are not far from all-time lows. The pace of company defaults is also at a record low, perhaps diminishing the risk in the eyes of investors.

As well as affecting US mortgage borrowers, a credit crunch could make hedge funds that use large amounts of borrowed money cut their debt, perhaps selling assets en masse in order to do so. If that led prices to fall, the effect could feed on itself as others scrambled to limit losses.

Companies, particularly weak ones, could find it hard to refinance existing debt – potentially leading to a sharply higher incidence of failure, which would further rock credit markets.

The worry is that such a wave of “deleveraging” could swell, with few investors both willing and able to start buying and halt the decline in asset prices. “There is an elevated risk of a financial market crisis during the next two months,” says T.J. Marta, fixed-income strategist at RBC Capital Markets. “There is a concern that as liquidity tightens, the wheels could fall off.”

Signs exist that investors have adjusted leverage levels in recent weeks. The yen is tending to strengthen whenever other markets show weakness, an indication that “carry trade” investors – who borrow in yen at low interest rates to finance purchases elsewhere – are at best nervous about their exposure.

Steven Wieting, economist at Citigroup, points out that banks have tightened lending standards, at least for mortgages, according to the latest quarterly survey by the Federal Reserve. But he notes that the shift followed a period of easy loan availability, which continued even after mortgage delinquencies began to rise.

There seem few signs of investors leaving the debt markets. The huge quantities of capital looking for a home, which have powered the ability of private equity to announce ever larger leveraged buy-outs, have not dried up. Still, analysts worry that the subprime meltdown could be the catalyst that brings the era of easy access to cheap debt to a close.

A rout could turn vicious

One area where the impact of the subprime mortgage shake-out is already clear is the equity market. Each day on Wall Street seems to bring fresh news of specialist lenders collapsing and fears about possible problems elsewhere, such as at the investment banks that have big subprime holdings. The result is dizzying volatility.

Financial stocks have been down since worries over the subprime sector began in earnest in mid-February. The big equity sell-off of February 27, though in part the result of concerns about a possible economic slowdown in China, also demonstrated subprime anxieties in the US. The financial sector took among the biggest tumbles that day, with some banks down by as much as 8 per cent.

The power of fear has remained visible this week. Goldman Sachs shares failed to budge even after the bank reported another quarter of stunning earnings on Tuesday – and Goldman does not even have much of a subprime business. Lehman Brothers, which does, saw its shares initially plunge 5 per cent when it reported record results on Wednesday but suggested that it was seeing some impact from problems in the subprime market.

Lehman’s shares reversed course later that morning when executives took the very rare step of publicly spelling out exactly how much of its revenue (an average of 3 per cent over the past six quarters) came from its business of originating and buying subprime loans in order to package and sell them as mortgage-backed securities to investors.

“The current battle involving Wall Street firms’ subprime exposure and investor perception of contagion risk rages on without any end in sight,” says Michael Hecht, a Bank of America analyst. “This is occurring in spite of positive commentary from both Lehman and Goldman Sachs that the sky is not falling.”

One fear surrounding the investment banks is that while subprime might not be that big a problem on its own, a flight from risk could mean that other profitable Wall Street businesses – such as the packaging of prime mortgages, credit card loans, student loans and other liabilities into securities – would dry up.

David Viniar, Goldman’s chief financial officer, says such securitisations have been a key part of Wall Street’s profit growth. But he adds that he does not think the current subprime problems will derail that growth.

“The concept of securitisation, which I think of as the ability to [divide] up credit risk so you can put it in the hands of people who want it as opposed to people taking parts of risk they don’t want, has been an important development over the last several years,” he says.

“It has been good for all of the capital markets – and I still think it will be an important financial tool that will be used, although I think the subprime market will be smaller.”

The wild ride played out in the larger market as well on Wednesday, as the two main schools of thought (subprime is a disaster versus subprime is no big deal) fought it out, leading to big swings in the main indices.

One of the biggest fears among market watchers now is that the worriers will win, whether based on fact or fear, and push stock prices beneath levels that have held even in the face of recent heavy selling pressure. For the Dow Jones industrial average the recent bottom being watched by the market is 12,050, which was hit on March 5. If that level is breached, the theory goes, the rout could quickly turn vicious, with selling begetting more selling and reason going by the wayside.

One common counter-argument is that there is plenty of cash on the sidelines waiting to rush in to buy stocks on the cheap after a few days of big losses. While it is true that there is a lot of liquidity looking for a place to go, it does not follow that this money will naturally flow back into the stock market.

“Liquidity isn’t about money on the sidelines per se, but rather about the risk appetite of those on the sidelines,” says Paul McCulley of Pimco, the investment group. “When risk appetite turns, no amount of liquidity on the sidelines matters, particularly when a crowd gathers there.”

Alan Ruskin, strategist at RBS Greenwich Capital, says the subprime story could continue to impact on markets through the rest of 2007. That would not necessarily lead to repeated big sell-offs but it could prevent any significant gains. “The persistent uncertainty does restrain buying and the return of risk appetite,” Mr Ruskin adds. “The market is plainly more fearful about what it does not know than what it does know.”

Neo-cons have been consigned to history

Neo-cons have been consigned to history
By Jacob Weisberg
Copyright The Financial Times Limited 2007
Published: March 15 2007 02:00 | Last updated: March 15 2007 02:00

The term "neo-conservative" has many usages, including "former liberal" and "Jewish conservative". In recent years, however, it has taken on clearer definition as a philosophy of aggressive unilateralism and the attempt to impose democratic ideas on the Arab world. The neo-conservatives also constitute a distinct group around George W. Bush, the US president. They pushed for the invasion of Iraq and remain identified with hardline positions on Iran, Syria and North Korea.

Outside the administration, the chief fulcrum of neo-conservatism is the American Enterprise Institute. The day after vice-president Dick Cheney's former aide Scooter Libby was convicted of perjury, AEI held its annual black-tie gala. I did not go expecting contrition, but under the circumstances it seemed possible that self-examination might feature on the menu. Once a lazy pasture for moderate Republicans hurtled into the private sector by Gerald Ford's 1976 defeat, AEI has turned in recent years into a kind of Cheney family think-tank. It had not been a good week, year, or second term for any of these people and I thought a few cocktails might cause them to consider their predicament.

This was fantasy on my part. From the stage, one took no hint that matters were not working out as anticipated. All rose to salute the arrival of Mr and Mrs Cheney, herself a longtime fellow at the institute. The vice-president looked on from the head table as his friend, Bernard Lewis, perhaps the most significant intellectual influence behind the invasion of Iraq, came up to accept an award.

In his address, the 90-year-old Mr Lewis did not revisit his argument that regime change in Iraq could provide the jolt needed to modernise the Middle East. Instead, he spoke about the millennial struggle between Christianity and Islam. Mr Lewis argues that Muslims have adopted migration, along with terror, as the latest strategy in their "cosmic struggle for world domination". This is a familiar framework from the original author of the phrase "the clash of civilisations". What did surprise me was Mr Lewis's denunciation of Pope John Paul II's 2000 apology for the crusades as political correctness run amok, which drew clapping. Mr Lewis's view is that the Muslims started the trouble by invading Europe in the eighth century; the crusades were merely a failed imitation of Muslim jihad in an endless see-saw of conquest and reconquest.

Were one to start counting ironies here, where would one stop? Here was a Jewish scholar criticising the Pope for apologising to Muslims for a holy war against Muslims, which was also a massacre of the Jews. Here were the theorists of the invasion of Iraq, many of them also Jewish, applauding the notion that the crusades were not so terrible and embracing a time horizon that makes it impossible to judge their war an error. And here was the clubhouse of the neo-conservatives, throwing itself a lavish party when the biggest question in American politics is how to escape the hole they have dug.

But whether or not the neo-cons are prepared to face it, there are increasing signs that their moment is finally over. At the Defence department, Donald Rumsfeld has been replaced by Robert Gates, a member of the Iraq Study Group and an affiliate of the realist school associated with the previous President Bush. Paul Wolfowitz, the architect who wanted to build a new Middle East on Saddam's rubble, has been moved to the World Bank, where he observes a Robert McNamara-like silence on the failure of his war. Another former Pentagon official, Douglas Feith, is under investigation for misrepresenting intelligence data to make the case for the invasion.

At the State department, Condoleezza Rice is returning to her realist roots and now actually seems to direct policy. She has embraced shuttle diplomacy in the Israeli- Palestinian conflict, is considering conversation with Syria and Iran and even made a nuclear deal with North Korea. These steps signify a broader shift away from what the neo-con defector Francis Fukuyama calls "hard Wilsonian" ideas and back towards the less principled, more effective pragmatism of Brent Scowcroft, former national security adviser, and James Baker, former secretary of state.

The most important sign of all is the fading influence of Mr Cheney, who for six years dominated foreign policy in a way no previous vice-president ever has. Mr Cheney is discredited, unwell and facing various congressional investigations. He was badly damaged by the Libby trial, which exposed his ruthless mania to justify a war gone wrong.

But the larger factor in Mr Cheney's demise is that his neo-conservative hypotheses have been falsified by events. Invading Iraq did not catalyse a new Middle East; isolating North Korea advanced its nuclear programme; high-handed unilateralism has reduced American power. At the outset of his presidency, Mr Bush thought himself lucky to have a number two who did not aspire to his job. He may now grasp the hazard of lending so much power to someone with no incentive to test his views in the political marketplace.

As disciples of Bernard Lewis, it is unlikely Mr Cheney and the neo-con crusaders will apologise for what they have wrought. Like Mr Bush, they look to the long span of history for vindication. It will indeed be eons before anyone trusts them again.

The writer is editor of

If Gonzales gets boot, who should fill shoes?

If Gonzales gets boot, who should fill shoes?
By Steve Chapman
Copyright © 2007, Chicago Tribune
Published March 15, 2007

When James Buckley ran for the United States Senate in New York in 1970, his campaign billboards asked a question: "Isn't it time we had a senator?" The latest controversy surrounding the Justice Department raises a question of its own: "Isn't it time we had an attorney general?" Alberto Gonzales started out in Washington as the president's man, and he has done nothing to endanger his favored status. But that leaves the rest of us sorely unrepresented.

The uproar over the firing of eight U.S. attorneys may be a case where Gonzales actually had sound reasons, rather than unsavory political motives, for doing what he did. Someone who has consistently been a pliable administration functionary, though, can hardly expect the benefit of the doubt when scandal erupts. That makes this a good time to consider what sort of person ought to replace Gonzales in the likely event that he will soon return to private life.

The short answer is: someone very different. This attorney general owes almost everything to George W. Bush, who brought him on as his legal adviser when he was governor of Texas, appointed him to the state supreme court, gave him the job of White House counsel and installed him at Justice. It's about as easy to imagine Gonzales standing up to the president as it is to picture Mickey Mouse biting Walt Disney.

Whatever else he has done in Washington, he has conspicuously failed to earn a reputation for fearless and independent judgment, so everything that has come out about the removal of the prosecutors has been interpreted in the most incriminating fashion.

Some of it is hard to interpret any other way. The attorney general is entitled to get rid of mediocre prosecutors. Yet of the seven who got the gate in December, two had just been given high grades by Kyle Sampson, then Gonzales' chief of staff. One of those rated unsatisfactory was Bud Cummins of Arkansas, who the department now admits was removed only to make room for a former aide to Karl Rove. And now we also know that the White House, which had denied any role in the firings, was involved from the start.

What bodes particularly ill for the attorney general is that even conservative Republicans in Congress are furious. New Hampshire Sen. John Sununu pronounced the administration's handling of this matter "unacceptable." Nevada Sen. John Ensign said he was "very angry" about the dismissal of the prosecutor in his state. Sen. Tom Coburn of Oklahoma said the firing of the U.S. attorneys amounted to "idiocy."

When you start getting reviews like that from people in your own party, you're entering the land of the living dead, which was so recently occupied and then vacated by Donald Rumsfeld. A Cabinet official who becomes a gross liability may find that even Bush's loyalty has limits.

But getting rid of Gonzales will be nothing to applaud if Bush replaces him with another friend or partisan player carrying out a White House agenda. What is needed is the lawyer equivalent of Defense Secretary Robert Gates, a distinguished figure with unblemished integrity, a titanium backbone and an excess of independence and competence.

An even better model is Edward Levi, who was charged with restoring confidence in the Justice Department in the aftermath of Watergate. He was a respected law professor and president of the University of Chicago, not a buddy of President Gerald Ford, and he carried out his mission impeccably. As Supreme Court Justice Antonin Scalia said later, Levi's crucial asset was "a level of integrity such as there could never be any doubt about his honesty, forthrightness or truthfulness." That would be a change, wouldn't it?

Candidates such as Levi don't grow on trees, but I can think of people who have the attributes the department and the country need right now. One is Harvard law professor Charles Fried, who was solicitor general under President Reagan. Another is John Danforth, the former Republican senator from Missouri who headed the investigation into the 1993 raid on the Branch Davidian compound in Waco, Texas. Or maybe retired Supreme Court Justice Sandra Day O'Connor, fresh from a stint on the Iraq Study Group, would do her country one more service.

There may be other people capable of pulling the Justice Department out of its slough of despond. But Alberto Gonzales is not one of them.

In my last column, which dealt with the subpoenaing of reporters by special counsel Patrick Fitzgerald in the I. Lewis "Scooter" Libby case, I noted that Washington and Lee University journalism professor Edward Wasserman had described the episode as "a calamity." Professor Wasserman writes to say he was referring only to the failure of reporters to keep their promises of confidentiality to their sources, not to Fitzgerald's decisions.


Steve Chapman is a member of the Tribune's editorial board. E-mail:

You can search for more columns in our archives.

`Gay baby' article irks both sides - Baptist leader's theory assailed on left, right

`Gay baby' article irks both sides - Baptist leader's theory assailed on left, right
By David Crary
Copyright © 2007, Chicago Tribune and The Associated Press
Published March 15, 2007

NEW YORK -- The president of the leading Southern Baptist seminary has incurred sharp attacks from the left and right by suggesting that a biological basis for homosexuality may be proven, and that prenatal treatment to reverse gay orientation would be biblically justified.

Rev. R. Albert Mohler Jr., one of the country's pre-eminent evangelical leaders, acknowledged he irked many fellow conservatives with a blog article this month saying scientific research "points to some level of biological causation" for homosexuality.

Proof of a biological basis would challenge the belief of many conservative Christians that homosexuality, which they view as sinful, is a matter of choice that can be overcome through prayer and counseling.

However, Mohler, president of the Southern Baptist Theological Seminary in Louisville, was assailed even more harshly by gay-rights supporters upset by his assertion that homosexuality would remain a sin even if it were biologically based, and by his support for possible treatment that could switch an unborn gay baby's sexual orientation to heterosexual.

"He's willing to play God," said Harry Knox, a spokesman for the Human Rights Campaign, a gay-rights group. "He's more than willing to let homophobia take over and be the determinant of how he responds to this issue, in spite of everything else he believes about not tinkering with the unborn."

Mohler said he was aware of the invective being directed at him on gay-rights blogs, where some have likened him to Josef Mengele, the Nazi notorious for death-camp experimentation.

"I wonder if people actually read what I wrote," Mohler said in a phone interview. "But I wrote the article intending to start a conversation, and I think I've been successful at that."

The blog article, published March 2 on Mohler's personal Web site (, was titled: "Is Your Baby Gay? What If You Could Know? What If You Could Do Something About It?"

Mohler began by summarizing recent research into sexual orientation, and advising readers to brace for the possibility that a biological basis for homosexuality may be proven.

Mohler wrote that such proof would not alter the Bible's condemnation of homosexuality, but said that the discovery would be "of great pastoral significance, allowing for a greater understanding of why certain persons struggle with these particular sexual temptations."

Mohler said he would strongly oppose any move to encourage abortion or genetic manipulation of fetuses on grounds of sexual orientation, but he would endorse prenatal hormonal treatment--if such a technology were developed--to reverse homosexuality.

"I realize this sounds very offensive to homosexuals, but it's the only way a Christian can look at it," Mohler said.

Mohler's argument was endorsed by Rev. Joseph Fessio, editor of Ignatius Press, Pope Benedict XVI's U.S. publisher.

"Same-sex activity is considered disordered," Fessio said. "If there are ways of detecting diseases or disorders of children in the womb, and a way of treating them that respected the dignity of the child and mother, it would be a wonderful advancement of science."

Dr. Jack Drescher, a New York City psychiatrist critical of those who consider homosexuality a disorder, commended Mohler's openness to the prospect that it is biologically based.

"This represents a major shift," Drescher said. "This is a man who actually has an open mind, who is struggling to reconcile his religious beliefs with facts that contradict it."

Wednesday, March 14, 2007

Bigotry That Hurts Our Military

Bigotry That Hurts Our Military
By Alan K. Simpson
Wednesday, March 14, 2007; A15

As a lifelong Republican who served in the Army in Germany, I believe it is critical that we review -- and overturn -- the ban on gay service in the military. I voted for "don't ask, don't tell." But much has changed since 1993.

My thinking shifted when I read that the military was firing translators because they are gay. According to the Government Accountability Office, more than 300 language experts have been fired under "don't ask, don't tell," including more than 50 who are fluent in Arabic. This when even Secretary of State Condoleezza Rice recently acknowledged the nation's "foreign language deficit" and how much our government needs Farsi and Arabic speakers. Is there a "straight" way to translate Arabic? Is there a "gay" Farsi? My God, we'd better start talking sense before it is too late. We need every able-bodied, smart patriot to help us win this war.

In today's perilous global security situation, the real question is whether allowing homosexuals to serve openly would enhance or degrade our readiness. The best way to answer this is to reconsider the original points of opposition to open service.

First, America's views on homosexuals serving openly in the military have changed dramatically. The percentage of Americans in favor has grown from 57 percent in 1993 to a whopping 91 percent of 18- to 29-year-olds surveyed in a Gallup poll in 2003.

Military attitudes have also shifted. Fully three-quarters of 500 vets returning from Iraq and Afghanistan said in a December Zogby poll that they were comfortable interacting with gay people. Also last year, a Zogby poll showed that a majority of service members who knew a gay member in their unit said the person's presence had no negative impact on the unit or personal morale. Senior leaders such as retired Gen. John Shalikashvili and Lt. Gen. Daniel Christman, a former West Point superintendent, are calling for a second look.

Second, 24 nations, including 12 in Operation Enduring Freedom and nine in Operation Iraqi Freedom, permit open service. Despite controversy surrounding the policy change, it has had no negative impact on morale, cohesion, readiness or recruitment. Our allies did not display such acceptance back when we voted on "don't ask, don't tell," but we should consider their common-sense example.

Third, there are not enough troops to perform the required mission. The Army is "about broken," in the words of Colin Powell. The Army's chief of staff, Gen. Peter Schoomaker, told the House Armed Services Committee in December that "the active-duty Army of 507,000 will break unless the force is expanded by 7,000 more soldiers a year." To fill its needs, the Army is granting a record number of "moral waivers," allowing even felons to enlist. Yet we turn away patriotic gay and lesbian citizens.

The Urban Institute estimates that 65,000 gays are serving and that there are 1 million gay veterans. These gay vets include Capt. Cholene Espinoza, a former U-2 pilot who logged more than 200 combat hours over Iraq, and Marine Staff Sgt. Eric Alva, who lost his right leg to an Iraqi land mine. Since 2005, more than 800 personnel have been discharged from "critical fields" -- jobs considered essential but difficult in terms of training or retraining, such as linguists, medical personnel and combat engineers. Aside from allowing us to recruit and retain more personnel, permitting gays to serve openly would enhance the quality of the armed forces.

In World War II, a British mathematician named Alan Turing led the effort to crack the Nazis' communication code. He mastered the complex German enciphering machine, helping to save the world, and his work laid the basis for modern computer science. Does it matter that Turing was gay? This week, Gen. Peter Pace, chairman of the Joint Chiefs, said that homosexuality is "immoral" and that the ban on open service should therefore not be changed. Would Pace call Turing "immoral"?

Since 1993, I have had the rich satisfaction of knowing and working with many openly gay and lesbian Americans, and I have come to realize that "gay" is an artificial category when it comes to measuring a man or woman's on-the-job performance or commitment to shared goals. It says little about the person. Our differences and prejudices pale next to our historic challenge. Gen. Pace is entitled, like anyone, to his personal opinion, even if it is completely out of the mainstream of American thinking. But he should know better than to assert this opinion as the basis for policy of a military that represents and serves an entire nation. Let us end "don't ask, don't tell." This policy has become a serious detriment to the readiness of America's forces as they attempt to accomplish what is arguably the most challenging mission in our long and cherished history.

The writer was a Republican senator from Wyoming from 1979 to 1997.

Chicago Tribune Editorial - Morality and the military

Chicago Tribune Editorial - Morality and the military
Copyright © 2007, Chicago Tribune
Published March 14, 2007

The Pentagon's top general created a ruckus this week with his candid remarks to the Tribune's editorial board about whether gays should serve openly in the U.S. armed forces. Marine Gen. Peter Pace, chairman of the Joint Chiefs of Staff, said he doesn't support lifting the military's Don't Ask, Don't Tell policy --which allows homosexuals to serve as long as they keep quiet about their sexual orientation--because to do so would condone "immoral" behavior.

"I do not believe the United States is well served by a policy that says it is OK to be immoral in any way," Pace said. It was his personal viewpoint, expressed with conviction, and the general is certainly entitled to his opinion. But he's out of step with the evolving sensibilities of U.S. troops and the American people, who are increasingly willing to accept the reality that gay men and women are serving capably and honorably, and that efforts to keep them in the closet hurt the military.

Don't Ask, Don't Tell was adopted in 1993 because it was clear the country wasn't ready to drop the long-standing ban on gays in the military. The belief at the time was that allowing openly gay troops would compromise combat readiness by lowering morale, recruitment and unit cohesion.

John M. Shalikashvili, who held Pace's job when the policy was adopted, called it "a useful speed bump"--a way for the military to buy time until the public was ready to lift the ban entirely. Earlier this year, Shalikashvili said that time may be here.

About the same time, a Zogby poll of service members returning from Afghanistan and Iraq found that 73 percent have no problem serving alongside gays and 23 percent are sure they already have. There were about 65,000 gays in the armed forces in 2004, according to an Urban Institute study. A bill that would allow them to serve openly has been introduced in the U.S. House of Representatives.

Don't Ask, Don't Tell is a costly policy. A Government Accountability Office study last year said the military has spent $191 million to recruit and train replacements for gays who have been kicked out since the policy took effect. Last year, 742 were removed. Especially in wartime, it makes no sense to turn away capable soldiers.

When it comes to judging homosexual behavior as immoral, Pace is certainly not the last man standing. And yes, the military can and does hold its personnel to higher standards of conduct than those that apply to civilians, as the general pointed out. Those rules are necessary not to enforce a particular standard of morality but to prevent behaviors that undermine military cohesiveness. Thus a soldier who sleeps with another soldier's spouse or an officer who has sex with a sergeant could face discipline or even court-martial.

With few exceptions, though, the Uniform Code of Military Justice doesn't prohibit specific sexual behaviors. Most such breaches come under Article 134, a catch-all provision against "all disorders and neglects to the prejudice of good order and discipline in the armed forces and all conduct of a nature to bring discredit upon the armed forces."

Some may argue that anything more adventurous than monogamous procreative heterosexual sex is a discredit to the armed forces. Rank-and-file military personnel will tell you they are no less inhibited than their civilian counterparts. But if they're engaging in private, consensual sex that doesn't compromise their military mission, Uncle Sam leaves them alone. Gay personnel deserve nothing less than the same treatment.

Financial Times The Short View By John Authers

The Short View By John Authers
Copyright The Financial Times Limited 2007
Published: March 14 2007 02:00 | Last updated: March 14 2007 02:00
If you had never heard of Accredited Home Lenders of California before yesterday, there is no need to be ashamed. A subprime lender, specialising in lending to those with poor credit histories, it was briefly last year worth a little more than $1bn. But it has lost

90 per cent of its value since, and this has, quite remarkably, had global repercussions.

Forex traders for two of the biggest global banks arrived at work in Asia and in London to find the news that Accredited was "exploring various strategic options" at the top of memos from their strategists outlining the market for the day.

The US Mortgage Bankers Association's quarterly reports on delinquency rates also do not normally rank among major market-moving indicators. That changed yesterday when the MBA announced that subprime delinquencies had increased to 13.33 per cent in the fourth quarter. The news turned a poor day for the European stock markets into a bad one, as bourses sold off to suffer falls of more than 1 per cent. The same happened in the US.

Yesterday's reaction revealed more about current perceptions of risk in the market than about the underlying US economy. Delinquency rates for the larger "prime" mortgage sector increased, but remain at only 2.57 per cent - not significantly up from their 2.47 per cent level a year earlier. Accredited is not big enough to spark a crisis on its own.

So why the fears? Yesterday's retail sales data, which disappointed traders, showed that the US consumer cannot be taken for granted. The fear is that problems in the mortgage market will damage consumption as a whole.

Research from Guerite Advisors cites data from Freddie Mac, one of the central US mortgage lenders, to show that prime home equity withdrawals grew from an average of 0.55 per cent of gross domestic product for most of the 1990s to reach 2.93 per cent of GDP in the second quarter of last year. Freddie Mac expects this number now to drop sharply.

It is too soon to tell how fast this will drop - but this, rather than the subprime problems, could determine whether the current difficulties turn into something worse.

Financial Times Editorial Comment: Apologist for the imperial presidency

Financial Times Editorial Comment: Apologist for the imperial presidency
Copyright The Financial Times Limited 2007
Published: March 13 2007 21:52 | Last updated: March 13 2007 21:52

Alberto Gonzales, US attorney-general, has always served one client: President George W. Bush. Such devotion was admirable, so long as Mr. Bush was governor of Texas and Mr. Gonzales was his in-house lawyer. But as attorney-general, he is meant to be the people’s lawyer – not the president’s.

The revelations of the past few days and weeks about the sackings of US prosecutors and violations of US civil liberties by the Federal Bureau of Investigation have amply demonstrated Mr. Gonzales’ disdain for the people, the Congress and the justice system that underpins US democracy.

None of this is really surprising: since he became attorney-general in 2005, Mr. Gonzalez has repeatedly shown a worrisome willingness to do the president’s biding. He has provided spurious legal justifications for government torture, detentions and surveillance policies, parts of which have been found to violate US and international law and the US constitution.

That is not the way America’s chief legal officer is meant to behave: the attorney-general is no mere political lackey of the White House; his job differs markedly from that of any common-or-garden cabinet officer. Attorneys-general, however close to the president, are supposed to put the cause of justice before the narrow political interests of the man that appointed them. Even Mr. Gonzales’ much-reviled predecessor, John Ashcroft, showed more independence from his political masters.

Mr. Gonzales has survived several crises over his handling of the war on terror, including a public outcry over warrantless eavesdropping on Americans’ overseas phone calls and e-mails, which ended with him backing down and submitting to oversight by a special court. But the latest crisis, over the political sacking of US prosecutors, shows no signs of dying down.

The White House has admitted that it was behind the sackings and a senior justice department official has fallen on his sword in an apparent attempt to insulate Mr. Gonzales from charges that, yet again, he was carrying out a political agenda set by the president, or Karl Rove, the president’s political adviser. But the Democrats, who now hold narrow control of Congress, will not let him off lightly this time. There are calls for his resignation.

Mr. Gonzales had every right to sack prosecutors, who are political appointees. But he had no right to mislead Congress about why he did so – even though he is now blaming lower officials for the misinformation. Mr. Gonzales has shown a disdain for Congress and the rights of the American people. He has amply proved that he will never be anything other than Mr. Bush’s lawyer – a mere apologist for the imperial presidency. The affair has already claimed one top scalp at the justice department. It is high time Mr. Gonzales stepped down too.

Mexico deflated by Bush’s visit

Mexico deflated by Bush’s visit
By Adam Thomson in Mexico City
Copyright The Financial Times Limited 2007
Published: March 13 2007 21:18 | Last updated: March 13 2007 21:18

On Monday evening, George W. Bush stepped on to Mexican soil at the beginning of a two-day visit to the US’s southern neighbour and greeted each member of the welcoming committee with a: “Hi. How are you?”

If their replies had reflected the views of most Mexicans, they would almost certainly have responded: “Not very well.” There is growing frustration south of the border about the lack of progress on US-Mexican relations since Mr Bush took office at the beginning of 2001. A recent poll conducted by the BBC showed that most Mexicans consider US influence in the world to be negative.

Political analysts say that the objective of Mr Bush’s trip to Latin America was to curry favour with the growing Latin community in the US and to look for a possible counterweight to the in-creasing regional influence of Hugo Chávez, Venezuela’s leftwing president.

But little concrete progress can be expected from the visit, argues Jorge Zepeda, a political analyst in Mexico City. “He thinks a quick trip can make up for years of neglect but it can’t because he is not offering anything.”

One area in which Felipe Calderón, Mexico’s centre-right president who came to power in December, is desperate to make progress is immigration. Every year, an estimated 1m Mexicans head north in search of better-paid jobs. Of those, about 400,000 manage to cross illegally into the US.

Mr Calderón wants the US to approve a comprehensive immigration bill that would allow Mexicans to work temporarily in the US while also legalising the status of millions of Mexicans who live there without permission.

Mr Bush is sympathetic to such a plan, but political analysts say that any hope of him swaying US legislators on the immigration debate all but vanished last year when his party lost control of Congress.

Another area in which Mr Calderón would like to see greater US assistance is in the fight against drugs. Since taking office in December, Mr Calderón has launched a large-scale offensive against the country’s drugs cartels in an effort to “win back territory from organised crime”.

In a recent interview with the Financial Times, the Mexican president admitted that Mexico lacked the resources to tackle the problem effectively. “We cannot confront this problem alone,” he said. “We will need help.”

One high-level diplomat told the FT last week that a natural starting point in that help would be greater US commitment to combat the illegal flow of arms and chemicals used to move drugs into Mexico from the north.

On Tuesday, there was some limited hope that Mr Bush might use a press conference scheduled for Wednesday morning to announce a joint plan to combat drugs. Yet most agree that any plan is likely to lack significant funds to make much of a difference.

If Washington thinks that offers on the two issues will prove sufficient to persuade Mr Calderón to take on the role of trying to contain Mr Chávez in the region, it is likely to be severely disappointed.

Mr Calderón, indeed, ruled out any such idea in a recent interview. I am not interested in playing a role with Bush in that respect,” he said.

The result, argues Mr Zepeda, is almost certain to underline the disappointment that has marked the bilateral relationship ever since the high hopes that surrounded his first trip when he visited Vicente Fox, the former president, in 2001 on his ranch in the state of Guanajuato.

“Bush started his presidency playing cowboys with Fox on his ranch and he is ending it playing Indians in some Mayan ruins,” he says. “What has been achieved in the interim? Absolutely nothing.”

Slowdown fears feed rally

Slowdown fears feed rally
By Saskia Scholtes in New York, Rachel Morarjee in London and,David Turner in Tokyo
Copyright The Financial Times Limited 2007
Published: March 14 2007 02:00 | Last updated: March 14 2007 02:00

The flight to quality gathered pace yesterday, pushing global bond prices higher on the back of ongoing concerns that problems in the subprime mortgage market could spark a slowdown in the wider US economy.

US Treasury prices surged as investors sought the haven of government bonds amid fears that subprime mortgage lenders were nearing bankruptcy or struggling with bad debts.

The rally was aided by weaker-than-expected February retail sales, which rose 0.1 per cent against forecasts for a 0.3 per cent rise. Analysts said much of the buying was related to ongoing turmoil in the subprime market. Subprime lender New Century Financial said it was being investigated by the Securities and Exchange Commission and that the company had received a grand jury subpoena from the US Attorney's Office for the Central District of California. Another subprime lender, Accredited Home Lenders, said it may seek to raise additional capital and cut more jobs.

By late afternoon in New York, the yield on the two-year Treasury note was down 11.8 basis points at 4.522 per cent. The yield on the benchmark 10-year note was 7.1bp lower at 4.491 per cent.

Eurozone government bonds were driven higher as investors looked to exit US markets and sought out safe havens.

UK gilt prices rose sharply with the yield on the two-year paper down by 4.9bp to 5.230 per cent. The yield on the benchmark 10-year bond fell 5.4bp to 4.731 per cent.

The two-year Schatz slid 0.2bp to 3.903 per cent while the yield on the 10-year Bund sank 2.6bp to 3.897 per cent.

Japanese government bond prices rose mildly on Tuesday, taking their lead from the overnight US Treasuries market.

But investors were reluctant to make more than minor adjustments to their portfolios, since allocations for the fiscal year ending March 31 have already been made. The yield on the 5-year fell 1bp to 1.160 per cent.

Rate of US mortgage defaults increases

Rate of US mortgage defaults increases
By Saskia Scholtes, Ben White and Michael Mackenzie in New York
Copyright The Financial Times Limited 2007
Published: March 14 2007 02:00 | Last updated: March 14 2007 02:00

Late payments and defaults on US mortgages increased in the fourth quarter to their highest level in three and a half years, the Mortgage Bankers' Association said yesterday, the latest in a series of ominous signals for the US mortgage market.

Late payments rose for all loan types but were driven by problems in the risky "subprime" sector, for home loans to borrowers with weak credit. The highest delinquency rates were on subprime adjustable-rate mortgages that begin at a low "teaser" interest rate but later reach much higher levels.

"The states hit hardest are not just the bubble states, but those states without particularly vibrant economies" such as Michigan, Iowa and states around the Gulf of Mexico, said T.J. Marta, fixed-income strategist at RBC Capital Markets.

Delinquency rates for subprime adjustable-rate mortgages reached 14.44 per cent in the fourth quarter of 2006, jumping 1.22 per cent in three months, the MBA said.

The overall mortgage delinquency rate increased to a seasonally adjusted 4.95 per cent in the fourth quarter, up from 4.67 per cent in the previous quarter and from 4.70 per cent in the fourth quarter of 2005.

Alan Ruskin, head of international strategy at RBS Greenwich Capital, noted that, although the data were broadly expected, many adjustable rates would soon start moving sharply higher - suggesting that the problems could get worse.

"The data will do nothing to assuage concerns for this sector, even if it also adds little fresh fuel to the fire. As such, it will keep heightened risk aversion intact," said Mr Ruskin.

The new figures came as troubles continued to ripple through some of the biggest US subprime lenders.

Accredited Home Lenders said it was exploring options to increase liquidity, including cutting jobs. The California-based lender said it had met $190m in margin calls from its lenders this year, two-thirds of them since February 15.

Accredited also said it was working with lenders to waive certain covenants, including requirements regarding levels of net income.

Accredited shares were down 64 per cent to $7.30 in early afternoon New York trading.

Meanwhile, the New York Stock Exchange said it would move to delist the shares of New Century Financial, the second-largest US subprime lender. The company also disclosed that the Securities and Exchange Commission was investigating the company's accounting.

New Century shares have lost most of their value amid the rise in subprime defaults and a disclosure earlier this month that federal prosecutors were conducting a criminal inquiry in the company's accounting and trading in its shares. The company has stopped granting new loans and creditors have largely cut off funding, suggesting it is on the brink of bankruptcy.

Gonzales admits ‘mistakes’ over firings

Gonzales admits ‘mistakes’ over firings
By Caroline Daniel in Washington and Brooke Masters in New York
Copyright The Financial Times Limited 2007
Published: March 13 2007 19:58 | Last updated: March 13 2007 19:58

Alberto Gonzales, US attorney-general, on Tuesday took responsibility for “mistakes” in the way the Justice Department handled the sacking of eight US attorneys, but said he stood by his decision to remove them.

His comments came as the Bush administration scrambled to limit the fall-out from newly released internal e-mails that showed senior White House officials played an active role in the forced resignations.

Mr Gonzales said the White House had asked two years ago about removing all 93 top prosecutors, but said he “rejected” the proposal because, “I felt that that was a bad idea and it was disruptive”.

The plans were eventually scaled back and in December seven prosecutors were told to resign for what the Justice Department insisted were performance reasons. An eighth was pushed out to make room for a protégé of Karl Rove, presidential adviser.

President George W. Bush also complained personally in October to Mr Gonzales that some prosecutors had not aggressively pursued voter fraud.

Five of the eight people fired were heading some form of political corruption probe, Democrats said.

Kyle Sampson, Mr Gonzales’ chief of staff and the Justice Department’s go-between with the White House, resigned late on Monday night, becoming the first political casualty of the affair. In an e-mail, released yesterday, Mr Sampson ranked the US attorneys in March 2005 according to their degree of loyalty. Some were ranked “bold...exhibited loyalty to the administration” while others who were “weak...chafed against administration initiatives”.

The new evidence contradicts earlier Justice Department testimony that the White House was only minimally involved. Mr Gonzales said he knew Mr Sampson had been charged with improving the quality of US attorneys but said he was unaware of the e-mails and contacts with the White House.

Senators on both sides of the aisle stepped up their criticism.

“There has been unprecedented breach of trust, abuse of power and misuse of the Justice Department,” said Democratic senator Chuck Schumer, renewing his call for Mr Gonzales to step down. “This was a longstanding plan to exact political vendettas or to make political pay-offs.”

Senator John Ensign, a Republican from Nevada, defended the fired prosecutor from his state and said the administration had given him no warning. “I was flabbergasted when I heard this. I cannot tell you. I’m not a person who raises his voice very often...[the firing] was completely mishandled by the attorney-general.”

Patrick Leahy, the Democratic chairman of the Senate judiciary committee, promised additional hearings and the House judiciary committee will seek to interview Mr Rove.

Tony Fratto, spokesman, denied the White House role had been extensive. “It was pretty limited. Karl has a recollection that Harriet Miers [former White House counsel] had mentioned the idea to him. His response was that it was ill-advised. The DoJ compiled this list and went through a lengthy process. We saw the list but at no time did we add names to it or delete names from it.”

Paul Light, a professor at New York University, said the firings reflected a tightening of White House control over agencies by installing chiefs of staff loyal to Mr Rove. “The White House used chiefs of staff all across government to force through their agenda for the last six years,” he said.

Top US general ‘regrets’ anti-gay comment

Top US general ‘regrets’ anti-gay comment
By Demetri Sevastopulo in Washington
Copyright The Financial Times Limited 2007
Published: March 14 2007 01:23 | Last updated: March 14 2007 01:23

General Peter Pace, chairman of the US Joint Chiefs of Staff, on Tuesday attempted to deflect criticism of his comments that homosexuality was “immoral” by saying his remarks reflected only his personal opinion.

Gen Pace stirred controversy by telling the Chicago Tribune that the military should not condone immoral acts, such as homosexual relations.

“I believe that homosexual acts between individuals are immoral and that we should not condone immoral acts,” Gen Pace said in an interview with the paper.

After his remarks sparked an outcry from a diverse array of people, including gay activists, Democrats, and a senior Republican member of the Senate armed services committee, Gen Pace on Tuesday attempted to play down the criticism by saying the remarks reflected only his personal opinion.

“I should have focused more on my support of the policy and less on my personal moral views,” he said.

Asked about the comments on Tuesday, Robert Gates, defence secretary, said: “I think personal opinion really doesn’t have a place here. What’s important is that we have a...statute that governs ‘don’t ask, don’t tell’. That’s the policy of this department and it’s my responsibility to execute that policy as effectively as we can. As long as the law is what it is, that’s what we’ll do.”

Under former president Bill Clinton, the military enacted a policy of “don’t ask, don’t tell,” which allowed gays and lesbians to serve in the military as long as they were not open about their sexuality. In the interview, Gen Pace had expressed support for the policy, which he said opposed homosexual acts.

John Warner, a respected Virginia Republican who chaired the Senate armed services committee until the Democrats gained control of Congress in January, joined Democrats in criticising the comments.

“I respectfully, but strongly, disagree with the chairman’s view that homosexuality is immoral,” Mr Warner said in a statement. “In keeping with my longstanding respect for the armed services committee hearing process, I am deferring comment on the current policy until after such hearings are held on the subject.”

The controversy comes as some Democrats attempt to reverse the decade-old “don’t ask, don’t tell” rule. Some lawmakers oppose the rule on the grounds that it is discriminatory, while others are concerned that it makes it more difficult for the military to enlist new recruits.

The Service members Legal Defense Network, a group that advocates lifting the ban on gays serving openly in the military, said Gen Pace’s comments were “outrageous, insensitive and disrespectful to the 65,000 lesbian and gay troops serving in our armed forces”.


A man was being tailgated by a stressed out woman on a busy
boulevard. Suddenly, the light turned yellow, just in front
of him.  He did the right thing, stopping at the crosswalk,
even though he could have beaten the red light by accelerating
through the intersection.

The tailgating woman was furious and honked her horn, screaming
in frustration as she missed her chance to get through the
intersection, dropping her cell phone and makeup.

As she was still in mid-rant, she heard a tap on her window
and looked up into the face of a very serious police officer.  
The officer ordered her to exit her car with her hands up.  
He took her to the police station where she was searched,
finger printed, photographed, and placed in a holding cell.  

After a couple of hours, a policeman approached the cell and
opened the door.  She was escorted back to the booking desk
where the arresting officer was waiting with her personal

He said, "I'm very sorry for this mistake.  You see, I pulled
up behind your car while you were blowing your horn, flipping
off the guy in front of you, and cussing a blue streak at him.  
I noticed the 'What Would Jesus Do' bumper sticker, the
'Choose Life' license plate, the 'Follow Me to Sunday School'
bumper sticker and the chrome-plated Christian fish emblem
on the trunk.  Naturally...  I assumed the car was stolen."

Tuesday, March 13, 2007

General steps on gay landmine

General steps on gay landmine
Copyright by The Chicago Tribune
Posted by Frank James at 11:22 am CDT

Gen. Peter Pace, chairman of the Joint Chiefs of Staff, visited the Tribune Tower yesterday and met with Chicago Tribune journalists.

A story by my Washington bureau colleague Aamer Madhani, who covers defense issues and attended the meeting, is drawing wide attention because Pace controversially called homosexuality "immoral" even as he said he supports the military's "don't ask-don't tell" policy which allows gays to serve in the military so long as they stay deep in the closet.

Gen. Peter Pace, chairman of the Joint Chiefs of Staff, said Monday that he supports the Pentagon's "don't ask, don't tell" ban on gays serving in the military because homosexual acts "are immoral," akin to a member of the armed forces conducting an adulterous affair with the spouse of another service member.
Responding to a question about a Clinton-era policy that is coming under renewed scrutiny amid fears of future U.S. troop shortages, Pace said the Pentagon should not "condone" immoral behavior by allowing gay soldiers to serve openly. He said his views were based on his personal "upbringing," in which he was taught that certain types of conduct are immoral.

Pace's comment raises questions of logical consistency. If as leader of an institution as important as the U.S. military you believe people are engaged in immoral behavior, the fact that they keep quiet about it doesn't make it any less immoral, does it?

So why would Pace be OK with don't ask, don't tell? It seems the only logically consistent attitude would be for him to oppose the current don't-ask, don't-tell policy and, instead, to support purges of suspected gays.

Pace likens his stance to the antipathy the military has for adulterous affairs which, among things, are known to be bad for morale and are thus punishable offenses in the military.

But many adulterous affairs are carried out in secret for obvious reasons, certainly a form of "don't tell."

The military, however, doesn't have a laissez-faire, "don't ask" policy about them. Commanders who suspect those under their command of having such affairs are expected to ask. So while Pace compares the two forms of "immoral" behavior to use his word, he's fine with the divergent treatment.

Pace also attributed his views on homosexuality to his "upbringing." But what if the lessons he learned and internalized as a youth included a dislike of blacks or Hispanics? Or the army? (Pace is a Marine.) It's doubtful that citing his "upbringing" would be an acceptable explanation for holding such views.

By citing his upbringing, Pace appears to be saying his views are so foundational, of such long-standing that he can't or won't change them. But surely he has revised other views he was taught as a youth just as most of us have. So clearly he has some choice about the views he holds as an adult.

This isn't meant as a criticism of Pace. It's meant to use Pace as an example of how confounding the issue of homosexuality is when one makes black-and-white moral arguments about it.

Chicago Tribune Editorial - Betrayed by the FBI

Chicago Tribune Editorial - Betrayed by the FBI
Copyright © 2007, Chicago Tribune
Published March 13, 2007

In the anxiety-ridden aftermath of the Sept. 11, 2001, terrorist attacks, the Bush administration asked for new investigative tools so it could head off future plots before they could be carried out. Despite the fears of civil libertarians that these powers would be abused, Congress passed the USA Patriot Act on the assumption that the executive branch could be trusted to act responsibly. Later on, in response to queries from Congress, the Justice Department insisted it was indeed acting responsibly. Now, though, we learn that this trust was badly misplaced.

The proof comes in the form of an audit by the inspector general of the Department of Justice on, among other things, the use of "national security letters"--orders for telephone logs, financial records and the like. The Patriot Act loosened the rules on these requests. Unlike search warrants, they don't require the FBI to get a judge's approval, which puts the burden on the bureau to act with restraint. But the report found it failed to enforce prudent controls on NSLs, failed to keep track of them and failed to give Congress accurate data about their use.

The FBI has made abundant use of the authority, issuing some 143,000 national security letters from 2003 through 2005. But in an alarming number of cases, it overstepped its bounds. In a review of 77 investigative files, the inspector general found 22 percent had possible violations of the law, and more than 60 percent had violations of the bureau's own rules. The report also found in some cases the FBI improperly got telephone records by using its emergency request authority even when, in fact, no emergency existed.

The good news is that the inspector general didn't find the FBI was abusing its power on purpose, or that its failures amounted to "criminal misconduct." In most of the cases, the agency could have gotten the information it wanted while still obeying the rules. The problem, the report concluded, lay mostly in inadequate training, confusing guidance and sloppy record-keeping.

Even in the most benign interpretation of this mess, you would think the Justice Department and the FBI would have taken extra care in exercising these new powers, if only to avoid giving ammunition to critics who said they invited abuses. Instead they put a terribly low priority on complying with the law and their own internal policies.

Even congressional Republicans are angry at the mistakes, with Sen. Arlen Specter, the top GOP member of the Judiciary Committee, threatening to "take away some of the authority which we've already given to the FBI, since they appear not to be able to know how to use it."

FBI Director Robert Mueller, who acknowledged the accuracy of the inspector general's conclusions, said in response that he is "committed to ensuring that we correct these deficiencies and live up to these responsibilities."

He has just about run out of time and trust.