Saturday, July 21, 2007

Dow gives back gains from week

Dow gives back gains from week
Copyright © 2007, Chicago Tribune
July 21, 2007

NEW YORK - Wall Street pulled back Friday, retreating from record levels following disappointing results from longtime favorites Caterpillar Inc. and Google Inc.

The Dow Jones industrial average tumbled 149.33 points, or 1.1 percent, to 13,851.08. The index earlier plunged by more than 200 points, and finished the week down 0.4 percent.

The Standard & Poor's 500 index fell 18.98, or 1.2 percent, to 1534.10, and ended the week 1.2 percent lower. The Nasdaq composite index slid 32.44, also off 1.2 percent, to 2687.60, and finished down 0.7 percent for the week.

The drop in stocks capped a losing week for the Dow after three weeks of gains, and came a day after the blue chips finished above 14,000 for the first time. The S&P 500 also logged a record close Thursday.

While Friday's retrenchment might not be surprising following weeks of somewhat volatile trading and the big gains Thursday, Caterpillar has been one of the best performers among the 30 stocks that make up the Dow. The Peoria-based maker of heavy equipment unnerved investors when its results came in well below expectations. Shares slipped $3.78, to $83.20.

Meanwhile, technology shares took a hit after a strong run Thursday. Google turned in a second-quarter profit that fell short of Wall Street's high expectations, while Microsoft Corp.'s earnings report wasn't impressive enough to alleviate concerns about the sector.

Google fell $28.47, or 5.2 percent, to $520.12. Microsoft, which like Caterpillar is part of the Dow, fell 35 cents, to $31.16, after its earnings met expectations, but failed to dazzle investors after several robust quarters that topped forecasts.

"As people start to absorb the numbers and start to see the second-quarter numbers aren't as good as the first quarter, that starts to create some pullback a bit," said Nick Raich, director of research at National City Private Client Group.

The dollar was lower against most other major currencies. Gold prices rose. Jitters over subprime lending also weighed on the market and led investors to buy up safer Treasury bonds instead.

As Treasury prices rose, the benchmark 10-year note's yield dropped to 4.95 percent from 5.03 percent late Thursday.

Google to take on wireless giants as its stock plunges/ 'Revolutionary' plan for high-speed access

Google to take on wireless giants as its stock plunges - 'Revolutionary' plan for high-speed access
By Jim Puzzanghera
Copyright © 2007, Chicago Tribune
July 21, 2007

WASHINGTON - If Google Inc. has its way, your cell phone will work on any wireless network and companies will sell high-speed Internet access for cut-rate prices.

Google thinks that would be a wonderful world -- for consumers as well as its own bottom line -- and is proposing to pony up $4.6 billion in a long-shot bid to create it.

The king of Web search offered Friday to dig into its mountain of cash to transform a chunk of public airwaves into a high-speed data freeway. If successful, it could drive down the price of Internet access by creating more competitors for phone and cable companies.

Google promised to bid in a coming federal auction of spectrum that is ideal for fast wireless Internet service -- but only if regulators agree to the company's proposals to require open access to those airwaves. That means any device, service, software application or network could operate on it with no restrictions.

"That would be revolutionary," said Bob Williams director of, a Web site run by Consumers Union that promotes telecommunications competition. "If you want high-speed Internet service, you basically have a choice of two, and in a lot of places you don't have any choice ... and that situation has to change."

Google told the Federal Communications Commission it would put up the minimum bid of $4.6 billion. The Mountain View, Calif.-based company wanted to prove its seriousness and counter big wireless companies such as AT&T Inc. and Verizon Communications Inc., which say the conditions would make the spectrum virtually worthless.

The offer is unlikely to sway the FCC. The agency thinks the airwaves being given up by TV broadcasters in 2009 as they switch to digital signals could fetch much more for the federal coffers.

But Google is showing its intention to influence one of the biggest spectrum auctions in the nation's history.

Google's offer comes at a time when investors are raising questions about how much money the company is spending to put its ambitious plans in place. Its stock fell more than 5 percent, to $520.12, Friday after big investments on hires and other expansion costs caused its second-quarter earnings to miss Wall Street's expectations.

The backlash didn't seem to faze co-founder Sergey Brin. "I guess there are some people out there who think we have already picked all the low-hanging, juicy fruit, but I think the jury is still out on how far we can take this business," he said.

Google actually might not want to license the airwaves itself. But it does want to force them open to increase competition with cable and phone companies.

Wireless companies now control all access to the spectrum they license from the government, which is why, for example, Apple Inc.'s iPhone can't be used on any network other than AT&T's. Under Google's plan people could connect any device to any network and run any software they want on their phones.

Companies would have the right to use the airwaves at a wholesale price to offer their own Internet access.

"In short, when Americans can use the software and handsets of their choice, over open and competitive networks, they win," Google Chief Executive Eric Schmidt wrote in a letter to FCC Chairman Kevin J. Martin on Friday.

The effort is backed by public-interest groups and a coalition of major technology companies, including Intel Corp., eBay Inc. and EchoStar Communications Corp. But it faces huge obstacles in Washington, where the politically powerful phone companies have been fighting it.

Last week, Martin supported Google's plan to allow people to use any device or software on a network but not the more controversial open-access requirement.

Caterpillar profit plunges - Net falls 21% despite strong offshore sales

Caterpillar profit plunges - Net falls 21% despite strong offshore sales
By James P. Miller
Copyright © 2007, Chicago Tribune
July 21, 2007

Caterpillar Inc., in a performance that fell significantly short of analysts' expectations, reported Friday that production difficulties and weaker sales in key U.S. end markets caused second-quarter earnings to drop more than 21 percent.

The profit shortfall at the Peoria-based maker of heavy equipment jarred investors, and shares of Caterpillar tumbled as much as 10 percent before rallying to close at $83.20, off $3.78, or 4.3 percent, on the New York Stock Exchange. Caterpillar is one of the 30 components in the Dow Jones industrial average, and its drop helped pull the blue-chip index down nearly 150 points.

Caterpillar's "disappointing earnings," said Chairman and Chief Executive Jim Owens, reflect a drop in demand for truck engines, weakness in North American sales of construction equipment and supply-chain disruptions.

A number of observers suggested the lower-than-expected earnings reflect transient pressures on Caterpillar's profit margins, and are not evidence of any sag in the company's robust offshore markets. From that perspective the shortfall is a matter of imperfect execution, and thus is fixable.

"On the revenue side, no doubt it was a very solid quarter," Edward Jones analyst Matt Collins told The Associated Press, "but if you can't manage costs and get the strong results to flow through to the bottom line, investors will get concerned."

Analysts had been expecting per-share earnings of $1.48 or $1.49, down a few cents from the year-ago quarter's record profit. But Caterpillar shocked investors with the news that net income was just $823 million, or $1.24 a diluted share, a much bigger-than-expected drop from $1.05 billion, or $1.52 a share, in the second quarter of 2006. The downturn came even though Caterpillar's sales rose by a solid 7 percent, to $11.36 billion.

Experts had been anticipating soft demand for Caterpillar's truck engines, and the big swoon in the U.S. housing market had been forecast to cut into the company's sales of construction equipment. But booming sales to still-strong offshore markets had been expected to offset those transient domestic challenges.

That's how things played out in terms of sales, but Caterpillar's profit margins came under unexpectedly heavy pressure because of operational inefficiencies associated with the extremely high production rates it has maintained in recent years.

Those difficulties, which are sometimes traceable to bottlenecks caused by a shortage of tires or other crucial components that Caterpillar obtains from its capacity-constrained suppliers, have plagued the company periodically since its global markets began to surge about three years ago.

"Caterpillar's wounds in the second quarter were largely self-inflicted," said Merrill Lynch analyst Andrew Obin, noting that the company "continues to struggle with internal capacity constraints and supply-chain inefficiencies."

Caterpillar is in the fourth year of a positive industry cycle that frequently lasts about seven years. Historically the company has added capacity to meet demand at cyclical peaks. That maneuver maximizes profits during good times but creates higher fixed costs that serve as a drag on earnings when demand inevitably subsides.

Owens, in a break with tradition, has tried to avoid building large amounts of new capacity during the current surge in demand, and instead is attempting to make existing operations more efficient.

In large part that effort appears to be working, and promises to help Caterpillar's future earnings. But periodically, as in the latest quarter, his gamble has generated downside profit surprises.

Profit margins at both the company's diesel-engine segment and its flagship heavy-machinery group were narrower than expected, JPMorgan analyst Stephen Volkmann told investors, "as core operating costs remained stubbornly high."

Despite the underperformance Caterpillar reaffirmed its earlier full-year profit guidance, saying it expects earnings in a range of $5.30 to $5.80 a share, up from the previous year's $5.17 a share.

Despite the profit decline caused by "operating inefficiencies and higher raw-material costs," Morningstar analyst John Kearney told investors, "we are maintaining our fair value estimate as the firm remains on track to meet our full-year operating forecasts."


Bush Gitmo plan rejected

Bush Gitmo plan rejected
Copyright by The Associated Press
July 21, 2007

WASHINGTON - When Guantanamo Bay detainees challenge their status as "enemy combatants," judges must review all the evidence, not just what the military chooses, a federal appeals court ruled Friday.

The U.S. Court of Appeals for the District of Columbia Circuit rejected the Bush administration's plan to limit what judges and the detainees' attorneys can review when considering whether the Combatant Status Review Tribunals acted appropriately.

"Counsel for a detainee has a 'need to know' the classified information relating to his client's case," the appeals court ruled. "The government may withhold from counsel, but not from the court, certain highly sensitive information."

CIA gets directions on interrogations - Order allows use of some harsh methods

CIA gets directions on interrogations - Order allows use of some harsh methods
By Greg Miller
Copyright © 2007, Chicago Tribune
July 21, 2007

WASHINGTON - President Bush signed an order Friday that clears the way for the CIA to resume some of the harsh interrogation methods it has used against terrorism suspects, even while it prohibits techniques that had caused an international outcry, including sexual humiliation and denigration of religious symbols.

The executive order ends months of legal skirmishing within the government over how to comply with laws barring mistreatment of detainees and a Supreme Court ruling last year requiring the U.S. government to treat terrorism prisoners in accordance with the Geneva Conventions.

In practical terms, the document places significant new limits on the CIA, even while making it clear that the agency will continue to operate under special rules that set it apart from the rest of the government. The order places no restriction on employing coercive methods -- such as sleep deprivation and the use of stress positions -- that are expressly off limits for the military and domestic law-enforcement agencies.

On another level, the order represents an attempt by the Bush administration to straddle two competing mandates by bringing the CIA program into line with court rulings and legislative requirements without disabling an operation that Bush and Vice President Dick Cheney have defended as one of the most valuable weapons in the war on terrorism.

The order does not specifically address one of the most controversial methods employed by the CIA: water boarding, a technique in which a prisoner is strapped to a board and doused with water to simulate the sensation of drowning. A separate document spelling out specific techniques remains classified.

Human-rights groups said the order brings the U.S. closer to international standards on the treatment of prisoners, but still gives the CIA significant latitude to employ methods that other countries and organizations have condemned.

"It certainly was a positive thing to see express prohibitions on things like sexual humiliation," said Jumana Musa, advocacy director for Amnesty International in Washington. "But the places where [the document] is silent speak volumes."

In a statement issued to the CIA workforce on Friday, agency director Michael Hayden said that because of the order, "we can focus on our vital work, confident that our mission and authorities are clearly defined."

The agency suspended its use of harsh methods three years ago as the Bush administration's legal justifications for them began to crumble and CIA operatives working in secret detention facilities overseas became worried that they might face lawsuits or even criminal prosecution for the techniques they were being told to use.

In a telephone briefing with reporters, an administration official refused to elaborate on what the order will allow CIA interrogators to do. The official stressed that the order contains "red lines which I think we can all agree are beyond the pale," but acknowledged that there is no provision for allowing the Red Cross to visit CIA facilities or to allow prisoners to be in contact with their families.

The order prohibits acts deemed "beyond the bounds of human decency, such as sexual or sexually indecent acts undertaken for the purpose of humiliation." It forbids "acts intended to denigrate the religion, religious practices, or religious objects of the individual," a provision that appears designed to address complaints at Guantanamo Bay in Cuba.

Bush stands by troubled ally - Pakistan's Musharraf faces new challenge after court reverses ouster of nation's chief justice

Bush stands by troubled ally - Pakistan's Musharraf faces new challenge after court reverses ouster of nation's chief justice
By Bay Fang | Washington Bureau
Copyright © 2007, Chicago Tribune
July 21, 2007

WASHINGTON - Faced with a growing series of challenges to one of its key allies in the war on terror, the Bush administration expressed its continued support for Pakistani President Pervez Musharraf on Friday after his nation's Supreme Court reversed his controversial ousting of a top judge.

The court's ruling that Musharraf had illegally suspended Pakistan's chief justice was joyously celebrated by political opponents who have staged widespread demonstrations against him in recent months, and was issued just as the country is enduring a spate of bombing attacks following the army's uprooting of militants from the Red Mosque last week in Islamabad, the capital.

The mounting problems of Musharraf, an army general who took power in a 1999 coup, have raised questions about his ability to remain in command and whether a successor would continue with efforts to aid Washington in combatting Al Qaeda and other radical Islamists in the region.

But administration officials emphasized Friday that Musharraf still has their confidence and support, despite criticism that Washington has placed too much stock in the trouble-plagued general.

"The government of Pakistan is facing difficult challenges," said Tom Casey, a State Department spokesman. "But the important thing for us to do is to be able to work with President Musharraf, with other political leaders, with those who want to see and share President Musharraf's vision and our vision of Pakistan as a modern, moderate Islamic state ... and a full partner with the international community in confronting extremism."

Pakistan's ambassador to the U.S., Mahmud Ali Durrani, insisted meanwhile that the court's ruling would not weaken Musharraf and instead showed the strength of the country's democratic processes.

"Why should U.S. policy change?" Durrani asked. "Musharraf is not weaker or stronger, he is as he was."

In a surprise ruling Friday, the Pakistani Supreme Court ruled unanimously that Musharraf had "illegally" suspended Chief Justice Iftikhar Mohammed Chaudhry on charges of misconduct. The court ordered that Chaudhry, who had become a reluctant hero to government opponents, be restored to his post.

The ruling not only appeared to undermine Musharraf's authority and bolster his opposition, but it could have a serious direct impact on his bid to remain in the presidency. The general plans to ask the sitting parliament to grant him a new five-year term before it is replaced in elections in January, but that bid is expected to be legally challenged by his opponents before the Supreme Court.

When Musharraf suspended Chaudhry, critics said he was trying to sideline the independent-minded chief justice in order to appoint someone who would be more sympathetic to his agenda.

Outside the courtroom in Islamabad, Pakistan, on Friday, lawyers chanted "Go, Musharraf, go!" and renewed demands that the president step down. The decision also prompted joyful demonstrations in other major Pakistani cities, including Karachi, Quetta, Peshawar and Rawalpindi.

Exiled former Prime Minister Benazir Bhutto declared the court's rebuke of Musharraf to be one of the most remarkable judgments in the history of Pakistan's judiciary.

The movement in support of Chaudhry had "turned into struggle against dictatorship, [for the] restoration of the constitution and for supremacy of the parliament," she said in a statement.

Others echoed the Pakistani ambassador to the U.S. by arguing that the judgment was actually beneficial to Musharraf because it may allow him to defuse the immediate crisis.

"Had it gone the other way, people would be on the streets, and there would be riots," said Marvin Weinbaum, a former Afghanistan and Pakistan analyst at the State Department's Bureau of Intelligence Research. "Now, he'll still be president, he still has his uniform on, and he'll have mileage from the Red Mosque incident that will give him leverage to go after the extremists."

But the spiraling violence across the country in the past week adds to the sense that the government is losing its grip on power. Musharraf's government also faces questions in Washington about its commitment to the war on terror.

The National Intelligence Estimate released earlier this week by the Bush administration said that Al Qaeda had established a "safe haven" in the federally administered tribal areas along the border with Afghanistan, and blamed the Pakistani government's decision last year to scale back its military operations in the region.

However, the Bush administration continues to say that Musharraf is doing all it can.

"There's no question President Musharraf is taking on extremism," said Frances Townsend, Bush's homeland security adviser.

Still, some think the U.S. needs to start contemplating another strategy, in the event that Musharraf is not able to maintain power.

"I think our relationship with Pakistan needs to be reconsidered," said former Indiana Rep. Lee Hamilton, who was co-chairman of the Iraq Study Group. "We have been precluded from going into Pakistan after [Osama] bin Laden because of our agreement with Musharraf, but we should reconsider that. ... What has driven our relationship with Pakistan is the fear that an alternative to Musharraf would be radical leadership with a bomb."

Husain Haqqani, a Boston University political science professor, said, "The U.S. has falsely convinced itself that Musharraf is the only option in Pakistan. But most political players, except extremist Islamists, are willing to work with the U.S. Why put all their eggs in Musharraf's increasingly broken basket?"


Friday, July 20, 2007

IRAQ WAR - Pentagon accuses Hillary: Claims her questions help enemy propaganda

IRAQ WAR - Pentagon accuses Hillary: Claims her questions help enemy propaganda
Copyright by The Chicago Sun-Times
July 20, 2007

WASHINGTON -- The Pentagon told Democratic presidential front-runner Hillary Rodham Clinton that her questions about how the U.S. plans to eventually withdraw from Iraq boosts enemy propaganda.

In a stinging rebuke to a member of the Senate Armed Services Committee, Undersecretary of Defense Eric Edelman responded to questions Clinton raised in May in which she urged the Pentagon to start planning now for the withdrawal of American forces.

A copy of Edelman's response, dated July 16, was obtained Thursday.

''Premature and public discussion of the withdrawal of U.S. forces from Iraq reinforces enemy propaganda that the United States will abandon its allies in Iraq, much as we are perceived to have done in Vietnam, Lebanon and Somalia,'' Edelman wrote.

He added that ''such talk understandably unnerves the very same Iraqi allies we are asking to assume enormous personal risks.''

Clinton spokesman Philippe Reines called Edelman's answer ''at once outrageous and dangerous,'' and said the senator would respond to his boss, Defense Secretary Robert Gates.

Clinton has privately and publicly pushed Gates and Joint Chiefs Chairman Peter Pace two months ago to begin drafting the plans for what she said will be a complicated withdrawal of troops, trucks and equipment.

''If we're not planning for it, it will be difficult to execute it in a safe and efficacious way,'' she said then.

The strong wording of the response is unusual, particularly for a memo to a member of the Senate committee with oversight of the Defense Department and its budget.

Clinton aides said the letter ignored important military matters and focuses instead on political payback.

''Redeploying out of Iraq with the same combination of arrogance and incompetence with which the Bush administration deployed our young men and women into Iraq is completely unacceptable, and our troops deserve far better,'' said Reines, who said military leaders should offer a withdrawal plan rather than ''a political plan to attack those who question them.''

Edelman's letter does offer a passing indication the Pentagon might, in fact, be planning how to withdraw, saying: ''We are always evaluating and planning for possible contingencies. As you know, it is long-standing departmental policy that operational plans, including contingency plans, are not released outside of the department.''

Edelman is a former U.S. ambassador and one-time aide to Vice President Dick Cheney. During the 2004 campaign, Cheney told Iowa voters that electing John Kerry would risk another terrorist attack.

Kerry jumped to Clinton's defense, deriding what he called smear tactics.

''They will say anything, do anything, and twist any truth to avoid accountability,'' said the senator.

International Herald Tribune Editorial - Buying time for an aimless war

International Herald Tribune Editorial - Buying time for an aimless war
Copyright by The International Herald Tribune
Published: July 19, 2007

The nation's anguish over the Iraq war was kept on hold in the U.S. Senate on Wednesday as the Republican minority maintained serial threats of filibuster to buy time for President George W. Bush's aimless policies. Last week, the House of Representatives debated and voted along party lines for a timetable for a U.S. troop withdrawal by next spring. But a similar measure was allowed no such decisive expression in the Senate.

Instead, the Republicans insisted on the approval of a "supermajority" of 60 of 100 senators before putting to a vote a measure that would apply real pressure on the president to shift his disastrous course in Iraq.

The Republicans are doing the public a real disservice and playing an increasingly risky hand by delaying sober consideration of the war. The filibuster threat on Iraq also is part of a broader Republican tactic of demanding super-majorities on a raft of major issues in the hopes of paralyzing the Senate and then painting the Democrats as a do-nothing, marginal majority.

The Democratic Party's leader in the Senate, Harry Reid, tested the opposition's stated appetite for unhampered debate by staging an all-nighter Tuesday, replete with cots and carry-out pizzas. A measure containing a withdrawal timetable failed to get the 60 votes it needed, but it did draw a 52-vote majority, including four Republicans, that amounted to more handwriting on the wall for Bush loyalists. A year ago, a nonbinding withdrawal measure drew 39 votes. The tide is shifting, even if the White House and its Republican backers won't recognize it.

The Republican leader, Mitch McConnell, notes that the Democrats engaged in similar guerrilla tactics when they were in the minority. But McConnell should keep in mind that voters can tell the difference between principled resistance and political showmanship. The Democrats' former minority leader, Tom Daschle of South Dakota, lost his seat three years ago when he was roundly attacked by the opposition for running a partisan, obstructionist minority.

The Iraq war stands apart as a watershed issue - a downward spiral that the public increasingly sees as a colossal waste of the nation's blood and treasure.

In postponing real action to September and beyond, Republicans laughed off the all-night debate as a "slumber party" of "twilight zone" theatrics by the Democrats. In fact, Bush loyalists seem trapped in the twilight zone, ducking their responsibility to represent constituents by applying credible pressure on the president to come up with an end to his sorry war.

The gay debate by JENNIFER VANASCO - See it Live at Sidetrack upper deck on August 9

The gay debate by JENNIFER VANASCO
Copyright by The Chicago Free Press and Jennifer Vanasco
July 18, 2007

On August 9, the top Democratic contenders for president will duke it out in a televised forum on gay rights for the first time ever.

Sponsored by the Human Rights Campaign Foundation and LOGO (full disclosure: my day job is associate editor of, which LOGO owns), the candidates—Hilary Clinton, Barack Obama, John Edwards, Christopher Dodd and Dennis Kucinich—will answer questions put forth by Joe Solmonese, executive director of HRC, Melissa Etheridge and members of the public.

Well, I’m a member of the public. And I have a few questions I’d like to ask the candidates:

1. Civil unions are continuing to be a disaster for New Jersey, because citizens had the gall to believe that officials were truth-telling when they said that civil unions would confer the same rights as marriage in that state. Unfortunately, private companies don’t seem to agree. What are the lessons we should take from New Jersey’s situation? Could it mean that civil unions aren’t the equivalent of marriage after all?

2. Most of you say that you believe in civil unions for gays and lesbians, but not marriage (Kucinich is the notable exception). Do you believe in civil unions for straight people as well? Shouldn’t straight people have the option of a non-religious, state ceremony like a civil union? Or are civil unions one of those “special rights” reserved for gay people we hear so much about?

3. How will you end “Don’t Ask, Don’t Tell?” What will you do to ensure full respect of gays and lesbians once we can openly serve?

4. What do you think is the most important issue facing GLBTs today?

5. The gay issue is dividing up America’s (indeed, the world’s) churches. Though a separation of church and state is mandated by our Constitution, what separation entails, exactly, seems to be difficult to determine. Many of you have publicly professed your faith, and are relying on faith communities to support your presidency. Many of you have turned to your faith to explain political positions you hold.

To those who think it’s important that the president be a moral and spiritual leader as well as a political and military one, what message will you give about gays and lesbians? Will you assure the religious public that you believe that being gay is as moral as being straight? Or will you say that just as being straight is not a moral issue, being gay is not a moral issue either, but a biological one?

6. The rights of gay families need to be protected. Would you consider supporting something like a Gay Families Act, similar to Bush’s misguided Healthy Marriage Initiative, which directed federal funds toward keeping poor married people married? Such an act or Initiative could go toward keeping intact those families who are unjustly struggling due to the lack of federal recognition of gay marriage.

Additionally, it could disseminate research showing that gay parents make good parents, help eliminate barriers to the adoption or fostering of children by gays and lesbians, and educate the public about the normalcy of gay family life.

7. Will you support the Uniting American Families Act, which seeks to keep bi-national gay couples from being separated due to immigration law?

8. The Employment Non-Discrimination Act must be passed. It simply must. We are past the point in history when it is acceptable for a man to be thrown out of a restaurant, or a woman to be fired, or for two teenagers to be kicked off a bus simply because he is gay, she doesn’t “look like a woman” or they are kissing someone of the same sex. How will you use your political capital and lobbying savvy to help ensure such an outcome?

9. President Bush has a history of anti-gay appointments: Chairman of the Joint Chiefs of Staff Peter Pace said that being gay was immoral; current Surgeon General nominee James Holsinger equated homosexuality with a disease. What will you do to make sure that gays and lesbians are well represented in your administration?

10. Will you support and increase funding for HIV/AIDS research?

That’s just a sampling. I have many others.

I need to say, though, that in an ideal world, we wouldn’t have to choose a president on gay issues. In an ideal world, every candidate would be an equal rights candidate—every candidate would start with the premise that being gay is normal and moral, that gays should be allowed to marry and serve in the military, that being gay should have no bearing on whether or not one can keep one’s natural or adopted children.

But we do not live in such a world. And so a forum like this is important. Let’s hope the candidates are asked the right questions.

Jennifer Vanasco is an award-winning, syndicated columnist based in New York City. Email her at; read her occasional blog at

Richardson apologizes for 'maricon' remark

Richardson apologizes for 'maricon' remark
Copyright by The Chicago Free Press
July 18, 2007

SPARKS, Nevada—Democratic presidential candidate Bill Richardson said his use of a Spanish word that some contend is a slur against homosexuals was meant to be playful but apologized to anyone who was offended.

With critics revisiting the statement he made on a radio program a year ago, Richardson questioned the timing of their comments, as campaigning for the 2008 elections is picking up.

“My record is the strongest among the presidential candidates on gay rights issues and I’m puzzled by the timing of this,” he told The Associated Press July 12.

Richardson, a Hispanic and the governor of New Mexico, was a guest on Don Imus’ syndicated radio program on March 29, 2006. Imus jokingly said one of his staffers suggested Richardson was “not really Hispanic.”

Richardson replied in Spanish that if the staffer believes that, then he is a “maricon.” The Gay and Lesbian Alliance Against Defamation says the word means “faggot” in Spanish.

In a statement this week, Richardson told the AP, “It was a playful exchange between me and Don Imus that was not intended to demean anybody, but if I offended anybody, I apologize.”

Financial Times Editorial Comment: Open skies deal is clouding over fast

Financial Times Editorial Comment: Open skies deal is clouding over fast
Copyright The Financial Times Limited 2007
Published: July 17 2007 19:35 | Last updated: July 17 2007 19:35

Henry Kissinger famously asked who he should phone if he wanted to talk to Europe. After Congress’s latest go at unpicking the hard-won “open skies” agreement to liberalise transatlantic aviation, European Union negotiators may be asking who they should have called in Washington to get a reliable commitment out of the US.

The deal, signed in April after years of laborious on-off talks, marked a real advance towards an open aviation market. Allowing US airlines to fly to any point in Europe, and vice versa, it promised much-needed industry consolidation and better transatlantic services.

Yet it was at best a lopsided compromise, giving US operators the right to fly between EU member states while their own domestic market remained closed. It could be justified only by the US commitment to complete second-stage negotiations by 2010, intended in particular to allow greater foreign investment in American airlines.

But no sooner was the treaty signed than the newly opened skies were clouding over, with squabbles breaking out over the scope of second-stage talks and the US, more recently, crying foul over European proposals to force carbon emissions trading on international airlines.

The US Congress, moreover, by proposing even tighter restrictions on the involvement of foreign airlines and investors, now threatens to undermine both the substance of the existing treaty and its development into reciprocally liberal arrangements. Its pre-emptive strike was entirely predictable: spurred by union complaints, Congress has consistently fought to block any extension of foreign ownership.

But US proponents of liberalisation must be careful not to cede too much to a protectionist lobby. If Congress succeeds both in eroding the benefits of the original deal, and in hampering further liberalisation, Jacques Barrot, the EU transport commissioner, will find it impossible to defend a deal that was always questionable, as it hinged on expectations of better things to come.

He will be under pressure to take a tough line from the UK in particular, which agreed only reluctantly to open Heathrow to competition and is already issuing loud reminders that Europe can withdraw benefits granted to US airlines if there is no new accord by 2010.

Europe is unlikely to adopt such drastic measures. But the US would risk an agreement that is much to its own advantage, and that of consumers, if it allowed matters to escalate. Meanwhile, as it gears up for the next round of negotiation, the EU should learn to leave fewer hostages to fortune.

Financial Times Editorial Comment: To win respect, Moscow must itself respect the rule of law

Financial Times Editorial Comment: To win respect, Moscow must itself respect the rule of law
Copyright The Financial Times Limited 2007
Published: July 19 2007 22:32 | Last updated: July 19 2007 22:32

Moscow’s ejection of four British diplomats in response to the expulsion from the UK of four Russians looks like an attempt to draw the line in a nasty diplomatic dispute.

In a narrow sense, this is is welcome. The tit-for-tat gestures display carefully calibrated levels of pride and anger – but do little to tackle underlying difficulties.
But, in a broader sense, the apparent end of this particular diplomatic duel does not change the fact that Russian-British and ­Russian-western relations remain at their lowest ebb since the end of the Soviet Union.

The west has contributed to this gloomy situation by failing to pay enough attention to Moscow’s concerns on some important issues: the US should, for example, have spent more time preparing the ground for its controversial plans for missile defence bases in eastern Europe.

But the blame for deteriorating east-west relations lies largely with Russia. Under President Vladimir Putin, the Kremlin has developed an increasingly belligerent approach to the rest of the world. It bullies its neighbours, especially over energy supplies. And it puts extreme pressure on its political opponents – at home and abroad. Mr Putin cannot be held criminally responsible for Alexander Litvinenko’s grisly death. But he is morally responsible for creating an atmosphere in which political scores are settled by murder. Any hope the Litvinenko killing might be a one-off attack was this week dispelled by news that Boris Berezovsky, the UK-based oligarch, was also the target of a murder plot.

It is understandable that Moscow should want to recover some of its Soviet-era superpower clout. But Russia must accept it cannot win respect by spreading fear. Respect for the rule of law and for human rights – especially the right to life – is fundamental.

To be sure, western countries sometimes fall short of these standards, even to the point of resorting to extraterritorial plots, as with the CIA’s proposals for assassinating Saddam Hussein, the former Iraqi leader. But that does not excuse Russia. If the Kremlin wants good relations with other countries it must start by ensuring that Russian citizens, whether government agents or not, respect the law.

In the meantime, the UK and other western states must co-operate with Moscow in pursuing their interests. Russia will want to do the same. Much of mutual benefit can be achieved, notably in energy. But such exchanges cannot lead to a more fundamental rapprochement without fundamental changes in Russia’s approach to the world.

Financial Times Editorial Comment: Time for the Fed to prevent a subprime rerun

Financial Times Editorial Comment: Time for the Fed to prevent a subprime rerun
Copyright The Financial Times Limited 2007
Published: July 19 2007 19:28 | Last updated: July 19 2007 19:28

Ben Bernanke, the chairman of the Federal Reserve, gave a testimony of two halves on his semi-annual visit to Congress. In the monetary policy half he repeated the Fed’s stance of the last year or so: more concerned about inflation than growth. In the other half he unveiled some sensible plans to prevent a repeat of the debacle in the subprime mortgage market.

On monetary policy Mr Bernanke said once again that the Fed’s biggest worry was a pick-up in inflation in 2008 and 2009. That stance looks right: the labour market is tight, growth is not far below trend, and the dollar’s 9 per cent fall against the euro over the last year is equivalent to a monetary loosening.

Mr Bernanke observed that credit spreads for risky assets such as corporate bonds have risen in recent days. But he noted that spreads remain low by historical standards and did not forecast further falls in bond prices. Given the Fed’s inflation concerns, he is probably happy to see some rise in the cost of borrowing to invest. There is certainly no reason to expect early cuts to Federal Reserve interest rates.

On banking supervision, another of the Fed’s responsibilities, Mr Bernanke had more to say. The Fed and other regulators have failed to stop some of the most vulnerable consumers in the US being sold high-interest mortgages they could not afford to service, some with onerous conditions, such as high penalties for early repayment. In his testimony Mr Bernanke indicated what he would do about it.

There are all manner of tricks – rates that start low and then rise, hidden penalties, and costs hidden in the footnotes – that a lender can use to disguise the true monthly cost of a mortgage. The Fed must be careful not to hinder product innovation or price competition, but it is right to suggest that some of these practices are abusive and should be banned, while others should be more clearly disclosed. Consumers must know what a mortgage is actually going to cost them.

The Fed, alongside other banking regulators, has also woken up to the need to scrutinise non-bank lenders, such as mortgage brokers, which have expanded fast in recent years. That is good, but with new institutions and practices emerging all the time – online person-to-person lending exchanges, for example – the Fed needs to look out for the next problem while it tackles the last.

The economy looks likely to weather this subprime crisis even if, as Mr Bernanke suggested on Thursday, total losses are in the order of $50bn-$100bn. But now is the time, through sensible regulatory action, to make sure there is no repeat.

A futile attempt to imprison Palestinian extremism

A futile attempt to imprison Palestinian extremism
By Philip Stephens
Copyright The Financial Times Limited 2007
Published: July 19 2007 19:26 | Last updated: July 19 2007 19:26

This week I experienced a jolt of optimism. On the eve of Tony Blair’s first meeting with the so-called Quartet as its special envoy to the Middle East, George W. Bush unveiled plans for an autumn peace conference. Maybe Mr Bush, I thought, has decided to seize the last chance for his presidency. A peace deal between Israelis and Palestinians would not erase from the history books the legacy of Iraq. It would add a powerful competing chapter.

How desperately the Middle East needs a new narrative. I listened recently to an experienced, and sober, diplomat enumerate the multiplying dangers. His latest visit to the region had left him feeling that the smallest spark would set another fire.

The bloodshed, sectarian and ideological, in Iraq needed little explanation. Set alongside it was the threat that Iran could start a nuclear arms race in the region and break the international non-proliferation regime. More immediately, there was a danger of renewed fighting in Lebanon, where both Syria and Iran were still acting to destabilise the government. Another flare-up with Israel was possible at any moment: last summer’s war had left Hizbollah down but far from out.

We should add to this dangerous swirl, the diplomat said, the sharpening tensions in most Arab states caused by Iran’s bid for regional hegemony. Tehran’s capacity to radicalise the Arab street, graphically underlined by the Lebanon war, was seen as a rising threat to regimes from Saudi Arabia to Egypt. The leader of one, pro-western Arab regime, my interlocutor added, had described Iran as an “octopus with its tentacles in every part of the region”. All this before you reach the smouldering fires on the West Bank and Gaza.

You can see why a US administration whose power and prestige have been so damaged might see strategic advantage in a new effort to douse the tinder in Palestine. True, Mr Bush has thus far engaged only sporadically and inattentively in the Middle East. Now, though, the harsh judgment of history beckons.

For all that it is badly weakened, the US remains the indispensable player. Thus far, Mr Bush’s record has been dismal. He reminded us again this week that he is the first US president explicitly to endorse a two-state solution. Yet almost everything he has done, or not done, has gone in the opposite direction.

The inside story was set out recently by another diplomat. The leaked end-of-mission report written by Alvaro de Soto, the United Nations envoy to the Middle East, on his departure from his post two months ago makes for bleak reading.

The tale that Mr de Soto recounts – one echoed in many European capitals – is one in which all attempts to match demands on the Palestinians to live up to their commitments under the road map with pressure on Israel to do likewise have failed.

The roadblock has been in Washington – in an administration that has forsaken evenhandedness to fall in behind the Israeli government. Condoleezza Rice, the US secretary of state charged with resuscitating peace talks, has operated on the shortest of White House leashes.

Mr de Soto is predictably dismissed by US hawks as another of those wishy-washy UN liberals who are soft on terrorism. In fact, he is as plain as could be in his condemnation of the aims of the Palestinian Hamas movement and its murderous attacks on Israelis. No one says the Palestinians are blameless.

Nor, though, are the Israelis or the international community. Ever since Hamas’s election victory last year, the US-led policy of the Quartet has been counter-productive. The effort to isolate Hamas has instead left it in control of a besieged and bleeding Gaza and is radicalising ever larger swaths of the Palestinian population.

This policy has been rubber-stamped by a subservient European Union and by a timid UN. Russia, the fourth member of the Quartet, has largely kept quiet. I presume Moscow sees the damage the US is inflicting on itself.

Mr Bush, I thought as I turned to the detail of his speech, must have come to the same realisation. My optimism was fleeting. Sure, there were token admonitions to Israel to stop the expansion of settlements and loosen its stranglehold on Palestinian life. Yes, US money is flowing to the new government appointed by President Mahmoud Abbas. We are told the Palestinians will soon see the advantages of supporting Mr Abbas’s Fatah movement.

US policy, in other words, still deludes itself that Hamas can be marginalised out of existence. To that purpose more than a million Palestinians will remain locked in the prison that is now Gaza. Such collective punishment will serve only the cause of the extremists.

By now, one supposes, Mr Blair will have read Mr de Soto’s report. Some will have told him that it is too bleak in its conclusions. There are glimpses of light. Rising Iranian power has concentrated the minds of Arab leaders: television images from Gaza are a gift to Iran.

The report will have reminded Mr Blair of the fate of his predecessor. James Wolfensohn was also pressed on the Quartet by the US. His role, like Mr Blair’s, was to reinvigorate the economy and rebuild political institutions. All went smoothly until he began to insist that Israel loosen its grip on the Palestinian territories. Mr Blair starts with a stronger hand because of his closeness to Mr Bush. But there have already been signs that the US state department is anxious to rein in his remit.

Mr Blair’s contribution must be to persuade Mr Bush of the obvious. A peace deal that at once safeguards, as it must, Israel’s security and meets the legitimate aspirations of Palestinians can be struck only if the radicals are drawn in.

That means Mr Blair must talk to Hamas. There is a distinction here between talking and negotiating. The former is needed to see whether there are grounds for the latter. It is quite possible that such talks would founder. But the Quartet cannot continue to demand of Hamas as a precondition for negotiations concessions that would naturally form part of such negotiations.

Analogies are always imperfect. But Mr Blair understands the principle well from Northern Ireland. IRA terrorists were never asked to recognise Northern Ireland’s right to exist; merely to accept the fact of its existence. The IRA’s renunciation of violence came towards the end rather than the beginning of a decade-long process. The role of intelligence agencies is to know their enemies, that of diplomats to talk to them. I wish Mr Blair well in his new, diplomatic career.

Dow Jones director quits over bid/Do not sell Murdoch the family treasure

Dow Jones director quits over bid
By Joshua Chaffin in New York
Copyright The Financial Times Limited 2007
Published: July 19 2007 17:18 | Last updated: July 19 2007 23:15

Dieter Von Holtzbrinck, a German publishing executive, has resigned from Dow Jones’ board, saying that he could not support the company’s sale to Rupert Murdoch’s News Corp.

“Although I’m convinced that [the] News Corp offer is very generous in financial terms, I’m very worried that [Dow Jones’] unique journalistic values will long-term strongly suffer after the proposed sale,” Mr Von Holtzbrinck wrote fellow directors two days after they gave their backing to $5bn News Corp offer.

Mr Von Holtzbrinck, who abstained from that vote, is chairman of the supervisory board of Verlagsgruppe Georg von Holtzbrinck, which publishes German business paper Handelsblatt. Dow Jones took a stake in the paper in 1999 as part of a broader alliance between the companies.

Dow Jones’ fate now lies with the Bancroft family, whose members control 64 per cent of its voting power.

The Bancrofts are scheduled to meet their legal and financial advisers on Monday in Boston to review Mr Murdoch’s offer, as well as strategic alternatives the company has considered in recent months.

Jim Ottaway, one of the company’s largest shareholders, made a last appeal to them in Friday’s Financial Times, urging the family not to relinquish a company it has controlled for more than a century to Mr Murdoch.

Mr Ottaway, whose family controls 7 per cent of Dow Jones’ voting power, says the company is healthy and does not need to be sold, and that Mr Murdoch’s age and questions about succession at News Corp could pose risks to the Journal’s editorial independence.

“Who will keep Murdoch’s promises, which he is famous for not keeping himself, in the future?” Mr Ottaway wrote, adding: “News Corp is not a good long-term home for Dow Jones.”

Meanwhile, Dow Jones reported a 27 per cent drop in second-quarter earnings due to a continued slump in print advertising at the Wall Street Journal newspaper and special compensation charges.

For the quarter, profit fell to $21m, or 25 cents a share, from $28.8m, or 34 cents a share, a year earlier. However, revenue rose 16 per cent to $529.7m, helped by the acquisition of Factiva, the financial information company.

Richard Zannino, Dow Jones’ chief executive, told investors on Thursday that the Bancrofts were “carefully considering” the offer, but declined to speculate on their stance.

In spite of voting in favour of the proposed deal at Tuesday’s board meeting, Mr Zannino pledged that Dow Jones would press ahead with a transformation plan, regardless of the News Corp talks.

With the recent acquisitions of Factiva and eFinancialnews, the company has been trying to reduce its reliance on print advertising.

For the most recent quarter, the domestic Journal recorded a 6.8 per cent drop in print advertising revenues, and executives acknowledged on Thursday that July sales would also be “soft”.

Overall, the company said print revenues had fallen to 57 per cent of Dow Jones’ total.

Do not sell Murdoch the family treasure
By Jim Ottaway
Copyright The Financial Times Limited 2007
Published: July 19 2007 18:57 | Last updated: July 19 2007 18:57

Ihope the Bancroft family, when they meet on Monday in Boston, will vote against the agreement to sell Dow Jones to News Corporation. It is not easy for the Bancrofts to vote against a chorus advising them to sell. It is not easy to vote against their own immediate enrichment, or to deny a dramatic increase in family assets from $36 to $60 a share to their children, grandchildren and favourite charities. But there are good reasons not to accept the offer.

There is no need to sell Dow Jones, which was not for sale before Rupert Murdoch made what he described himself as “an insanely high” offer. Dow Jones is leading newspaper-dominated publishing companies with its successful transition to internet age electronic news businesses. Dow Jones is not a sick company. Under Peter Kann, the recently retired chairman, it sped up its transition. Under Rich Zannino, his successor, it has continued to grow. In a memo to staff, Mr Zannino said: “We have a very bright future as an independent company should the News Corp bid not come to pass.”

Mr Zannino nevertheless voted as a Dow Jones director for the sale to News Corp “because our prospects might be even brighter in combination with the businesses of News Corp”. That is not a strong argument for ending more than 100 years of Dow Jones as a successful independent business news company by selling it to a huge conglomerate in another unhealthy concentration of ownership of important global media.

News Corp is not a good long-term home for Dow Jones, a company with a $3bn rational market value that would disappear into a company with assets of $72bn, 85 per cent of the revenues of which come from entertainment, not serious news companies. Most of News Corp’s newspaper earnings come from downmarket tabloids in the UK. In the US, Mr Murdoch’s New York Post and Fox News are public statements of his personal, political and business interests and biases, not run in the Bancroft family spirit of public trusts.

At 76, Mr Murdoch is an exceptionally vigorous and clever businessman, but he is not immortal and he is without a clear or reliable management succession plan. As in any family-dominated company, there are sure to be ar- guments and uncertainties over ownership and management control when he retires or dies. Who will keep Mr Murdoch’s promises, which he is famous for not keeping himself, in the future?

Fear of the future should not drive the Bancroft family to sell Dow Jones to Mr Murdoch. Their fear that Dow Jones’ stock price will drop if they turn down his bid is exaggerated by their advisers to scare them into selling. Of course it will drop, but rational market analysts estimate the stock price would go back to the $36-$40 range where it was before the bid.

Their fear of future competition as a smaller news media company among global giants was increased by the coming Thomson purchase of Reuters, both of which now distribute Dow Jones news services. But the potential loss of revenues to Dow Jones has been greatly exaggerated. Of course there is plenty of competition in business news, but there is a growing need for more sophisticated and absolutely reliable business and market news.

Their fear that Dow Jones cannot continue to expand its electronic businesses, such as, Factiva and Marketwatch, because of lack of investment capital is also exaggerated. Dow Jones has greater debt capacity, if it is willing to use it, and can find strategic partners and investors to create new electronic businesses if needed.

The biggest problem the Bancroft family faces is fear itself. They also feel family fight fatigue, after the loss of $1bn in the 1990s’ Telerate disaster led to sharp criticism of Dow Jones management and unhappy arguments among and within the three big family groups, and between parents and children. Bancroft family divisions are inevitable in the fourth generation of Dow Jones ownership over 100 years. But all of them are good people, torn by their choices, with many Bancrofts of all ages who feel a noble loyalty to their family tradition of protecting the independence and high standards of Dow Jones and its people.

I hope a majority will vote to refuse Mr Murdoch’s generous offer, without fear, but with confidence in a strong Dow Jones that is making a remarkably successful transition to the electronic information age. Why give a very bright future as an independent company to Rupert Murdoch?

The writer, whose family controls 7 per cent of Dow Jones voting power, retired as a director in 2006 after 33 years in the management

Musharraf urged to resign over death toll

Musharraf urged to resign over death toll
By Farhan Bokhari in Islamabad and Jo Johnson in New Delhi
Copyright The Financial Times Limited 2007
Published: July 19 2007 08:44 | Last updated: July 19 2007 21:03

General Pervez Musharraf, Pakistan’s US-backed military ruler, faced calls to resign on Thursday after attacks by Islamist militants claimed at least 53 more lives, bringing the death toll since Saturday to 183.

Pakistan has been torn by extremist violence since Mr Musharraf ordered commandos to storm a mosque in Islamabad on July 10, a move that led to the death of at least 75 Islamists and promises of revenge from al-Qaeda and militant groups.

David Gardner on calls for General Musharraf to resign

Farhatullah Babar, spokesman for the Pakistan People’s party, said: “The military government has failed to contain militancy and should resign to pave the way for a democratically elected government that has the consent of the people behind it.”

The Karachi Stock Exchange 100-share index shed 3.41 per cent to 13,194.68, extending Wednesday’s 2.8 per cent fall. It remains 31.4 per cent up this year.

At least 30 people were killed in Hub, a town near the southern port of Karachi, when insurgents targeted a vehicle carrying Chinese workers.

The Chinese workers were all safe following the attack. The dead included Pakistani policemen assigned to protect the foreign nationals, after their van was destroyed by a remote-controlled explosive device.

Three Chinese mechanics were killed near the north-western city of Peshawar this month.

In the second of Thursday’s attacks, eight people died when a suicide bomber tried to drive a car laden with explosives into a police training school in Hangu, a town in the volatile north-western frontier region.

The Reuters news agency on Thursday night reported that Pakistani police said at least 15 people were killed in a suicide attack in Kohat, in the same province.

Google falls short of expectations

Google falls short of expectations
By Chris Nuttall in San Francisco
Copyright The Financial Times Limited 2007
Published: July 19 2007 23:20 | Last updated: July 20 2007 02:10

Google failed to meet Wall Street’s growth expectations in its second quarter as its expenses increased and revenues from affiliates rose less than anticipated, sending its shares more than 7 per cent lower in after-hours trading.

Google does not provide earnings guidance and its profits of $3.56 per share fell short of the $3.59 predicted by the consensus of analysts gathered by Reuters Estimates. Gross revenues of $3.87bn, up 58 per cent year-on-year, were in line with Wall Street forecasts.

This was a rare miss for Google, which had exceeded analysts’ profits estimates for ten of its previous 11 quarters as a public company. Its shares fell 7.3 per cent to $508.52 on the news in after-hours trading in New York.

Stock-based compensation was $58m higher than the first quarter and overall operating ex-penses grew to $1.21bn or 31 per cent of revenues, up from $972m or 27 per cent in the first quarter.

Eric Schmidt, chief executive, said Google had taken on more new employees than it expected – it employed 13,800 people worldwide at June 30, an increase of more than 1,500 in the quarter.

Google reported “particular strength” in revenues from its core products, with 74 per cent growth year-on-year. In contrast, growth in its Adsense programme, where affiliate sites feature Google ads, was only 36 per cent.

George Reyes, chief financial officer, told an analyst conference call that the weaker growth was due to seasonality and “changes to Adsense implementation with certain partners that were less favourable to revenues”. He also blamed network changes and policy changes, where some terminations were made where partners were not meeting Google’s standards.

Google paid back $1.15bn to its partners as Traffic Acquisition Costs, amounting to 30 per cent of advertising revenues. Advertising revenues represent 99 per cent of Google’s sales.

Mr Schmidt said Google’s international business was “very very strong” – 48 per cent of Google’s revenues now come from outside the United States, up from 42 per cent a year ago.

It had $12.5bn on hand in cash and equivalents at the end of the quarter.

Subprime fears hit financial offerings

Subprime fears hit financial offerings
By James Mackintosh in London, Doug Cameron in Chicago and Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: July 19 2007 16:02 | Last updated: July 19 2007 21:46

Investor nervousness over subprime losses in the US – which Ben Bernanke on Thursday cited at up to $100bn – is hurting demand for financial share offerings.

London’s MAN Group on Thursday blamed concerns about the impact on the financial sector of defaults on home loans to the riskiest borrowers for raising only $2.9bn, against a target of $3.5bn-$3.8bn from floating MF Global, its brokerage arm. The shares closed down more than 8 per cent from the $30 listing price at $27.55.

The MAN spin-off was the latest in a series of disappointments for financial services initial public offerings prompted by growing worries that credit could become tighter following the meltdown in the subprime market.

New York activist hedge fund Third Point raised $525m on Thursday from listing a fund in London after a 24-hour delay, well below its €500m ($690m) target. Lehman Brothers injected an extra $45m of its own money into a fund of private equity funds it listed in Amsterdam on Wednesday, to ensure hitting its $500m goal. Both have over-allotment options that could raise $48m and $50m extra respectively if the shares rise.

“Traditional investors have become a little bit skittish,” said one investment banker who advises on hedge fund and private equity IPOs.

The troubles in the subprime sector last month brought down two Bear Stearns hedge funds – one of which is now worthless – and have badly wounded a handful of other funds.

Peter Clarke, chief executive of MAN, said investors were cutting back their exposure to the financial sector because of the subprime risk.

“There’s some extra work people have to do in this environment to ensure they know what they’re buying into,” he said, adding that MAN had no subprime exposure.

But Daniel Loeb, founder and chief investment officer of Third Point, said the fund’s float was a “real success” and investors understood that it was not suffering from the US subprime problems.

“The people who are investing with us are sophisticated enough to understand that, if anything, we are doing better now because we are short subprime,” he said.

It remains unclear to what extent subprime contagion will spread into other markets, although widening credit spreads are already hurting some private equity buy-outs.

Shares in Blackstone, the private equity group that listed at $31 a share last month, tumbled 4 per cent on Thursday morning to $27.27.

Mr Bernanke told the Senate banking committee that the losses from subprime would be “significant” and said estimates suggested they may be $50bn to $100bn.

Additional reporting by James Politi in New York

Thursday, July 19, 2007

Iraq hasn't even begun - Consequences from the disaster we could have avoided will plague the world long into the future.

Iraq hasn't even begun - Consequences from the disaster we could have avoided will plague the world long into the future.
By Timothy Garton Ash, TIMOTHY GARTON ASH, a contributing editor to Opinion, is professor of European studies at Oxford University and a senior fellow at the Hoover Institution at Stanford University.
Copyright by The Washington Post
July 19, 2007

IRAQ IS OVER. Iraq has not yet begun. These are two conclusions from the American debate about Iraq.

Iraq is over insofar as the American public has decided that most U.S. troops should leave. In a Gallup poll earlier this month, 71% favored "removing all U.S. troops from Iraq by April 1 of next year, except for a limited number that would be involved in counter-terrorism efforts." CNN's veteran political analyst, Bill Schneider, observes that in the latter years of the Vietnam War, the American public's basic attitude could be summarized as "either win or get out." He argues that it's the same with Iraq. Most Americans have now concluded that the U.S. is not winning. So: Get out.

Because this is a democracy, their elected representatives are following where the people lead. Although the Democrats did not get the result they wanted in an all-night marathon on the floor of the Senate, from Tuesday to Wednesday this week, no one in Washington doubts that this is the way the wind blows. Publicly, there's still a sharp split along party lines, but leading Republicans are already breaking ranks to float their own phased troop-reduction plans.

President Bush says he's determined to give the commanding general in Iraq, David Petraeus, the troop levels he asks for when he reports back in September, and the White House may hold the line for now against a Democrat-controlled Congress. Leading Republican contenders for the presidency are still talking tough. However, the most outspoken protagonist of hanging in there to win in Iraq, John McCain, has seen his campaign nosedive. Even if the next president is a hard-line Republican, all the current Washington betting will be confounded if he does not, at the very least, rapidly reduce the number of U.S. troops in Iraq. After all, that's what the American people plainly say they want.

The American people's verdict is remarkably sharp on other aspects of the Iraq debacle. In a poll for CNN, 54% said the United States' action in Iraq was not morally justified. In one for CBS, 51% endorsed the assessment — shared by most of the experts — that U.S. involvement in Iraq was creating more, not fewer, terrorists hostile to the United States. If once Americans were blind, they now can see. For all its plenitude of faith, this is a reality-based nation.

So Iraq is over. But Iraq has not yet begun. Not yet begun in terms of the consequences for Iraq itself, the Middle East, the United States' own foreign policy and its reputation in the world. The most probable consequence of rapid U.S. withdrawal from Iraq in its present condition is a further bloodbath, with even larger refugee flows and the effective dismemberment of the country. Already, about 2 million Iraqis have fled across the borders, and more than 2 million are internally displaced.

Now a pained and painstaking study from the Brookings Institution argues that what its authors call "soft partition" — the peaceful, voluntary transfer of an estimated 2 million to 5 million Iraqis into distinct Kurdish, Sunni and Shiite regions, under close U.S. military supervision — would be the lesser evil. The lesser evil, that is, assuming that all goes according to plan and that Americans are prepared to allow their troops to stay in sufficient numbers to accomplish that thankless job — two implausible assumptions. A greater evil is more likely.

In an article for the Web magazine Open Democracy, Middle East specialist Fred Halliday spells out some regional consequences. Besides the effective destruction of the Iraqi state, these include the revitalizing of militant Islamism and enhancement of the international appeal of the Al Qaeda brand; the eruption, for the first time in modern history, of internecine war between Sunni and Shiite, "a trend that reverberates in other states of mixed confessional composition"; the alienation of most sectors of Turkish politics from the West and the stimulation of authoritarian nationalism there; the strengthening of a nuclear-hungry Iran; and a new regional rivalry pitting the Islamic Republic of Iran and its allies, including Syria, Hezbollah and Hamas, against Saudi Arabia, Egypt and Jordan.

For the United States, the world is now, as a result of the Iraq war, a more dangerous place. At the end of 2002, what is sometimes tagged "Al Qaeda Central" in Afghanistan had been virtually destroyed, and there was no Al Qaeda in Iraq. In 2007, there is an Al Qaeda in Iraq, parts of the old Al Qaeda are creeping back into Afghanistan and there are Al Qaeda emulators spawning elsewhere, notably in Europe.

Osama bin Laden's plan was to get the U.S. to overreact and overreach itself. With the invasion of Iraq, Bush fell slap-bang into that trap. The U.S. government's own latest National Intelligence Estimate, released this week, suggests that Al Qaeda in Iraq is now among the most significant threats to the security of the American homeland.

The U.S. has probably not yet fully woken up to the appalling fact that, after a long period in which the first motto of its military was "no more Vietnams," it faces another Vietnam. There are many important differences, but the basic result is similar: The mightiest military in the world fails to achieve its strategic goals and is, in the end, politically defeated by an economically and technologically inferior adversary.

Even if there are no scenes of helicopters evacuating Americans from the roof of the U.S. Embassy in Baghdad, there will surely be some totemic photographic image of national humiliation as the U.S. struggles to extract its troops.

Abu Ghraib and Guantanamo have done terrible damage to the U.S. reputation for being humane; this defeat will convince more people around the world that it is not even that powerful. And Bin Laden, still alive, will claim another victory over the death-fearing weaklings of the West.

In history, the most important consequences are often the unintended ones. We do not yet know the longer-term unintended consequences of Iraq. Maybe there is a silver lining hidden somewhere in this cloud. But as far as the human eye can see, the likely consequences of Iraq range from the bad to the catastrophic.

Looking back over a quarter of a century of chronicling current affairs, I cannot recall a more comprehensive and avoidable man-made disaster.

Immigration 'win' is no victory

Immigration 'win' is no victory
Copyright by The Chicago Sun-Times
July 19, 2007

The screaming mobs of immigrant-hating nativists are celebrating their victory over "illegal" immigrants. Using the cry of "no amnesty" as a shibboleth, they have blocked any opportunity for current immigrants to gain American citizenship, which used to be the goal of "Americanizers." They have also blocked serious efforts at border defense, such as the big wall that was to stretch from the Ocean to the Gulf, from sea to shining sea. They have cut off their noses to spite their faces when in fact the 12 million "illegals" have de facto amnesty.

With the few exceptions who might be swept up in random raids by the feds, the illegals are permitted to stay in America, to earn eight times as much as they would earn in Mexico, to own homes, to save money, to raise their children who might be born here as Americans, to watch American television, to play American sports (like soccer). All that is forbidden them is eventual citizenship. For the Minutemen and similar sickos, that does not sound like victory. The haters and the bigots lose stricter "enforcement" while the immigrants stay here.

That's the other magic word for nativists. It is spoken through tight lips and with steely eyes, clenched teeth and grim determination. If you say ''enforcement'' strongly enough that seems to guarantee that it will happen. The "enforcers," however, lost $4 billion when they killed the president's immigration bill. They are no better able to enforce the archaic laws than they were a year ago. More agents and higher walls would slow down perhaps but not stop the hordes of humans who want to become Americans. Only shooting them on sight would do the job. The harshness of those who speak "enforcement" trippingly on the tongue hints that this is what they mean.

Doubtless many of the illegals would like to become legal, to win green cards and to eventually become citizens and vote! But they will settle for the chance to live in this country and earn decent salaries for their hard work. So they are the winners in the wake of the defeat of the "reform" bill.

One of the dishonest cliches that the bigots prattle about immigrants is that they don't even speak English. Neither did most of our ancestors when they got off the boat at Ellis Island. Even the famine Irish from the West of Ireland were Irish speakers. The so-called Brooklyn accent that permeates much of the Big Apple is the remaining trace of English spoken by the Irish speakers. The children of immigrants (the second generation) of our ancestors spoke pretty good English and their grandchildren (third generation) spoke English as their first language. All the available research on Latinos supports the conclusion that they follow the same pattern, though the English speaking rates for the Latinos is higher than it was for most other immigrant groups.

Will the horde of immigrants ever stop? The Mexican birth rate has declined from 4.7 to 2.1, the same as in this country. When this takes full effect, like Ireland and England and Germany, this country might have to recruit ''foreigners.''

As a little boy long ago, I was riding the Lake Street L with my mother. Across from us, a couple of elderly women were speaking Italian. She whispered to me that if they wanted to be Americans they should learn to speak English. If I knew then what I know how, I might have replied, ''Their grandchildren will speak it as well as I do, maybe better.''

But then, as early entrants into the melting pot, we believed that it was for everyone.

International Herald Tribune Editorial - Contempt for Congress

International Herald Tribune Editorial - Contempt for Congress
Copyright by The International Herald Tribune
Published: July 18, 2007

The Bush administration's disregard for the rule of law hit another low when Harriet Miers, the former White House counsel, defied a congressional subpoena. A second former official, Sara Taylor, did testify, but she inappropriately invoked executive privilege to dodge key questions. Congress should take firm action to compel Miers and Taylor to provide the testimony it is entitled to hear.

Congress has been conducting a much-needed investigation of last year's dismissal of nine top prosecutors. The evidence so far strongly suggests that the firings were done for improper, political reasons, and that Miers and Taylor were involved. As part of its supervisory authority, Congress is entitled to question the two women.

Miers refused to appear before the House Judiciary Committee after President Bush, claiming executive privilege, took the extraordinary step of ordering her not to testify. If Congress is seeking any privileged information, Miers can decline to answer those specific questions. But executive privilege did not negate her legal duty to appear when Congress subpoenaed her.

The House of Representatives should vote to hold Miers in contempt. The Senate Judiciary Committee should review Taylor's testimony and demand answers to the legitimate questions she refused to answer. If she continues her recalcitrance she, too, should face contempt.

Any lesser response would be an invitation to this executive branch, and every future one, to treat Congress not as a co-equal branch of government, but as little more than an advisory body.

International Herald Tribune Editorial - Debating in New Orleans

International Herald Tribune Editorial - Debating in New Orleans
Copyright by The International Herald Tribune
Published: July 18, 2007

The commission that will pick the venues for next year's final presidential debates has begun visiting the 19 universities and cities eagerly vying for the headline recognition that the candidates' showdowns ignite. If there's any sense of justice, relevance, even poetic stagemanship at work, New Orleans should emerge hands down as the site for the debate that will be dedicated to the nation's domestic problems.

It's not too early to state this plainly as various locales and political forces jockey for favor. Three presidential debates and one vice-presidential debate are planned by the commission, which is balanced with major party appointees now vetting the applicants for logistics, security and the intangibles of political history.

By any score, no forum comes close to New Orleans - a place still struggling two years after Hurricane Katrina to recover its traction on the very issues at the heart of the domestic agenda: housing, health, education, economic opportunity and disaster response.

Predictably, there's speculation that the last place Republicans would want to be seen debating in the fall of 2008 is New Orleans, the site of President Bush's domestic debacle in muffing recovery from Katrina. But an embattled Republican nominee could show some counterintuitive grit by welcoming the venue as the ideal place to demonstrate forthrightness and concern in emphasizing a new post-Bush agenda. New Orleans' anguish would only be compounded if partisanship denied the city a chance to bear witness to America's troubles.

New Orleans is already media-tested for the debate throngs, with tourist know-how and a convention center where the nation saw Katrina survivors gather for shelter. Its sponsorship is by four of the city's universities - Dillard, Loyola, Tulane and Xavier - and a nonpartisan civic group, Women of the Storm, who succinctly make the ultimate debater's point: "see it for yourself."

International Herald Tribune Editorial - The politics of fear

International Herald Tribune Editorial - The politics of fear
Copyright bhy The International Herald Tribune
Published: July 18, 2007

On Tuesday, the director of national intelligence released a report with the politically helpful title of "The Terrorist Threat to the U.S. Homeland." Fran Townsend, the president's homeland security adviser, held a news conference to trumpet its findings. The message, as always: Be very afraid. And don't question the president.

Certainly, the report's conclusions are disturbing. Nearly six years after 9/11, terrorism remains a huge threat. Al Qaeda has replaced leaders killed or captured by the United States, regrouped in its former home base in the tribal lands on the Pakistan-Afghanistan border and is trying to use affiliated terrorists in Iraq "to raise resources and to recruit and indoctrinate operatives."

If the report is given an honest reading, it is a powerful rebuke to President George W. Bush's approach to the war on terror. It vindicates those who say that the Iraq war is a distraction from the real fight against terrorism.

The administration, however, seized on the report and, through bald political timing, tried to use it to dampen calls for an end to Bush's catastrophic war. That required some particularly twisted logic.

Townsend, for example, dismissed a reporter who asked whether the fact that al Qaeda has regrouped in the area from which it planned the 9/11 attacks suggested that it was a mistake to divert American forces to Iraq. She said al Qaeda headed by Osama bin Laden and the terrorists in Iraq that use the name al Qaeda are the same.

In fact, we've seen no evidence of that, and none was in the intelligence report, at least the page and a half of conclusions released to the public.

Was there a link before the war between Osama bin Laden and Abu Musab al-Zarqawi, the terrorist leader in Iraq? Townsend refused to answer. "This is ground long covered," she snapped.

Indeed it is. The answer is, "No." In fact, Bush's bungled invasion spawned a new terrorist army and gave it a home base. Now, the report said, those terrorists are the only ones affiliated with al Qaeda that are "known to have expressed a desire to attack the" United States.

The White House denied that the report was timed to the Senate debate. But the administration controls the timing of such releases and the truth is that fear of terrorism is the only shard remaining of Bush's justification for invading Iraq.

This administration has never hesitated to play on fear for political gain. It is a cynical ploy, but in the past it has worked to cow Democrats into silence, if not always submission, and herd Republicans back onto the party line. That must not happen this time.

Dollar at lifetime low against euro

Dollar at lifetime low against euro
By Neil Dennis
Copyright The Financial Times Limited 2007
Published: July 19 2007 03:00 | Last updated: July 19 2007 03:00

The US dollar fell yesterday as expectations of moderating US inflation, a sluggish housing market and moderate growth prospects revived the possibility of interest rate cuts later in the year.

Ben Bernanke, chairman of the US Federal Reserve, told US lawmakers yesterday that the closely watched core inflation data - which leaves out the volatile food and energy prices - had moderated over the past few months though underlying price pressures remained a concern for the central bank.

His comments came as consumer price inflation data showed core CPI rising 0.2 per cent month-on- month to an annualised2.2 per cent - as expected.

"Core CPI is at its lowest level in 15 months, lending further support to the Fed's case that slower growth will bring elevated core inflation back in line with price stability without resorting to higher rates," said Michael Woolfolk at Bank of New York.

Mr Bernanke said the pace of US home sales was expected to remain sluggish for some time. A separate set of data yesterday recorded a month-on-month increase in starts on new homes in June, however, the stronger-than-expected figure, was helped by a downward revision of the May figure.

Paul Ashworth at Capital Economics said: "We suspect the Fed could be forced to cut interest rates late this year as conditions in the labour market deteriorate."

By midday in New York the euro was up 0.2 per cent to $1.3810. The yen gained0.3 per cent to Y121.84, while sterling added 0.3 per cent to $2.0520.

Earlier, the dollar had wilted as financial markets were rocked again by investor worries about the fallout from problems in the subprime mortgage sector. Equity markets slumped, while the flight to safety lifted government bonds after Bear Stearns, the US investment bank, declared that its two subprime-focused hedge funds were "virtually worthless".

The dollar hit a new low of $1.3833 against the euro, and a new 26-year trough against the pound at $2.0548.

Sterling gained little momentum from the publication of the minutes of the last Bank of England monetary policy committee meeting.

Six of the nine MPC members voted to lift interest rates to 5.75 per cent at this month's meeting. Three, however, felt rates should go no higher until the tightening measures enacted so far have had time to feed through to the economy.

"This group could still change their mind given the recent [UK] inflation data," said James Knightley at ING. "CPI figures [on Tuesday] suggested core inflation pressures continued to build while energy and food prices remained under upward pressure."

The pound rose 0.1 per cent against the euro to £0.6725, and by 0.1 per cent against the yen to Y250.11.

The Short View By John Authers- The Subprime Market

The Short View By John Authers- The Subprime Market
Copyright The Financial Times Limited 2007
Published: July 19 2007 03:00 | Last updated: July 19 2007 03:00
Ben Bernanke made his name writing textbooks on economics. Yesterday the chairman of the Federal Reserve deployed those skills, treating the US Congress to a textbook analysis of the factors affecting the US economy and monetary policy.

His bottom line was plain - he is positive about the US economy, but too worried about inflation to prompt anyone to bet on a cut in interest rates. No surprises there.

But he did not get a textbook response. Investors bought bonds, pushing the benchmark 10-year Treasury yield below 5 per cent for the first time in six weeks, and sold stocks - a textbook "flight to quality". The dollar sank. Traders seemed to be reacting to a different speech.

The disconnect lies in the subprime mortgages mess. Bear Stearns' announcement, after the market closed on Tuesday, that one of its hedge funds investing in subprime-linked securities had been wiped out, was worse than many on the market had assumed.

No one thinks Bear Stearns was uniquely unlucky. Many other funds, which have not yet had to adjust their values for current market prices, are presumably in the same state.

It was what Bernanke did not say about subprime that raised concerns. Two months ago, he said in as many words that he did not expect "significant spillovers from the subprime market to the financial system".

He did not repeat this yesterday. Rather, he said that conditions in the sector had "deteriorated significantly" thanks to "mounting delinquency rates on adjustable-rate loans". He also mentioned increased concerns among investors about other forms of credit risk. Compared with his previous comments, which he could easily have repeated, this looks bleak.

The biggest problem is that no one has yet written the textbook on the subprime market. With a short history, it remains a great unknown. So it may be good that other markets are at last taking notice.

Fed chief acknowledges credit fears/Fed chief says subprime losses could hit $100bn/Bernanke sees little threat of credit crunch

Fed chief acknowledges credit fears
By Krishna Guha in Washington and Richard Beales, Michael MacKenzie and Saskia Scholtes in New York
Copyright The Financial Times Limited 2007
Published: July 18 2007 18:47 | Last updated: July 19 2007 01:34

Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other safe assets.

Although the Federal Reserve chairman played down the likely effect on the US economy, declaring that financial conditions remained “generally favourable”, US Treasury yields fell sharply following the release of his testimony to Congress. Ten-year notes were yielding 5.02 per cent – 2 basis points down on the day – after dipping below 5 per cent.

Mr Bernanke said the Fed had trimmed its central tendency forecasts for growth this year and next, but made no change to its forecasts for inflation.

Investors were already shaken by news that two Bear Stearns-managed hedge funds that had invested in subprime loans were nearly worthless. Weak earnings reports added to the day’s gloom. On Wall Street, the S&P 500 index closed down 0.2 per cent, following a day of losses across most of Asia and Europe.

The jitters also boosted S&P 500 volatility with the Chicago Board Options Exchange Vix index closing up 2.3 per cent at 16.0.

Derivative indices tracking corporate credit risk on both sides of the Atlantic rose across the board. The dollar weakened, with the New York Board of Trade dollar index falling to a 15-year low during the day.

Mr Bernanke said conditions in the subprime mortgage sector had “deteriorated significantly” and noted “increased concerns among investors about credit risk on some other types of financial instruments”.

But he said “even after their recent spreads remain near the low end of their historical ranges” and added that business financing activity “remained fairly brisk”.

The reduction in the Fed’s growth forecasts reflect a more protracted drag from housing investment, as well as a weak first quarter. They suggest that the Fed now thinks the economy is unlikely to return to its trend rate of growth until some time next year.

The lack of a change in the inflation forecasts, meanwhile, underlines policymakers’ reluctance to put much store on the recent decline in core inflation.

However, the Fed’s basic story was unchanged. It still expects growth to remain at a “moderate pace” while the housing adjustment proceeds, before returning to about trend as the drag from housing fades. Inflation is expected to moderate very slowly, with a slight rise in unemployment.

While noting that housing woes posed a downside risk to the outlook, Mr Bernanke said there was also a risk that consumer spending could bounce back more strongly than expected.

He emphasised that the Fed had “consistently stated that upside risks to inflation are its predominant policy concern”. Mr Bernanke highlighted the high rate of headline inflation, as well as the lower rate of core inflation excluding food and energy.

“Bernanke has acknowledged that the subprime situation is an issue and it is spreading,” said Richard Gilhooly, a strategist at BNP Paribas. But Gerald Lucas, senior investment advisor at Deutsche Bank, said subprime problems were primarily a threat to the financial sector.

Fed chief says subprime losses could hit $100bn
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: July 19 2007 16:02 | Last updated: July 19 2007 16:02

Total losses from the subprime mortgage meltdown may be in the order of $50bn to $100bn, according to estimates cited by Ben Bernanke in testimony to Congress on Thursday.

The Fed chairman said:”There clearly will be some significant financial losses associated with defaults and delinquencies on these mortgages.”

Mr Bernanke also cautioned Congress against legislating narrowly on China’s exchange rate, rather than addressing this in combination with the need for structural reform.

He said the exchange rate was ”not a subsidy in the legal sense” but rather the cause of distortions in the Chinese economy that channel resources towards exports rather than production for domestic demand.

Bernanke sees little threat of credit crunch
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: July 19 2007 01:42 | Last updated: July 19 2007 01:42

The agitation in financial markets on Wednesday contrasted sharply with the largely benign and little-changed economic outlook laid out by Ben Bernanke in his testimony to Congress.

Mr Bernanke made clear that the Fed does not see the tightening of credit conditions to date as severe enough to have macro-economic implications.

The US central bank did shave its “central tendency” forecasts for growth a fraction this year and next but this simply reflected the mathematical effect of a more protracted drag from residential investment.

The Fed appears increasingly confident that the rest of the economy is in robust shape and both consumer spending and business invest ment will expand at a “moderate pace” in the coming quarters.

Mr Bernanke did admit for the first time that credit concerns have spread beyond the subprime mortgage market. But he said credit spreads are still low by historical standards and financing activity remains brisk.

With equity prices up strongly since the start of the year and the dollar down – offsetting the contractionary effect of higher credit spreads – financial conditions generally remain “supportive of economic growth”.

His assessment suggests the Fed sees no immediate threat of a broad credit crunch. Indeed the central bank is probably happy to see investors pull back a little from what had been extraordinary levels of risk appetite and demand slightly higher prices for risk, slightly lower levels of leverage in some deals and tighter covenants on some loans.

Nor will the Fed be troubled by swings in asset prices so far. With no evidence of outright panic, denial of liquidity or forced selling, financial markets appear to be working well.

Nonetheless, Mr Bernanke and his colleagues know that this could change quickly and will monitor developments carefully. In all probability, the subprime drama is not yet fully played out.

Headline-grabbing news of losses suffered by particular financial institutions to some extent represent the allocation of losses the Fed knew were in the system.

But the lags involved in marking to market and the likelihood of waves of credit downgrades mean there is still a risk of a downward spiral, in which troubled investors are forced to liquidate their holdings because of tougher margin requirements, putting more downward pressure on the market.

The Bear Stearns case is reassuring in so far as it showed that painful losses can be absorbed by the system, without threatening the supply of credit to businesses and consumers. But it is troubling in so far as it showed that even sophisticated investors could fail to hedge properly and be left holding derivative products so complex no potential buyer could figure out whether they had any value.

The Fed will focus as ever on the health of systemically important financial institutions. Their total exposure to subprime does not appear large relative to their capital. This remains the case even when you add exposure to bridging finance on private equity deals – particularly since sponsors with future deals to finance are likely to allow some repricing. But the Fed will pay attention to the rise in the cost of credit default swaps that insure against default by major financial institutions – a signal that there is concern about their exposure to credit and volatility more generally.

Fed officials know that financial crises can occur without any obvious deterioration in economic fundamentals – as they did in 1987 and 1998. However, they will be relieved that credit repricing is occurring now – when the downside risks to growth seem to have receded – and not a few months ago, when the risk of a downturn in the economy and accompanying rise in defaults loomed much larger.

Wednesday, July 18, 2007

Deb Mell for State Representative

By now you may have learned, whether through the media or friends, that Deb Mell is running for State Representative. If you know Deb, you know this is a good thing for Illinois. If you know Deb, you also know that she is not only a community activist and leader, she is a advocate for women's rights and a supporter of our community. She is also a very close friend of mine. Because of our friendship, and because of Deb's deep commitment to public service, I have joined the Citizens for Deb
Mell campaign as the Treasurer and Finance Chair. Over the next 7 1/2 months (Primary is February 5th), the Citizens for Deb Mell campaign will be working tirelessly to get Deb elected to the General Assembly. In order to get Deb elected, we need to fuel the campaign. And in order to fuel Deb's campaign, we need three things: time, people and money.

To that end, I am asking you to join me, Deb and the Citizens for Deb Mell campaign team. In order to join the team, we need you to do one of two things: (1) contribute time; and/or (2) contribute money. If you can do both, even better. You can join the team one of two ways: (1) respond directly to me; or (2) go to, read about Deb and her campaign, and sign up to contribute time or money. You will see that there are many opportunities to volunteer and many ways to
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I cannot begin to tell you how invested I am in Deb, Deb's campaign, and Deb's future. If you know Deb, you know she will represent us all in Springfield. If you know Deb, you know what a standup person she is. If you know Deb, or want to know Deb, you will join me in getting Deb elected to the General Assembly!

Surgeon General Nomination in Limbo

Surgeon General Nomination in Limbo
by Bob Roehr
Copyright byh The Windy City Times and Bob Roehr


The nomination of James Holsinger to be Surgeon General of the United States appears to be in limbo after his July 12 appearance before the U.S. Senate Committee on Health, Education, Labor and Pensions. A growing number of organizations have come to oppose his confirmation, based in large part on his views on gays as expressed in a 1991 paper.

“The office of Surgeon General has become a morass of shameful political manipulation and distortion of science,” said chairman Ted Kennedy, D-Mass., in opening the hearing.

He cited testimony earlier in the week by former Surgeon General Richard Carmona on how the White House sought to suppress or change the content of reports, as well as experience with the Bush administration hiding or warping scientific findings in areas including global warming, stem-cell research, abstinence-only programs and birth control.

Kennedy announced introduction of the Surgeon General Integrity Restoration Act, which would radically reshape the office and protect it from political influence, should it be enacted. The bill would establish budgetary and administrative independence from the Department of Health and Human Services and the White House. It would require that the president select a nominee from a list of candidates drawn up by the Institute of Medicine.

He said this hearing was to determine if Holsinger was the right person to fill that role; “To see that the new Surgeon General has the independence needed to provide objective, reliable scientific advice to the nation.”

Sen. Sherrod Brown, D-Ohio, asked Holsinger, “To what extent do you think that scientific evidence versus political/religious ideology should influence the surgeon general’s recommendations?

Holsinger affirmed his commitment to science. “I believe that is the position of any Surgeon General.”


Kennedy focused on the 1991 paper on homosexuality that Holsinger had written for a committee of the United Methodist Church, which was considering those issues within the church.

“So many say that you did not look at the real science, you were controlled by ethics and religion—all of which are admirable elements and all of which have value in terms of politics and making judgments and decisions,” Kennedy said. “But the issue is: Did you avoid available science in terms of your document?”

Kennedy pointed out that the nation’s and world’s premier medical and psychological groups had written extensively on the subject, “But as I understand in reading the notes from the meetings when you were tasked to do this study…all of that scientific information was effectively ignored.” Other sources have written to Kennedy, saying their research was misused by Holsinger.

“This raises serious questions about your willingness to use the best in terms of science,” the senator said.

Holsinger claimed that the report was for laymen and was not meant to be a comprehensive scientific paper.

But Kennedy didn’t buy it, asking “If it is a literature review, why not reference the most prominent medical and scientific journals?” He accused Holsinger of “cherry picking” his data.

Holsinger said, “I am deeply troubled by these allegations [ concerning his views on sexual orientation ] because, I do not feel that they represent who I am, what I believe, or how I have practiced medicine. I pledge to you today that I will continue to serve all Americans, regardless of sexual orientation or any other personal characteristic.”

Under prodding from ranking Republican Mike Enzi of Wyoming, Holsinger spoke of how he had helped gay and lesbian patients and how he had “fought fiercely” to defend presentation of lesbian health issues at a conference on women’s health in 2002 at the University of Kentucky.


Senator Barbara Mikulski, D-Md., recounted that the two had crossed swords when Holsinger was a senior official with what is now the Department of Veterans’ Affairs ( VA ) . She said, “We did not have a good time together.

“You resisted change in the area of quality control. You were often indifferent or dismissive of oversight when it came to the healthcare of women veterans, and sexual harassment at VA medical facilities.”

Holsinger seemed to acknowledge the futility of trying to change Mikulski’s opinion of him.

Sen. Patty Murray, D-Wash., grilled Holsinger on how he might respond to White House pressure to change language or suppress reports. He stressed the need for dialogue and context, reserving the right to resign in protest, without detailing what type of pressure might trigger his resignation.


The hearing was unusual in that no other persons testified on behalf of or in opposition to the nominee. Nonetheless, many groups had made their feelings known beforehand.

AIDS Action opposed Holsinger based on his “long documented history of prejudice towards lesbians and gay men,” and 76 local and national organizations joined in signing that letter.

The HIV Medicine Association said, “A man who believes homosexuality is a condition to be “cured” is not fit to be the nation’s First Physician.”

And to the surprise of many, the American Public Health Association joined the call to reject the nomination on July 11. “At a time when one of our association’s top priorities is to eliminate disparities in health, including disparities in the gay and lesbian community, we cannot support a nominee with discredited and non-evidence-based views on sexuality.”

The association has more than 50,000 members working in the field of public health, the principle area of responsibility of the surgeon general. This is only the second time in its history that it has opposed a nominee.

More than half of the health committee members did not attend the hearing. Among them was right wing firebrand Tom Coburn, R-Okla., who would be expected to support the nominee if he had the blessings of the far right.

Three Democratic presidential aspirants—Hillary Clinton, Christopher Dodd and Barack Obama—sit on the committee. All previously had issued statements expressing concern with the nominee, but none attended the session; they reportedly were at the NAACP convention in Detroit.

The AIDS Institute’s Carl Schmid was surprised by the intensity of Sen. Mikulski’s opposition to Holsinger based on her earlier experience with him. Schmid would not be surprised if Mikulski put a hold on the nomination if it ever reaches the floor of the Senate.

The right wing has been largely silent on the nomination. Only Concerned Women for America ( CWA ) distributed a statement at the hearing, and its focus was gay-bashing ( and they’re for it ) . They said Holsinger’s nomination “has become unfairly politicized due to both his medical findings on homosexual behavior and his religious beliefs.” This constitutes an “inappropriate and unconstitutional…religious litmus test,” they asserted.

However, CWA was careful to note that it “takes no position” on Holsinger’s nomination.

The Family Research Council ( FRC ) later told its supporters that Holsinger had “recanted his earlier statement” on homosexuality. It questioned his stance on stem cell research. FRC concluded, “Dr. Holsinger’s confirmation should not fail because of his views, but because of his seeming lack of conviction on any of them.”

Committee staff indicated that they do not anticipate an early vote on the nomination.