Saturday, August 25, 2007

Teen to Apple: Never say never - AT&T's exclusive contract for iPhone didn't sit well with hacker intent on breaking lock

Teen to Apple: Never say never - AT&T's exclusive contract for iPhone didn't sit well with hacker intent on breaking lock
By Eric Benderoff and Jon Van
Copyright © 2007, Chicago Tribune
August 25, 2007

Why would anyone pick up a sleek, beautiful new $500 iPhone and take a soldering gun to it?

You could almost say Apple Inc. issued a dare.

Hackers got credit for another victory Friday, as news spread that a New Jersey teenager broke into his iPhone and reconfigured it so the machine could make calls via a wireless carrier other than AT&T.

The iPhone, available since late June, is supposed to work only with AT&T, which has a five-year exclusive contract. But limiting the touchscreen phone to a single carrier immediately was seen by many tech-savvy tinkerers as an invitation to assert their control over the device.

Hacking, of course, has a long history in the digital age. On top of that, many cell phone aficionados are rankled by the idea that they often can't choose which carrier to provide service for a cool new phone.

So it's no surprise that 17-year-old George Hotz's accomplishment in making his iPhone run on T-Mobile's network joins a host of claims by other hackers manipulating the Apple device.

YouTube is filled with videos of people who appear to have created their own iPhone by using Apple's software on other mobile gadgets, including a T-Mobile Wing smart phone, a Sprint PPC-6800 and Microsoft Corp.'s Zune music player.

Technology analyst Rob Enderle said others already have unlocked the iPhone by getting it to work with a competing carrier: "We should have downloadable applications for these things in a week."

To do what Hotz accomplished takes plenty of skill -- and time. Hotz said he spent 500 hours on the project.

"He's been tinkering with it all summer," his father, also named George Hotz, said. "It shows it can be done, but it's not an easy task."

In a video on YouTube, the bushy haired Hotz shows his iPhone running on T-Mobile's wireless network before he makes a call to a landline phone in his bedroom. Then, he removes the T-Mobile SIM card he inserted into the phone as additional evidence.

Also in the video, Hotz said he worked with other hackers to complete the task. On Thursday, he published a 10-step guide on his blog, http://iphonejtag, but acknowledged they may be challenging.

Technology blog Engadget on Friday reported successfully unlocking an iPhone using a different method that required no tinkering with the hardware, according to The Associated Press. The software was supplied by an anonymous group of hackers that apparently plans to charge for it.

Representatives from Apple and AT&T would not comment on the hacked iPhone, although one representative questioned the validity of Hotz's hack.

The hack is being seen as an interesting but harmless accomplishment, said Martin Dunsby, chief executive with Vollee Inc., a maker of games for mobile devices.

But Jeff Kohler, a wireless executive at Bathgate Capital Partners in Denver, said, "From an AT&T standpoint, on a marketing level, those people [at AT&T] have to be disappointed. There is the potential to lose the exclusivity and branding that goes with the iPhone."

Dunsby said the hack will have no "business impact. But the message this sends is that subscribers want innovation and flexibility in their platform."

Indeed, when Apple announced it had an exclusive agreement with AT&T to carry the iPhone, many mobile phone fans were excited because the phone would run on a GSM network, meaning perhaps a SIM card from another carrier would work.

But Apple, in an unprecedented move, locked the SIM card into the phone so users would not be able to insert a card from T-Mobile or a European carrier to make the iPhone work. Buyers of GSM phones made by Nokia and Motorola, for example, can easily open the back of the phone and slip in a SIM card for another wireless carrier.

"The message [the hack] sends to the communications industry is that innovation is important, but being in a closed environment isn't a good thing," Dunsby said.

He added, though, that most people won't see the benefit of doing a hack as complicated as the one Hotz achieved.

According to interviews, Hotz said he used soldering tools and software to hack the iPhone. He said the two iPhones he hacked, one of which he's put up for bid on eBay, have all their features intact except the visual voice-mail function.

Hotz's sudden popularity was noticed by major television networks Friday. He was picked up by a limousine for a trip to New York City for an interview with NBC, ABC and other broadcasters, his father said.

On Saturday, he heads to college to start his freshman year.

"It's great he got it done in time," the elder Hotz said. "He can enjoy this moment of glory."


Hillary haters' sharpen their swords

Hillary haters' sharpen their swords
By Jill Zuckman
Copyright © 2007, Chicago Tribune
August 26, 2007

DALLAS — Richard Collins, a wealthy Texas philanthropist, businessman and political aficionado, heaps praise on the woman he has set out to destroy, Sen. Hillary Clinton (D-N.Y.).

"She looks like a winner," said Collins, sitting in his high-rise office with sweeping views of the city. "She's run a good campaign, very consistent, no mistakes."

But make no mistake about it: Collins is just one in a vast army of professional "Hillary haters" who are banking on Clinton becoming the Democratic nominee. Like the Swift Boat Veterans for Truth in the 2004 election who denigrated John Kerry's military service in Vietnam, Collins and others are searching for just the thing that will crystallize the way voters think and feel about her.

And not in a good way.

Armed with new technologies and fueled by animus, they are bent on preventing "four more years" of Clintonism. Every old charge, it seems, is being repackaged and sold as new. Every rumor is given a new, blog-stoked currency.

The rise of the Internet has meant that more people are getting their message out without the expense of paper, postage or manpower. Anyone with a computer can weigh in on the political debate and alter a candidate's course, and Clinton opponents have started early.

With his affable demeanor and sixth-generation Texas twang, Collins, 60, is the force behind, a humorous and snarky Web site, as well as an independent expenditure group dedicated to stopping Clinton's march to the White House.

His efforts have included flying a banner over the site of the South Carolina Democratic debate, as well as a cartoon called "The Hillary Show," a "Jetsons"-like satire that portrays Clinton as a mean and unforgiving talk show host.

"This is not personal," said Collins, a Republican who has donated money to Sen. John McCain (R-Ariz.) and former New York Mayor Rudolph Giuliani. "It's about her policies. We think they would be wrong for the country."

A magnet for criticism

Not every Democratic presidential candidate, however, draws such venomous opposition. Ever since she uttered those famous words about staying home, baking cookies and holding teas rather than fulfilling her professional goals, Clinton has been a magnet for passionate criticism.

This fall, Citizens United, a conservative organization that claims half a million members, will release a documentary film about the life and times of Hillary Clinton. It's being made with the help of Dick Morris, the fired former adviser to Bill Clinton who has turned criticizing both Clintons into a crusade.

"I think once people see this film, I don't know how she would be able to get their vote," said David Bossie, the group's chairman and president, who worked as the chief investigator for the House committee investigating the Clinton-era Whitewater scandals before he was fired too.

Other "Hillary haters" have less money but no less wrath for the senator from New York.

Robert Morrow, a self-employed securities trader who works from home in Austin, describes himself as one of the nation's premier experts on Hillary and Bill Clinton. He said he has bought every book ever written about the Clintons, and he draws on them for the reams of information he e-mails to journalists and political activists detailing allegations of rape, sexual assault and physical violence, which Clinton's campaign dismisses as baseless.

"You've got to believe there's going to be a thousand people like me in the general election exposing the Clintons' track record of violating people and criminality," said Morrow, who calls the former First Couple "sociopaths and thugs."

Clinton says she knows the attacks will come and that she's uniquely qualified in knowing how to fight back.

"I've been through it and I understand their tactics," Clinton told voters last week at a house party in Concord, N.H. "And I have been subjected to them for 15 years and I have survived them. And there is something to be said for that."

'Unhinged' over the Clintons
Some Democratic strategists say the political right's obsession with both Clintons is far more intense than it ever was toward Kerry, the Democratic nominee in 2004, or Michael Dukakis, the candidate in 1988.

"There's clearly a sliver of the right wing in the country that's unhinged over both of the Clintons. Their hatred is simply pathological," said Jim Jordan, who is advising Sen. Christopher Dodd's presidential bid. "I'm sure some of these kooks look back at the Clinton White House as the good ol' days — they were energized and relevant then."

What is unclear is whether voters are numb to the charges that Clinton's legion of detractors offer, or whether those charges will help reinforce negative feelings.

oward Wolfson, Clinton's communications director, argues that voters have almost become immune. "For most Americans, not only has the page turned, but the book is closed on that kind of thing," he said.

John Pitney Jr., a political science professor at Claremont McKenna College, believes anti-Hillary Clinton groups will face a steep battle undermining Clinton the same way they harmed Kerry.

"If there's one thing Hillary Clinton knows about politics, it's that she has some enemies," Pitney said. "You're not going to catch her off guard. The question is whether they can persuade anybody beyond their Republican base."

Even Paul Weyrich, the conservative activist, wonders whether the attacks will work.

"Assuming she gets the nomination, the question for the general election is: Do these people contribute to the dialogue or do they turn people off," he said. "I haven't made up my mind yet."

Turning people off is exactly what Collins is trying to avoid with his efforts. "What we're trying to do with our site is define Hillary with humor," he said.

For example, Collins has three rules to guide the writing on his site: Chelsea Clinton is off-limits; no gay-bashing allowed; and Bill Clinton's womanizing is OK, but no naming names.

He says he believes the key to undoing Clinton's candidacy lies with exposing her true character. For example, his Web site has sharply criticized Clinton for not releasing documents relating to her time as first lady.

"She's hiding something. This is classic Clinton sleaze," said Collins, who describes himself as a mainstream Republican and says he has Democratic friends who don't like her either. "This sort of thing is the defining character issue that will cause her to lose."

He admires the work of a renegade staffer for Sen. Barack Obama (D-Ill.) who spoofed an Apple Computer television ad by depicting Clinton as an Orwellian, dictatorial figure speaking in a monotone to a hall full of robotic humans. When a female athlete tosses a hammer at the screen, destroying Clinton's image, this line appears: "On Jan. 14th, the Democratic primary will begin. And you will see why 2008 isn't going to be like '1984.' "

The ad was watched more than a million times on YouTube. And that's what Collins is hoping to replicate.

"The goal is to do something that everybody will watch," he said.

Currently, his site gets about 3,000 hits a day, and his overall budget for the cycle could reach as high as $4 million. He has spent about $400,000 so far—most of that his own money—building and hiring staff, including actors to do the voice-overs for "The Hillary Show" cartoons.

The architect of StopHerNow

Those cartoons are frequently conceived by Arthur Finkelstein, the reclusive Republican political consultant who became famous for constantly defining Democrats as liberals. He originally started and still calls the animator to dictate ideas for new scripts. Collins calls him "an old friend" and says Finkelstein advises him on several things, including Clinton.

A site managing editor based in Ohio, Kevin Holtsberry, is working to beef up the content, tapping into his relationships with conservative bloggers. He said they are trying to get the truth out about Clinton.

"She's going to try to redefine herself as a nice, charming, friendly, centrist-type person, competent, the kind of person who can get things done," he said. "Our job is to bring out the past and her real history."

Collins heads two foundations, both of which give away money, primarily for historic preservation and education efforts. One of the foundations has given about $4 million toward private school vouchers.

But politics is his passion, and he's proud that his mother was the first woman to serve on the Dallas City Council and that his uncle was once a member of Congress. His grandfather, he said, was a "kingmaker" when it came to Texas politics, and his great-grandfather was once a member of the state Senate.

His hoped-for contribution? Stopping Clinton.

The next credit crunch? - As home loan market tightens, mounting credit card debt could spur new crisis

The next credit crunch? - As home loan market tightens, mounting credit card debt could spur new crisis
By Susan Chandler
Copyright © 2007, Chicago Tribune
August 26, 2007

Now that the easy money in home mortgages is all but over, consumers may soon be caught in a financial squeeze with their credit cards.

That's the worry among some economists and credit counselors as home lending has shifted abruptly into low gear this summer. That leaves homeowners owing big sums to Visa or MasterCard without an important escape hatch—the ability to pay down the plastic by dashing off a check from their home equity line of credit or rolling the debt into a new, bigger mortgage.

"You're not going to be able to get that mortgage loan. You'll be stuck with the higher interest credit card debt," warns Carl Steidtmann, chief economist with Deloitte Research. "We will have to live within our means. I know it's a troubling phenomenon. But we're not going to be able to spend at levels well above our income levels."

Home mortgages have become much harder to get this summer as a wave of overleveraged homeowners, many of them with adjustable-rate loans, have defaulted on their home loans. As foreclosures soared, numerous lenders had difficulty raising new capital, and some have closed up shop. Others have tightened their requirements on borrowers and bumped up interest rates, which could decrease how much money a prospective buyer can borrow.

Mortgage debt and credit cards have become closely linked in recent years as interest rates hit post-war lows, and consumers were barraged with offers to use their home equity to pay off their high-cost credit cards. It was billed as a clean slate, but many homeowners went out and ran up new balances.

No shame in debt

It's not just a problem for the working poor, credit counselors say. Many middle- and upper-class households have come to view credit card debt as a reality of modern life.

"The psychology about carrying credit card debt has changed. What used to be a shame is just an additional way to buy stuff, and stuff is the operative word here," said Catherine Williams, vice president of financial literacy at Consumer Credit Counseling Service of Greater Chicago.

Freda Price, a divorced mother of two in Bethlehem, Pa., is trying to get her credit card debt under control. Five years ago, Price had a $49,000 mortgage and no significant credit card balances. But she now is struggling with $100,000 in mortgage and credit card balances because she has refinanced and used the cards to pay for attorneys in a long-running dispute over child custody with her ex-husband.

Price is close to hitting the maximum borrowing limit on her four credit cards, which are consuming about $300 a month in minimum payments. She finds herself charging gas and groceries on the cards, which she doesn't like.

"The sad thing is I never had any of this debt before," she said. "I have to pay the minimum because I can't afford much more."

Price's credit cards also are preventing her from saving for retirement. She is contributing only 1 percent to her 401(k) plan even though her insurance company employer matches up to 3 percent.

"I'm just between a rock and a hard place. I pack my lunch. I get the newspaper at the house. We don't go out to eat. We don't do much of anything," said Price, 51. "I was always very thrifty, but I don't know where else to cut."

Those who have given up the fight are showing up in the offices of bankruptcy attorneys such as Melvin Kaplan of Chicago. Kaplan's business was off by about 70 percent last year after the new bankruptcy law was passed. But within the last few months, "the phone is ringing off the hook," he said.

"It's brought about by credit cards and foreclosures," Kaplan said. "The credit cards have increased their minimum payments. They have all these teaser rates. They send out these checks and say, 'Use them.' But the first day you're late, you're paying 28 percent."

A credit card crunch could develop even faster if homeowners use those handy cash-advance checks attached to their monthly bill to catch up on delinquent mortgage payments.

Those advances, which may carry 3 percent transaction fees as well as interest rates of 20 percent-plus, will quickly increase the homeowner's financial distress. More than $900 billion in adjustable-rate mortgages are due to reset from next month through December 2008, which means lots of homeowners will be scrambling to come up with extra cash.

"This just scares the daylights out of me," said Williams. "This is a call to consumers to rein in their discretionary spending. Your home was never intended to finance your tennis shoes or allow you to carry an $800 designer bag."

Plastic for basics

Credit cards should be used to pay for only durable items such as appliances and possibly furniture, she said. Consumable items such as groceries and gas should be paid for with cash or a debit card. Never pay your mortgage with a credit card. If you are at the end of your financial rope, consider taking a loan against your 401(k) plan at work, Williams suggested.

Yet there is growing evidence that plenty of consumers are paying for basics with plastic. Discount chain Target Corp. reported its profit from credit cards rose 34 percent in the second quarter, although same-store sales rose by only 4.9 percent.

The credit card industry doesn't seem particularly concerned. It points to the fact that credit card delinquencies were relatively unchanged in the fourth quarter of 2006, at 4.56 percent of accounts, and bad-debt write-offs by card issuers are at a decade low.

Experts also take comfort in the fact that outstanding credit card balances have grown at a relatively modest 6.9 percent annual average over the past 10 years and haven't been in the double digits since 2000, according to the Nilson Report, a California credit card newsletter.

But that doesn't account for the fact that many consumers were rolling their credit card debt into their homes. No one knows precisely what that figure is, but Nilson Report publisher David Robertson estimates it might have added $288 billion to the $880 billion in outstanding credit card debt at the end of 2006. That would mean credit card debt had increased by about 225 percent in the past decade.

Even so, Diane Swonk, chief economist at Mesirow Financial in Chicago, isn't worried.

"Much of the shakeout in credit quality occurred in the 1990s," she said last week. "It's really amazing not to see the default rate for credit cards track mortgage defaults, but that isn't happening."

Not yet.

Ironically, credit card companies often do best right before the industry is about to tank. That's because consumers who are stretched are making only minimum payments and racking up heaps of interest on their unpaid balances, trying to keep all their financial balls in the air. But things can worsen quickly when an unexpected expense arises or their adjustable-rate mortgage payment increases. When people hit a wall, they begin missing payments or not paying anything at all. They eventually may find themselves seeking the advice of bankruptcy attorneys.

Average income shrinking

It would be easy to blame the free-spending ways of consumers for the mess their finances are in. High-priced Louis Vuitton handbags have been adopted by the masses, along with iPods, plasma-screen TVs and sleek mobile phones. Americans have closets jammed with clothes, and they eat out much more frequently. The U.S. savings rate was negative last year.

But the overconsumption explanation may be too one-dimensional.

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year of decline, the government reported recently. That occurred even as the cost of health care increased for many U.S. workers, and the burden for funding retirement continued to shift onto their shoulders.

Meanwhile, median home prices in the U.S. have increased from $119,600 in 2000 to $213,900 in 2005, a 79 percent increase, boosted in part by middle-class families that have paid premiums to purchase homes near good schools.

"The real problem lies in the basics: Median-earning families simply don't have enough money to pay the mortgage, buy health insurance, pay for transportation and day care and still put groceries on the table," said Elizabeth Warren, a Harvard law professor and author of "The Two-Income Trap."

"Others can make it day to day, but when a child gets sick or the transmission falls out of the car or there's a cutback in overtime, their cushion is so small that they can't manage even the smallest mismatch between expenses and income.

"Families have been making up the shortfall with credit and someday, perhaps someday very soon, the credit music will stop."

Financial Times Editorial Comment:The camera lies

Financial Times Editorial Comment:The camera lies
Copyright The Financial Times Limited 2007
Published: August 24 2007 19:53 | Last updated: August 24 2007 19:53

The aphorism “the camera never lies” was never true. Yet photography’s mendacious capabilities have been amplified by the capabilities of image editing software such as Photoshop.

This month, the French magazine Paris Match published photographs of a bare-chested President Nicolas Sarkozy that appeared to have been “improved”. Courtesy of some unknown digital artist, Mr Sarkozy lost his love handles (les poignées d’amour, if you were wondering), thus appearing just that tiny bit more like his muscular counterpart, Vladimir Putin, and a little less like the Michelin Man.

Come to think of it, who can now be so confident that the Russian president’s impressive pectorals – recently on display on a fishing expedition – belong to him and not to Arnold Schwarzenegger? Russian television did, after all, seem to embellish the footage of the submarine voyage under the North Pole with footage from Titanic.

Mr Sarkozy’s mysterious weight loss is controversial less for what it was than for what it exemplified: a cosy relationship with Arnaud Lagardère, the owner of Paris Match.

Yet such alterations, large and small, have been part of photography for decades. Some are subtle but insidious, such as the darkening of O.J. Simpson’s skin in a police mug shot used for the cover of Time magazine. Others have been outright malicious – such as a convincing fake showing John Kerry, then a US presidential hopeful, and Jane Fonda sharing the platform at an antiwar rally in the 1970s. Readers are now more sceptical and forensic tools are being developed to detect fakes.

But there is a broader issue here. Newspapers and magazines will always filter the way their readers perceive reality. If it is not digital manipulation, it is the choice of photograph, the use of quotations, even the decision to report or to remain silent. Readers place their trust in the press. Some will violate that trust and others will do their best to respect it. That was true long before Photoshop.

Financial Times Editorial Comment: Markets need a bit more backbone

Financial Times Editorial Comment: Markets need a bit more backbone
Copyright The Financial Times Limited 2007
Published: August 24 2007 18:05 | Last updated: August 24 2007 18:05

The credit market has stubbed its toe. It hurts, and market players are hopping around cursing and swearing, but so far the noise is out of proportion to the actual damage done. A few subprime lenders in the US have gone bust, but no highly rated bonds have defaulted, and the price of most risky assets is still unusually high. It may seem counter-intuitive, but the market could do with something a little more lingering and painful: a nasty toothache, only cured by an unpleasant trip to the dentist.

Though there is less sense of crisis, money market conditions are still far from normal. Three-month US Treasury bills, for example, still yield far less than the 5.25 per cent base rate. It is still hard to trade or value bonds backed by assets such as mortgages or credit card receivables and, as a result, confidence in the creditworthiness of banks and financing vehicles such as conduits has not been restored.

Central banks need to get the markets moving, and to do so, may have to inject liquidity at maturities such as three months, as well as overnight. But they should do so at penalty rates. There have been excesses in the market over the past few years, deals done at prices that barely reflect the risks involved. These deals may well require surgery, rather than just being patched up with cheap money.

During the recent turmoil, the bonds and loans of highly indebted companies have been volatile, and few such companies can borrow more at present. That makes sense. Companies sponsored by private equity, in particular, were borrowing on outrageously good terms.

Other areas of the market, however, have barely been touched. In emerging markets, for example, Mexico is only paying about 1 per cent more than the US Treasury for medium-term debt, and Colombia is only paying a further 1 per cent on top of that. That is for loans in US dollars, and seems optimistic.

Equities, which have rebounded this week, are little scathed by the debt market kerfuffle. The US is roughly 5 per cent off its level a month ago, the UK has fallen by 6 per cent, and most European exchanges are similar. The Chinese market has been hitting new highs. When adjusted for the economic cycle, stocks still look expensive, with the US market valued at more than 1.8 times its historical average according to estimates prepared by researchers Smithers & Co.

If money markets are disrupted for a month or two there will be harm to the real economy, and central banks need to respond to that. On the other hand, they need to avoid a market bail-out that encourages the kind of relentless risk-taking that has pushed asset markets to today’s precipitous levels. For healthy investment returns in the long run, and to avoid a bigger crash in the future, investors need to feel some pain rather than calling for the nearest ambulance.

US credit turmoil hits London property

US credit turmoil hits London property
By Jim Pickard and Chris Giles in London
Copyright The Financial Times Limited 2007
Published: August 24 2007 21:53 | Last updated: August 24 2007 21:53

Fears are growing that the fallout from the US subprime mortgage meltdown will hit house prices in central London, one of the world’s hottest high-end property markets.

Prices for “prime” homes in the most expensive streets of the capital have risen about 50 per cent in the past two years as a financial services boom has enriched bankers and other professionals in the City of London.

But the global market turmoil unleashed by the US subprime collapse is threatening activity levels at banks in the City, and London property agents are warning that high-end residential prices could suffer as result.

“If there is a downturn in City profits and employment levels, you couldn’t be surprised if central London prices fall,” said Liam Bailey, head of research at Knight Frank, the property consultancy.

The importance of the City to the economy was underlined as official figures showed business services contributed over half the economic growth in the second quarter of the year.

Mr Bailey said there had long been a correlation between the health of the City and London residential prices. The prime London market suffered badly in 2002 and 2003 after prices of technology and telecommunications shares crashed.

John Young of Humberts, a London estate agent, said the recent “uneasiness” in the City had prompted several deals to fall through. Tracy Kellett, founder of BDI Home Finders in London, a buying agent, said some sellers were dropping prices.

David Forbes, a director of agents Savills said it was too early to call the market.

Charles Ellingworth of Property Vision, an adviser to home buyers, said City “tremors” had a “huge impact” on buyers’ confidence. “We are not seeing panic yet but the closest comparison we have is that this feels remarkably like August 1998.”

But in a word of well-deserved caution, given the strength of the rebound after the 1998 financial crisis, he added: “For three months, we didn’t do a deal then suddenly in November it all came back to life and we had the two busiest months ever.”

Additional reporting by Steve Lodge

International Herald Tribune Editorial - White House shell game

International Herald Tribune Editorial - White House shell game
Copyright by The International Herald Tribune
Published: August 24, 2007

The Bush administration's obsession with secrecy took another absurd turn this week. The administration is claiming that the White House Office of Administration is not covered by the Freedom of Information Act, even though there are some compelling reasons to think it is. Like the fact that the office has its own FOIA officer. And it responded to 65 FOIA requests last year. And the White House's Web site, as of Thursday, insisted the office is covered by FOIA.

The fight over the Office of Administration's status is part of a larger battle over access to an estimated 5 million e-mail messages that have mysteriously disappeared from White House computers. The missing messages are important evidence in the scandal over the firing of nine U.S. attorneys, apparently because they refused to use their positions to help Republicans win elections. The Office of Administration seems to know a lot about when and how those messages disappeared, but it does not want to tell the public.

What exactly does the administration want to hide? It is certainly acting as if the e-mail messages would confirm suspicions that the White House coordinated the prosecutors' firings and that it may have broken laws. It is hard to believe the administration's constant refrain that there is nothing to the prosecutor scandal when it is working so hard to avoid letting the facts about it get out.

Fortunately, the White House does not have the final say on the Office of Administration. It made its absurd arguments to a federal judge who can restore some logic to the situation by ruling that the Freedom of Information Act applies, and the data must be turned over.

International Herald Tribune Editorial - The problem isn't Maliki

International Herald Tribune Editorial - The problem isn't Maliki
Copyright by The International Herald Tribune
Published: August 24, 2007

Blaming the prime minister of Iraq, rather than the president of the United States, for the failure of U.S. policy, is cynical politics, pure and simple. It is neither fair nor helpful in figuring out how to end America's biggest foreign policy fiasco since Vietnam.

Prime Minister Nuri Kamal al-Maliki has been catastrophic for Iraq ever since he took over from the equally disastrous Ibrahim al-Jaafari more than a year ago. America helped engineer Jaafari's removal, only to get Maliki. That tells you something important about whether this is more than a matter of personalities. Jaafari, as it happens, was Iraq's first democratically chosen leader under the U.S.-sponsored Constitution.

Continuing in the Jaafari tradition, Maliki's government has fashioned Iraqi security forces into an instrument of Shiite domination and revenge, trying to steer U.S. troops away from Shiite militia strongholds and leaving Sunni Arab civilians unprotected from sectarian terrorism. His government's deep sectarian urges have also been evident in the failure to enact legislation to fairly share oil revenues and the persistence of rules that bar much of the Sunni middle class from professional employment.

The problem is not Maliki's narrow-mindedness or incompetence. He is the logical product of the system the United States created, one that deliberately empowered the long-persecuted Shiite majority and deliberately marginalized the long-dominant Sunni Arab minority. It was all but sure to produce someone very like Maliki, a sectarian Shiite far more interested in settling scores than in reconciling all Iraqis to share power in a unified and peaceful democracy.

That distinction is enormously significant, since President George W. Bush's current troop buildup is supposed to buy, at the cost of American lives, a period of relative calm for Iraqi politicians to bring about national reconciliation. How much calm it has brought is the subject of debate. But just about everyone in Washington now agrees that Maliki has made little effort to advance national unity.

The most recent intelligence report on Iraq concludes that Maliki's government is unable to govern and will become "more precarious" over the next six months to a year. That is why there can be no serious argument for buying still more time at the cost of still more American lives and an even greater cost for Iraqis.

When it comes to fighting Al Qaeda in Iraq, Washington and Baghdad are often at cross-purposes. In the western province of Al Anbar, the American military has registered some gains by enlisting local Iraqi Sunnis to fight against foreign-led Al Qaeda formations. That strategy depends on the sense of Iraqi nationhood among local Sunnis. But the Maliki government prefers to concentrate on fortifying Shiite political power and exploiting the immense oil reserves of southeast Iraq. It is hard to imagine any Shiite government acting very differently.

Washington's failure to face these unpleasant realities opens the door to strange and dangerous fantasies, like Bush's surreal take on the Vietnam war. The real lesson of Vietnam for Iraq is clear enough. America lost that war because a succession of changes in South Vietnamese leadership, many of them inspired by Washington, never produced an effective government in Saigon.

The short-term sequels of American withdrawal from Indochina were brutal, as the immediate sequels of America's withdrawal from Iraq will surely be. But the American people rightly concluded that with no way to win a military victory, there could be no justification for allowing thousands more U.S. troops to die in Vietnam. Those deaths would not have changed the sequels to the war, just as more American deaths will not change the sequel to the war in Iraq. Once the war in Southeast Asia was over, America's domestic divisions healed, its battered armed forces were rebuilt and the nation was much better positioned to deal with the relentless challenges of global leadership.

If Bush took the time to study the real lessons of Vietnam, he would not be so eager to lead America still deeper into the 21st century quagmire he has created in Iraq. Following his path will not rectify the mistakes of Vietnam, it will simply repeat them.

Friday, August 24, 2007

Boston Globe Editorial - Coal's heavy cost

Boston Globe Editorial - Coal's heavy cost
Copyright by The Boston Globe
Published: August 23, 2007

Late in his presidency, George W. Bush finally brought himself to lament America's addiction to oil. But neither he nor leading Democratic politicians have ever rallied the United States to break its addiction to a more lethal form of energy: coal, which supplies half the nation's electricity.

This month, an accident in Utah entombed six miners. Three more died trying to rescue them. Four days after the first accident, three coal miners plunged down a shaft to their deaths in an Indiana mine. In China, which has the world's worst coal-mining fatality record, 181 miners are trapped in a flooded mine shaft with little hope of survival. More than 2,000 Chinese coal miners have died in accidents this year.

Then there are the respiratory conditions, including asthma, that are made worse by the sulfur dioxide, nitrogen oxide, and fine particulates emitted in coal's combustion. Coal-burning power plants are also the principal man-made source of the nerve-system poison mercury. Its buildup in many species of fish has caused the U.S. Food and Drug Administration to advise women of child-bearing age to limit consumption of that otherwise healthful source of protein. Despite such warnings, women in the United States face a 10-to-15 percent risk of bearing children with mercury levels high enough to slow their mental development.

In Appalachia, mining by mountaintop removal is changing the face of the earth. Coal burning is changing the climate of the earth.

Of all the fossil fuels, coal emits the most carbon dioxide, the most common greenhouse gas. Forty percent of America's total of carbon dioxide comes from coal burning, mostly to produce electricity. Gasifying coal before burning it makes it possible to capture and store carbon dioxide emissions, but the process raises the cost of the electricity produced and has yet to be tested at full scale. In the meantime, utilities in the United States and elsewhere continue to build coal-fired plants without controls on carbon dioxide. Last year alone, China built more than 90 major coal-fired power plants.
Today in Opinion

Legislation passed by the U.S. House that would force utilities to start getting more of their power from renewable sources faces an uncertain future in the Senate.

The United States cannot wean itself from coal overnight. But as Congress and all Americans chart the nation's energy future, coal's environmental costs, especially its contribution to global warming, have to be factored into the equation. So do those accidents in Utah, Indiana, and China.

In comparison to coal, no other energy solution - not wind, solar, nuclear, biomass or natural gas - takes as heavy a toll in lives and environmental destruction.

International Herald Tribune Editorial - The CIA report

International Herald Tribune Editorial - The CIA report
Copyright by The International Herald Tribune
Published: August 23, 2007

The CIA inspector general's report on the agency's failures before Sept. 11 was devastating - but not because it showed that America's spies missed the rise of Al Qaeda. George Tenet, then the director of central intelligence, rang the Qaeda alarm. He sent a memo to the entire intelligence community saying that he wanted no effort spared in the "war" with Osama bin Laden. He took on the president's closest advisers to agitate for a strike on a Qaeda base in Afghanistan.

The disturbing thing was that this all happened under President Bill Clinton. When George W. Bush won the White House, Tenet seems to have shifted his priorities. The CIA chief suddenly seemed consumed with hanging on to his job (through such innovative anti-terrorism measures as naming the CIA's headquarters in Langley, Virgina, for Bush's father).

The Bush team was so busy in 2001 trying to upend America's global relationships according to a neo-conservative agenda that the then national security adviser, Condoleezza Rice, did not see any urgency in reports that Al Qaeda was determined to strike in the United States. Tenet later helped hype the "slam dunk" intelligence that Bush used to justify diverting the military from the war of necessity against Al Qaeda in Afghanistan to the war of choice in Iraq.

Another disturbing aspect of the report released this week was its date, June 2005, which neatly sums up Bush's policies on transparency and accountability - he doesn't believe in either. Perhaps it's not surprising that the report wasn't released in 2005. Bush had just given Tenet the Presidential Medal of Freedom for his "pivotal" role in fighting Al Qaeda.

But it's distressing that the CIA director, General Michael Hayden, still says that he would not have released the report if the Democratic-led Congress had not required it. Like his predecessor, Porter Goss, who also quashed the report, Hayden does not seem to have much confidence in the American people.

"It will, at a minimum, consume time and attention revisiting ground that is already well plowed," he said, adding that the inspector general's office cannot do its work unless it is hush-hush.

We could not disagree more. The recommendations of the inspector general were tepid - a panel should decide whether senior leaders should be called to account on relatively narrow issues - and the administration has already refused to comply. But more broadly, the obsession with secrecy and refusal to accept public scrutiny have made a tragic mess of national security policy.

Americans still don't have the full story of how Bush hustled them into a war in which United States soldiers are trapped without hope of victory. Congress has rushed to pass profoundly dangerous changes to the constitutional fabric - the Patriot Act, the Military Commissions Act of 2006, recent changes to the Foreign Intelligence Surveillance Act - without real deliberation.

The good news is that Senator Jay Rockefeller, Democrat of West Virginia, now runs the Senate Intelligence Committee, and he forced the release of this report. He also is pushing the committee to finally finish its investigation into the creation of the myth of Iraqi weapons of mass destruction.

This is not about plowing old ground. Ignoring the mistakes of the past dooms a nation to repeat them. Just look at the comparison Bush drew Wednesday between Iraq and Vietnam. The only lesson he found in the nation's last foreign quagmire of a war was that it ended too quickly.

U.S. confirms telecoms' role in eavesdroppin

U.S. confirms telecoms' role in eavesdropping
By Eric Lichtblau
Copyright by The International Herald Tribune
Published: August 23, 2007

WASHINGTON: The Bush administration has confirmed for the first time that American telecommunications companies played a key role in the National Security Agency's domestic eavesdropping program after asserting for nearly two years that any role played by the companies was a "state secret."

The acknowledgment came in an interview that Mike McConnell, the director of national intelligence, conducted with The El Paso Times last week in which he discussed a number of sensitive issues that the administration has long insisted were classified and has refused to discuss publicly.

He made the remarks in an apparent effort to explain the broadened wiretapping authority that the administration gained from Congress earlier this month in legislation that Democrats are already threatening to revise.

McConnell's office refused to say whether the topics he disclosed, including the role of the telecommunication companies and the number of Americans intercepted through court-approved warrants, had been declassified prior to the interview.

McConnell asserted in the interview, a transcript of which the newspaper released Wednesday, that the public debate surrounding the congressional legislation this month will harm national security by giving terrorists information they can use against the United States.

"Part of this is a classified world. The fact that we're doing it this way means that some Americans are going to die," he said in the Aug. 14 interview.

In acknowledging the role of the telecommunications companies in the program, McConnell said that "under the president's program, the terrorist surveillance program, the private sector had assisted us. Because if you're going to get access you've got to have a partner."

AT&T and several major carriers are now being sued over their alleged role, and McConnell said those lawsuits were a driving force in the administration's efforts to include immunity for telecommunication partners in this month's wiretapping legislation.

"Now if you play out the suits at the value they're claimed, it would bankrupt these companies. So my position was we have to provide liability protection to these private-sector entities," he said.

The measure that Congress passed did not include the immunity protection that the administration had sought.

But McConnell's discussion of the issue is sure to figure in the case now on appeal in a U.S. federal court in San Francisco. In a hearing last week, the appellate judges looked skeptically at the administration's claims that the lawsuits should be thrown out because of a "state secrets" privilege. Lawyers for the government have refused to confirm whether the companies were involved in the surveillance program.

McConnell also sought to rebut claims that the legislation approved by Congress amounted to, in his words, "massive data-mining." The security agency's interception of communications, he said, is "surgical," and he said the number of court warrants approved for interceptions involving people inside the United States totaled "100 or less."

A special court approves more than 2,000 surveillance warrants a year, but officials have never been willing to spell out how many involved Americans.

BP says it won't increase pollution - Move follows outcry sparked by Tribune report, but pledge not to dump more in lake is not legally binding

BP says it won't increase pollution - Move follows outcry sparked by Tribune report, but pledge not to dump more in lake is not legally binding
By Michael Hawthorne
Copyright © 2007, Chicago Tribune
11:47 PM CDT, August 23, 2007

BP backed down Thursday from its plans to dump more pollution into Lake Michigan, but critics want the oil giant to ensure its promises are legally binding.

Responding to a month of unrelenting criticism from politicians and the public, BP pledged it will not invoke provisions of a new permit that allows the largest oil refinery in the Midwest to release significantly more ammonia and suspended solids into the lake.

BP, which promotes itself as environmentally friendly, said it would abide by more stringent limits in its previous permit as the company moves forward with a $3.8 billion expansion of its Whiting, Ind., refinery, the nation's fourth largest.

Indiana regulators on Thursday refused to commit to making BP's new pledge legally binding. But the decision is a victory for opponents who argued the permit undercut decades of efforts to clean up Lake Michigan, a magnet for sport fishing and the source of drinking water for Chicago and scores of other communities.

Bob Malone, chairman of BP America, flew to Chicago to deliver the news personally to Mayor Richard Daley, one of several politicians who said the company's initial plans were unacceptable to the public.

Malone vowed BP would search more thoroughly for alternatives to keep pollution out of the lake. He also threatened to scuttle the expansion project if an acceptable solution could not be found, though a company spokesman later said that was unlikely.

"Ongoing regional opposition to any increase in discharge permit limits for Lake Michigan creates an unacceptable level of business risk for this $3.8 billion investment," Malone said in a statement. "We are going to work hard to make this project succeed."

City officials gave BP a report last week listing technologies in use at other refineries that dramatically reduce ammonia and solids pollution. The report, prepared by Tetra Tech Inc., a leading engineering firm, concluded that BP could upgrade the Whiting refinery's water treatment plant for less than $40 million.

Political pressure
"We are pleased they have made some changes, but we are still going to work with them," Daley said after a 45-minute meeting with Malone at City Hall.

At the behest of U.S. Reps. Judy Biggert (R-Ill.) and Pete Visclosky (D-Ind.), BP is paying Argonne National Laboratory and Purdue University's Calumet Water Institute to evaluate more aggressive treatment technologies.

When BP secured its new water permit, federal and state regulators agreed there was not anything the company could do to keep more pollution out of Lake Michigan. Based largely on what BP told them, regulators concluded there is not enough room at the 1,400-acre refinery for the necessary equipment, according to public documents.

The permit allows BP to put an average of 1,584 pounds of ammonia and 4,925 pounds of suspended solids into the lake every day. The amount of solids, tiny sludge particles that pass through water treatment filters, is the maximum allowed under federal guidelines.

Citing past performance, company officials said the refinery likely would release less pollution than that. But critics said the permit sets a bad precedent, noting that the permit allowed 54 percent more ammonia and 35 percent more solids to be discharged.

As recently as Wednesday, BP had justified the additional pollution by noting the expansion would create 2,000 construction jobs and 80 permanent jobs. Shortly after a hearing before an Indiana legislative committee, though, the company signaled that it would relent to public pressure and change its plans.

"The public is ahead of all of us," said U.S. Rep. Rahm Emanuel (D-Ill.), who had been planning a campaign to get BP's top investors involved in the opposition. "They don't want more pollution in their lake."

Few complained about the permit while it was under consideration earlier this year, something critics said could be attributed to paltry outreach by BP and Indiana regulators. But following a Tribune story about the project in mid-July, opponents gathered more than 100,000 petition signatures, and a bipartisan group of politicians and celebrities urged BP to back off.

Among the opposition, Illinois Gov. Rod Blagojevich threatened to sue Indiana, U.S. Rep. Mark Kirk (R-Ill.) prepared legislation that would strip BP of lucrative tax breaks, and U.S. Sen. Dick Durbin (D-Ill.) and Emanuel dipped into their campaign funds to buy radio ads asking people to sign an online petition.

The U.S. House of Representatives last month voted 387-26 to approve a non-binding resolution urging Indiana regulators to reconsider the permit. And U.S. Sen. Barack Obama (D-Ill.) and Emanuel called for congressional hearings into how the permit squares with provisions in the Clean Water Act.

Opponents even enlisted Eddie Vedder, the lead singer of Pearl Jam, who called for a BP boycott with a "Don't go BP Amoco" protest song at Lollapalooza earlier this month.

"BP is hearing loud and clear that they need to do something different," said Cameron Davis, president of the Alliance for the Great Lakes, an environmental group that formally appealed the permit. "The public doesn't want business as usual."

The company's request to dump more chemicals into the lake runs counter to a provision in the Clean Water Act that prohibits any downgrade in water quality, even if discharge limits are met.

To get around that rule, Indiana regulators allowed BP to install equipment that dilutes its wastewater with clean lake water about 200 feet offshore. BP is the first company in Indiana allowed to use such a "mixing zone" in Lake Michigan, according to state records. Federal regulators increasingly have frowned on the method, which they describe in public documents as a threat to human health and to fish and wildlife.

Permit unchanged
Neither BP nor Indiana officials would commit Thursday to adjusting the permit to legally lower the acceptable amount of ammonia and suspended solids released into the lake. Both the company and the state also said there will be no changes to another provision in the permit that exempts BP from tough limits on mercury pollution until 2012.

Scott Dean, a BP spokesman, said it would be up to the Indiana Department of Environmental Management to alter the permit. But state officials said the company would first have to request the changes.

"The permit as issued is in effect," said Jane Jankowski, a spokeswoman for Indiana Gov. Mitch Daniels. "If the company seeks a modification, it could be subject to change like any other permit."

Why the Republican era may be ending

Why the Republican era may be ending
By Edward Luce in Washington
Copyright The Financial Times Limited 2007
Published: August 23 2007 19:31 | Last updated: August 23 2007 19:31

At the state agricultural fair in Iowa this month, Republican presidential   candidates competed with newborn piglets for the attention of thousands of passers-by. The squealing piglets won hands down.

Whether they were munching pork on a stick, visiting the life-size cow made of butter or grilling meat in photo-ops, most of the candidates were given the cold shoulder.

The Republican party gets a similar reception across America these days. Barack Obama, the 45-year-old Democratic candidate, has attracted crowds of up to 25,000. Mitt Romney, the leading Republican candidate in Iowa, could barely muster 40 listeners when he spoke from the Des Moines Register soapbox at the annual fair.

Whether judged by their anaemic showing in the opinion polls, the unpopularity of George W. Bush or in-fighting among social conservatives, the Republicans face a bleak electoral horizon in 2008. Many observers – including some Republicans – go so far as to pronounce the end of the party’s period of electoral dominance, which dates from Ronald Reagan’s presidential victory in 1980 or possibly back to 1968, when Richard Nixon was first elected to the White House.

They argue that the era of what political scientists call Republican realignment ended when the party was defeated in mid-term congressional elections last year and that the funeral will be held in 2008.

Most of the evidence looks bad for the Republicans. In opinion polls, 50 per cent of Americans identify with the Democratic party against 35 per cent for the Republicans. In campaign finance, congressional Democrats are raising twice as much as their Republican rivals. Likewise, the Democratic presidential candidates have raised $100m (£50m, €74m) more than their Republican counterparts since January.

But these are just numbers. The more abiding problem is structural. Although in intensity and duration the Republican realignment did not rival the party’s ascendancy in the generation that followed the civil war, or the Democratic hegemony that emerged from the Great Depression, it qualifies as a period of dominance.

Only once since 1964 has a Democratic presidential candidate won more than 50 per cent of the popular vote (Jimmy Carter in 1976, who was swept out four years later). In contrast, Republicans have won more than half the vote in six presidential elections in the last 40 years.

According to Kevin Philips, author of the seminal 1969 book The Emerging Republican Majority, which correctly forecast the Republican party’s takeover of the southern states after President Lyndon Johnson’s support for black civil rights, the latest period of Republican ascendancy ran out several years ago.

“If Bill Clinton had been a more effective president after 1992 and Al Gore had been a better candidate in 2000 then we would now be dating the Republican era as lasting from 1968 to 1992,” said Mr Philips in an interview. “The trends that sustained the Republican realignment have run their course.”

Of these, the most important was the Republican takeover of the south in the 1970s and 1980s which, when added to Republican dominance of most of the heartlands, reduced the Democrats to a regional party of the north-east and north-west.

Last year’s election reversed that picture, shrinking the Republican congressional showing primarily to the south and sweeping out what remained of the more moderate “Rockefeller Republicans” (the party’s liberal wing) in the north-east.

“We look dangerously close to being a regional party – with the south and then parts of the south-west and Midwest,” says Vin Weber, a former congressman who now heads Mr Romney’s campaign policy team. “Our challenge has to be to win elections from the centre again.” Perhaps most troublesome for Republicans, Democrats last year stormed their strongholds in much of the west – the most rapidly growing American states, which include Arizona, New Mexico and Colorado. Not coincidentally, the Democrats have chosen to hold next year’s presidential convention in Denver, Colorado. for the Republicans to retain the White House or regain control of the Senate.

In his recent memoirs, Bill Clinton said that Al Gore lost the 2000 election because of his opposition to guns. The Democrats appear to have learnt that lesson. In a Senate vote following Hurricane Katrina in 2005, many Democrats, including Mr Obama although not Mrs Clinton, voted to permit residents (in this case of New Orleans) to keep their firearms during a state of emergency. That would have been unthinkable 10 years ago.

Likewise, the Democratic party fielded many pro-gun candidates in the 2006 Senate races, including Jim Webb in Virginia, who was a Reaganite in his younger days. “The second amendment [upholding the right to bear arms] is in its strongest condition in many decades,” says Wayne LaPierre, head of the National Rifle Association, in an interview. “One of the biggest reasons for this is that Democrats have recognised there is much to lose by opposing it.”

The Democratic party has also neutralised some of its vulnerabilities on issues that matter to religious voters, such as abortion, gay marriage and secularism. In 2004 John Kerry, the Democratic presidential candidate, won just 22 per cent of the white evangelical vote, according to exit polls, compared with the 33 per cent Bill Clinton won in the 1990s. If Mr Kerry had sustained Mr Clinton’s share he would have won the state of Ohio and would now be in the White House instead of Mr Bush.

More encouragingly for Democrats, the Christian coalition looks like it is fragmenting. Not only are evangelicals and Catholics unable to unite behind one Republican candidate, but the movement as a whole appears to be losing steam. Some evangelicals are now more interested in global warming than abortion. Other Christian groups have lost leaders to death or scandal and do not seem able to find replacements.

On many of the “values issues” that have traditionally benefited Republicans, the tide seems to be going the Democratic way. “If you look at the attitude of Americans then the younger the demographic, the larger the support for gay civil union or the woman’s right to choose,” says Tom Schaller, a political scientist at the university of Maryland. “On embryonic stem cell research, which is probably the biggest values issue of the day, Americans of all age groups are in favour.”

Likewise, Republican candidates are finding it hard to ignite enthusiasm among their supporters with traditional rallying cries of fiscal conservatism, low taxes and strong defence. Partly this is because of Mr Bush’s record of big government conservatism, which has inflated America’s national debt on hefty new spending programmes – not all of them related to national security – without addressing America’s looming deficits for Social Security and healthcare.

Chris Edwards, an expert on tax and budget issues at the Cato Institute, the libertarian think-tank, says Republicans need to demonstrate substance behind their fiscal rhetoric given that they are labouring under Mr Bush’s shadow.

Most of the Republican presidential candidates claim to be “Reagan Republicans”. But, so far, Mr Edwards has seen little evidence of genuinely Reaganite policies on the campaign trail. “Reagan gave specific details of the departments and programmes he wanted to close,” he says. “Today’s candidates compare themselves to Reagan but they don’t want to take the tough decisions he made.”

The burden of the Iraq war is even harder for Republicans to escape. Because of the ardent pro-war sentiments of a significant rump of the party base, none of the candidates can afford to distance themselves too much from Mr Bush’s military surge in Iraq during the party primary elections. That will make it much harder for whichever Republican wins the nomination to tack back to the centre during the general election campaign.

Some Republicans see signs that Mr Bush’s surge may be yielding results. But given the state of public opinion, which has moved decisively against the war in the last two years, it will be very hard for that argument to sustain force on the ground in the presidential campaigns.

“What you will probably see is the Republican nominee becoming much more critical of Mr Bush when the primaries are over,” says an adviser to one of the Republican campaigns. “At the moment there is a delicate balancing act but it won’t last much beyond February.”

The departure at the end of this month of Karl Rove, Mr Bush’s electoral “boy genius” who is returning to his home in Texas, also brings into sharp relief the failures of the party’s recent attempts to extend the gains of the Nixon and Reagan era to create a permanent Republican majority. To many Republicans that aspiration now looks like hubris.

Mr Rove’s strategy of enthusing the Republican base helped the party to achieve its historic mid-term congressional victory in 2002, which was extended in 2004. But the same base now looks despondent and fragmented. Much of the Rove magic, including the micro-targeting of voters and “get out the vote” effort that sprung from it, have been copied by the Democrats.

“Karl Rove pioneered techniques in Texas and then on the national stage that took the Democrats by surprise,” says Jim Lindsay, a political scientist at the University of Texas in Dallas. “But techniques only give you a temporary advantage, which already appears to have faded.”

The other piece of Mr Rove’s strategy was to expand the Republican base by targeting America’s fastest-rising demographic segments – the Hispanic community and retiring babyboomers. Mr Rove’s logic was impeccable. But the execution proved faulty.

Mr Bush won 40 per cent of the Hispanic vote in 2004. But that share fell to just 29 per cent in the 2006 congressional elections following a backlash by conservative Republicans against liberal immigration reform, which is now also consuming the Republican presidential campaign.

Likewise, Mr Rove’s dreams of setting up private Social Security accounts to give Americans control over their retirement savings came to naught and frightened many senior citizens. “Both Hispanics and senior citizens are moving in the Democratic direction,” says Mr Lindsay.

What can a Republican presidential hopeful do to overcome these disadvantages? Some Republican optimists are pinning their hopes on a slip-up by the Democrats, perhaps by overreaching in their opposition to the Iraq war or by nominating the wrong presidential candidate. They point out that the Republicans lost the 2006 election because of Mr Bush’s unpopularity and because of the party’s reputation for corruption on Capitol Hill. But the Democrats did not win it, they claim.

But even if many Republican woes can be ascribed to the administration’s unpopularity rather than to a deeper malaise, Mr Bush will still be in the White House next year. Only partly in jest, Mr Philips offers the following advice. “Republicans should sit down and stick pins into voodoo dolls of Mr Bush,” he says. “If someone genuinely charismatic comes along and breaks out of the box then Republican fortunes could change. At the moment that is hard to see.”


Michael Dukakis, the losing 1988 presidential candidate, might be an unlikely adviser to Democratic 2008 hopefuls. But in a speech posted on YouTube this week, the former Massachusetts governor struck a chord with the growing number of Democrats who are worried their party may be getting too complacent about its prospects of winning next year.

Criticising unnamed Democratic colleagues for focusing only on states they believe they can win – the so-called “red-state, blue-state” division between Republicans and Democrats – Mr Dukakis argued that much of America was in fact purple. Democratic candidates should aim higher.

“Quite frankly our colleagues nationally just don’t get it,” said Mr Dukakis. “We have to have a 50-state campaign. Oklahoma is now Democratic, Colorado is now Democratic – we’re making gains in Utah, I kid you not.” Failure to organise more ambitiously, he implied, would leave the Democratic nominee vulnerable to events.

“Some crazy guy will blow up a building with three weeks to go [to polling day], and then we’ll be back in Bush-land again,” he said. “You know what’s going to happen – ‘national security, Democrats are weak on defence’ – we know the way they play the game.”

Diplomatic or not, many took Mr Dukakis’s remarks as a wake-up call for those assuming a new era of Democratic dominance is set to replace the fading Republican one. A more likely scenario, say political analysts, is that America is entering a period where neither party is likely to predominate at the national level for long even if the Democrats have far better prospects in the near future. “My view is that we’re entering a political limbo-land where everything is open to contest,” says Tom Schaller at the University of Maryland.

Those who worry about the Democratic party’s ability to shoot itself in the foot worry most about its political tactics over the Iraq war. Although the war is deeply unpopular with the American public and although that sentiment contributed to the Democratic congressional victory last November, much the same could have been said about the Vietnam war in the early 1970s.

A Democrat-controlled Congress helped force the US military withdrawal from Vietnam in 1973. Yet the party was punished for years afterwards by the electorate for the perception that it was unpatriotic and prone to disrespecting – and, on the leftist fringes, even burning – the American flag.

Many fear that the party could once again be overreaching itself in preparation for next month’s congressional testimony by David Petraeus, the US military commander in Iraq, who will give a progress report on Mr Bush’s “new way forward” in Iraq.

In an uncomfortable echo of the bitter rhetoric of the Vietnam era, Harry Reid, the Democratic Senate majority leader, was accused by Republicans earlier this year of hoisting “the white flag of surrender” when he pronounced that the war in Iraq was already lost – a remark that proved hard to qualify.

This week, many Democrats attacked Brian Baird, a fellow Democratic lawmaker representing a district in the state of Washington, after he returned from a fact-finding visit to Iraq. “There is no question that the political situation in Iraq is still a challenge,” Mr Baird said. “But it is my belief that discussion of premature withdrawal makes it more difficult for the political situation to resolve itself constructively.”

The second Democratic vulnerability could be in its choice of presidential candidate. Such is her lead in the polls, most Democrats assume that Hillary Clinton will probably take the nomination early next year. Many have praised Mrs Clinton’s tightly run and well-funded campaign.

But there are also concerns about the possibility of a backlash against political dynasty. If Mrs Clinton became president in 2009, that would raise the prospect of a Bush or a Clinton in the White House for 32 unbroken years (including George Bush senior’s eight-year stint as vice-president) – and 36 years if she were re-elected.

Some Republicans – including, many suspect, Karl Rove – are hoping that Mrs Clinton becomes the Democratic nominee, as they believe this would improve Republican prospects. The former first lady’s unfavourable ratings – the proportion of Americans expressing a negative view – are stubbornly higher than for other Democratic candidates. Equally, however, Mrs Clinton inspires intense loyalty in those who support her.

It may be that Mrs Clinton sails through the nomination and then wins the general election next year. But a lot would depend on her opponent. The same would hold for any Democratic nominee. “The point is that American politics is wide open again,” says Jim Lindsay of the University of Texas. “It is hard to see any permanent majorities on the horizon.”

Subprime worries hit Bank of China shares

Subprime worries hit Bank of China shares
© Reuters Limited
Aug 24 03:58:29

Shares in Bank of China and its subsidiary BOC Hong Kong slid on Friday amid worries that higher-than-expected exposure to sub-prime mortgages would eat into their earnings.

Bank of China shares extended opening losses and were down 6.11 per cent at HK$3.84, while BOC Hong Kong slid 4.2 per cent to HK$18.74. The Hang Seng Index was down 1.21 per cent.

UBS and Morgan Stanley both cut their ratings on BOC Hong Kong, the city’s second-biggest lender, citing concerns over its sub-prime exposure.

State-controlled Bank of China said late on Thursday that it held US$8.965bn in U.S. subprime mortgage-backed bonds and US$682mn in collateralised debt obligations at the end of June.

A meltdown in the U.S. subprime mortgage market has triggered a global credit squeeze and roiled markets over the past several weeks.

Bank of China, which posted a forecast-beating 52 per cent rise in first-half net profit, said it had set aside provisions of 388mn yuan and 758mn yuan, respectively, to account for potential losses.

”The size of the subprime exposure is bigger than expected,” said a banking analyst who declined to be named.

Rival Industrial and Commercial Bank of China, the world’s largest lender by market value, revealed on Thursday that it holds US$1.23bn in mortgage-backed securities, accounting for 4.32 per cent of its foreign exchange investment portfolio.

The state-controlled bank said it had incurred no loss on the portfolio, which accounts for 0.0012 per cent of its total assets.

ICBC shares were down 2 per cent on Friday morning.

Bank of China’s subprime bonds account for 3.51 per cent of Bank of China’s securities portfolio, while the CDOs account for 0.27 per cent of the total.

Morgan Stanley and UBS on Friday downgraded BOC Hong Kong by one notch to equal-weight and neutral, respectively, saying the stock was likely to be weighed down by its investment in sub-prime mortgages.

BOC Hong Kong disclosed it has US$1.6bn invested in sub-prime mortgage related asset-backed securities, Morgan Stanley said.

”We expect some losses ahead,” it said.

UBS also said the bank’s trading income was disappointing. It cut its price target for the bank to HK$20.80 per share from HK$21.70.

BOC Hong Kong on Thursday reported a 5.3 per cent rise in interim net profit to HK$7.47bn.

But Steve Cheng, associate director at Shenyin Wanguo, said the selling pressure on Bank of China would soon pass.

”The policy favouring the bank in the individual qualified domestic institutional investor scheme will attract buyers but some people may sell off China financials because of BOC. But to see the actual impact (of its exposure), we’ll have to wait,” he said.

Bank of China said it would begin accepting applications from mainland individuals next week interested in investing in Hong Kong-listed securities for the first time under a government pilot programme.

Its branch in the northern port city of Tianjin has been designated the initial gateway for the programme, which will be expanded nationwide and is expected to prop up Chinese stocks listed in Hong Kong over the longer term.

US intelligence is gloomy over Iraq

US intelligence is gloomy over Iraq
By Demetri Sevastopulo in Washington
Copyright The Financial Times Limited 2007
Published: August 24 2007 03:00 | Last updated: August 24 2007 03:00

The Iraqi government will continue to ‘struggle’ to achieve political reconciliation over the next year despite prospects for a moderately better security environment, according to a new US intelligence report.

The director of national intelligence yesterday re-leased the latest national intelligence estimate on Iraq, which said the US surge had helped ‘check for now’ the steep escalation in violence that gripped Iraq last year.

But the NIE concluded the Iraqi government would have difficulty implementing the political reconciliation that is considered key to bringing long-term stability to Iraq.

‘We assess, to the extent that coalition forces continue to conduct robust counter-insurgency operations and mentor and support the Iraqi security forces, that Iraq's security will continue to improve modestly during the next six to 12 months,’ said the report.

‘But . . . levels of insurgency and sectarian violence will remain high and the Iraqi government will -continue to struggle to achieve national-level political reconciliation and improved governance.’

The report comes as US politicians grow increasingly impatient with the government of Nouri al-Maliki, the Iraqi prime minister.

Carl Levin, the Michigan Democrat who heads the Senate armed services committee, this week called for the ousting of Mr Maliki.

‘Political and security trajectories in Iraq continue to be driven primarily by Shia insecurity about retaining political dominance, widespread Sunni unwillingness to accept a diminished political status, factional rivalries with the sectarian communities resulting in armed conflict, and the actions of extremists such as AQI (al-Qaeda in Iraq) and elements of the Sadrist Jaish al-Madhi militia that try to fuel sectarian violence,’ the NIE concluded.

The intelligence assessment found that while tribal Sunni sheiks working with US forces had reduced the capabilities of AQI, that co-operation had not translated into wider support for the Shia-dominated Iraq government.

The last NIE on Iraq, released in February,concluded that the term ‘civil war’ applied to parts of the conflict, and warned that the Iraqi government would be hard-pressed to achieve reconciliation given the country's sectarian divides.

The report released yesterday said that ‘developments in Iraq are unfolding more rapidly and with greater complexity’ than wasenvisioned in the February NIE.

The NIE also assessed that ‘the Iraqi government will become more precarious over the next six to 12 months because of criticism by other members of the major Shia coalition . . Grand Ayatollah Sistani, and other Sunni and Kurdish parties’.

Sunni 'killed'

By Steve Negus, Iraq correspondent

Al-Qaeda-linked fighters attacked a Sunni village in Diyala on Thursday, killing 15 people, police and witnesses quoted by agencies said. The reports said that 10 attackers were killed in the fighting in the village of Ibrahim al-Yahya, which began when militants detonated a bomb at the house of a local anti-al-Qaeda tribal sheikh, killing him and a member of his family.

Pressure growing to ease subprime crisis

Pressure growing to ease subprime crisis
By Jeremy Grant in Washington
Copyright The Financial Times Limited 2007
Published: August 24 2007 03:33 | Last updated: August 24 2007 03:33

The growing political importance of the subprime mortgage crisis was underscored on Thursday when Chris Dodd, Senate banking committee chairman, called on the Bush administration to speed up efforts that could allow the Federal Housing Administration to help.

The FHA is a 1930s-era agency that is the largest mortgage insurer in the world. The Treasury is already working with the Department of Housing and Urban Development (HUD) on measures that could allow the FHA to help more subprime borrowers with refinancings.

This would help the many borrowers who are in the autumn facing a switch in their payments at low introductory, or “teaser”, rates to more expensive rates.

Mr Dodd has for weeks been urging the administration – without success – to ease problems in the mortgage market by agreeing to lift caps on the mortgage portfolios of Fannie Mae and Freddie Mac, the two big “government-sponsored” lenders, which buy mortgages and package them into securities.

By now urging faster action on FHA reform – an issue that has the administration’s support – Mr Dodd has highlighted how some Democrats appear to be taking as much political advantage of the issue as they can.

Bill Gross, a prominent US fund manager, has also attracted attention by calling on the Bush administration to do more to help struggling borrowers.

In a letter to Henry Paulson, Treasury secretary, and Alphonso Jackson, his counterpart at HUD, Mr Dodd welcomed statements by Mr Paulson that many families caught up in the subprime crisis had been victimised by “bad lending practices”. He said: “I understand that the staff of [the two departments] are discussing ways to use the FHA single-family insurance programme to help borrowers escape these mortgages by refinancing them into more affordable FHA loans. I want to urge you to move expeditiously in this direction by making any administrative changes to the programme that are needed to achieve this worthy goal.”

By contrast, efforts by top Democrats such as Mr Dodd to persuade the Bush administration to allow higher caps on Fannie and Freddie’s mortgage portfolios have so far fallen on deaf ears.

Federal Financial Analytics, a Washington-based consultancy, said it believed it was “looking more and more likely that the administration will give the GSEs some leeway on their portfolios, although not the general increase Fannie has been seeking”.

Sentinel makes Chapter 11 filing - Clients sue over discount asset sale

Sentinel makes Chapter 11 filing - Clients sue over discount asset sale
By Becky Yerak and Robert Manor
Copyright © 2007, Chicago Tribune
August 18, 2007

Sentinel Management Group Inc. filed for Chapter 11 bankruptcy Friday, less than a week after the Northbrook-based cash-management firm halted redemptions from investors because of market volatility.

Its list of creditors with the 20 largest unsecured claims includes four Chicago-area firms: SMW Trading Co., Jump Trading LLC, Fortis Clearing Americas and Stone Capital Group Inc.

Chapter 11 allows a business to operate as it reorganizes its finances through a court-approved plan.

According to the filing, Sentinel has between 200 and 1,000 creditors and assets and liabilities of more than $100 million.

Numerous other local creditors listed include Alaron Clearing LLC, the Chicago Bears, the Chicago Tribune and Levy Restaurants.

"The purpose of the filing is to give the company the protections of Chapter 11 so they can continue to serve the interests of their customers," said Ronald Barliant, the attorney representing Sentinel.

The bankruptcy filing came as clients began hitting Sentinel with lawsuits, accusing it of selling assets too cheaply and without approval. On Thursday it was revealed that Sentinel had sold hundreds of millions of dollars in assets to giant Chicago hedge fund Citadel Investment Group.

Penson GHCO, the futures-clearing subsidiary of publicly traded Penson Worldwide Inc. of Dallas, filed suit late Friday afternoon in Cook County Circuit Court against both Sentinel and Citadel Investment Group, claiming that Sentinel sold assets to Citadel at discounts of up to 30 percent of face value.

Penson Worldwide, which went public in May 2006, said it would suffer an after-tax loss of $6.5 million if Sentinel's sale of certain assets isn't reversed.

Sentinel declined to comment Friday, and a Citadel spokeswoman could not be reached.

Earlier Friday, Penson said in a statement Sentinel sold some of its assets without approval and in breach of contract.

"To liquidate such a portfolio at such a discount to market value constitutes, among other things, a reckless disregard of industry fair practice," Penson President Daniel Son said in a statement Friday, calling it a "hastily arranged sale of Sentinel's assets at unfair prices."

Futures brokers said they used Sentinel to temporarily stash client money. Before the portfolio sale to Citadel it managed $1.6 billion and mostly served futures brokers, futures hedge funds, rich individuals and institutions.

Sentinel promised to obtain the best interest possible consistent with safety and to make money readily available.

On Monday, however, the company halted redemptions, citing instability in credit markets.

Also Friday afternoon, a U.S. district judge blocked the sale of some of the $312 million in Sentinel assets to Citadel, granting a temporary restraining order that applied only to Farr Financial Inc. and Velocity Futures.

The two Sentinel clients argued before U.S. District Judge Ronald Guzman that they would suffer if the sale of Sentinel's assets were allowed to go through at the discount Citadel expected to pay.

Guzman's order remains in effect until Aug. 31. The order prevents Sentinel from transferring or selling any interests Farr or Velocity placed with Sentinel.

"We think this transaction is closed," said Steven Roeder, a lawyer representing Citadel.

In an interview afterward, Roeder said the Farr and Velocity assets account for a "very small" portion of the sale.

After the hearing, Robert Trizna, a lawyer representing Farr, said his client has been kept in the dark for days.

"The next week or two will be very interesting as we discover what went on," Trizna said. "What did Citadel know and when did it know it?"

Citadel had bought $312 million in securities from Sentinel this week, less than the approximately $500 million originally thought to have changed hands.

Lawyers representing Sentinel clients have complained that Sentinel could have gotten a better price.

"It is disgraceful," said Jeff Barclay, who represents futures brokers. "This is a terrible transaction."

Lawyer Jeffrey Schulman, who represents some non-broker clients of Sentinel, said he knows nothing beyond two letters sent by Sentinel. Sentinel's "Web site is down and phone calls go nowhere," he said.

Meanwhile, the fate of an unknown number of Sentinel's clients remains in limbo.

"We know nothing," said one futures broker. "Nobody will talk with us."

The broker said his firm had more than $10 million on deposit with Sentinel. On Tuesday, as news of Sentinel's problems spread, he directed that the assets in his account be transferred to another institution.

"The answer we got is 'We never have done that,'" he said.

On Wednesday, Sentinel wasn't answering the phone, so the firm dispatched a worker to Sentinel's Northbrook office.

"He was turned away at the door," the broker said.


Top Republican says bring troops home

Top Republican says bring troops home
By Demetri Sevastopulo in Washington
Copyright The Financial Times Limited 2007
Published: August 23 2007 18:16 | Last updated: August 24 2007 01:37

John Warner, the most influential Republican senator on military affairs, on Thursday called on President George W. Bush to bring some troops home from Iraq by Christmas to send a “sharp and clear message” to the Iraqi government.

“The Iraqi government under the leadership of prime minister [Nouri al-] Maliki have let our troops down,” he said.

Mr Warner, who has just returned from an Iraq visit, spoke hours after the Director of National Intelligence released the latest National Intelligence Estimate on the country, which concluded that the Baghdad government would continue to “struggle” to achieve political reconciliation.

He said Mr Bush should send a clear message that the US was serious about wanting the Iraqi government to take more responsibility for the future of the country. “I think no clearer form of [message] than if the president were to announce on [September] the 15th that, in consultation with our senior military commanders, he’s decided to initiate the first step in a withdrawal of our forces,” said Mr Warner.

“I say to the president, respectfully, pick whatever number you wish...5,000 could begin to redeploy and be home to their families and loved ones no later than Christmas of this year.”

When Mr Warner last year said the situation in Iraq was “going sideways”, it spurred other Republicans to distance themselves from White House policy.

“If George W. Bush has lost John Warner, then he is in deep, deep trouble,” said Larry Sabato, a political science professor at the University of Virginia. “It is [also] a very important moment for the Republicans.”

Gordon Johndroe, a White House spokesman, said the administration would “wait until Ambassador Crocker and General Petraeus return from Baghdad and make their report”.

Mr Warner said the NIE had confirmed his view that the Iraqi government was not succeeding in achieving the political reconciliation considered crucial for the long-term stability of Iraq.

The NIE, which represents the views of the whole US intelligence community, said “levels of insurgency and sectarian violence will remain high and the Iraqi government will continue to struggle to achieve national-level political reconciliation and improved governance”.

The NIE concluded that the US surge had helped “check for now” the steep escalation in violence that gripped Iraq last year.

The report comes as US politicians grow impatient with the Iraq government.

Mr Bush showed his frustration this week when he refused to endorse Mr Maliki. Carl Levin, the Michigan Democrat, this week called for the dismissal of Mr Maliki.

The NIE concluded that “political and security trajectories” in Iraq continue to be driven by, among other factors, Shia insecurity, widespread Sunni unwillingness to accept a diminished political status, factional rivalries and al-Qaeda actions.

Thursday, August 23, 2007

Nervous columnist issues big disclaimer By Garrison Keillor

Nervous columnist issues big disclaimer By Garrison Keillor
Copyright © 2007, Chicago Tribune
August 22, 2007

They put Jose Padilla away for having filled out an application form to attend an Al Qaeda training camp, a milestone in criminal-conspiracy law that makes me wonder about you readers and what you might do that some ambitious prosecutor could trace back to something I wrote 16 months ago.

I'm serious. Here we are, consorting on the page, in the old conspiracy between Author and Unnamed Others, my hand on your shoulder, whispering stuff, speaking freely -- including things I may not have thought through a-l-l-o-f-t-h-e-l-e-g-a-l-i-m-p-l-i-c-a-t-i-o-n-s-o-f -- so let me just say this: I accept no liability for whatever you may or may not do after reading my column. It has nothing to do with me. Zero. Zilch.

You readers know me and I don't know you. This now makes me nervous. We are invisibly linked through words I have written, and yet the meaning of those words, as determined by a jury of 12 men and women good and true, could be far, far from what I intended and as I sit there at the defense table in the Miami courtroom, smelling the musky cologne of your idiot attorney, looking past him at you, you wretched cretin, as the linguistics expert for the State, a tall bunheaded woman with a doctorate in literary deconstruction, testifies that the subtext of my column in question was a command that you plant an explosive device in the heel of your cowboy boot and try to run through airport security hollering "I'm a-comin', Mama!"

I know people who went to prison for protesting the war in Vietnam and it is nothing to be taken lightly. It can mess with a person's mind and not every mind survives the message. You would like to imagine that you would be heroic like Nelson Mandela or Voltaire, but I am not looking for opportunities to be heroic. I am 65, thank you very much, and very, very uninterested in spending time in prison. My plan is to moulder gently in my own home and read the books I wrote term papers about as an English major and dandle my grandkids and at some point write a heart-warming memoir about my years in broadcasting.

So whatever weirdness you are plotting, stop it right now. Put those liquids or gels away. Stop going to the airport and asking strangers to carry packages aboard the aircraft. Stop offering to pack their bags for them. Whatever suspicious things you are doing, stop it right now. Don't look away as if I were talking to somebody else. I am talking to YOU. Yes. You.

I don't know you. I never knew you. I never asked you to read this column. Isn't that right?

If so, sign here: _________.

DATE: _____.

Anybody who does not sign is hereby assumed not to be a reader of this column and therefore no responsibility of mine. Tell your lawyer to go bark up some other tree.

Back when I was a child, thanks to my rigorous upbringing that included stories about Boys From Good Homes Who Fell In With Bad Company, I assumed that I would wind up in a federal penitentiary, and that is why I didn't go into engineering or medicine or law, professions that give you some definite criminal capabilities. Instead I went into the paragraph profession, but now that conspiracy has become such a useful all-purpose tool for prosecutors, I feel rather exposed. What if I had written years ago that the World Trade Center was ugly, which it was, and I wish it didn't exist, and what if that paragraph had been found paper-clipped to the Al Qaeda application?

Ever since that dreadful September day, the current vice president has been obsessed with the idea that someone somewhere must be prevented from doing the horrible thing they may or may not be about to do and if the Constitution and common law and common sense must be crunched underfoot in order to prevent that, then so be it. Where there is smoke, there is fire. This, however, is rough on smokers, if the Fire Department is called out whenever someone exhales. And that's what happened to Mr. Padilla. He lit up a stogie and was nailed for contemplating arson. God forgive us our zealous cruelty.


Garrison Keillor is an author and host of "A Prairie Home Companion." E-mail:

International Herald Tribune Editorial - Stacking the electoral deck

International Herald Tribune Editorial - Stacking the electoral deck
Copyright by The International Herald Tribune
Published: August 22, 2007

America's Electoral College should be abolished, but there is a right way to do it and a wrong way. A prominent Republican lawyer in California is doing it the wrong way, promoting a sneaky initiative that, in the name of Electoral College reform, would rig elections in a way that would make it difficult for a Democrat to be elected president, no matter how the popular vote comes out. If the initiative passes, it would do serious damage to American democracy.

California currently gives all 55 of its electoral votes - the biggest electoral college prize in the nation - to the candidate who wins the statewide popular vote. Virtually all states use this winner-take-all method. The California initiative, which could go to a vote in June, would instead give the 2008 presidential candidates one electoral vote for every congressional district that they win, with an additional two electoral votes going to whoever got the most votes statewide. (Democrats appear, rightly, to have backed off from plans to try just as anti-democratic a trick in North Carolina.)

The net result of the California initiative would be that if the Democratic candidate wins in that state next year, which is very likely, the Republican candidate might still walk away with 20 or more of the state's electoral votes. The initiative, backed by a shadowy group called Californians for Equal Representation, is being promoted as an effort to more accurately reflect the choices of the state's voters, and to force candidates to pay more attention to California, which is usually not in play in presidential elections. It is actually a power grab on behalf of Republicans.

The Electoral College should be done away with, but in the meantime, any reforms should improve the system, not make it worse.

If California abandons its winner-take-all rule while red states like Texas do not, it will be hard for a Democratic nominee to assemble an Electoral College majority, even if he or she wins a sizable majority of the popular vote. That appears to be just what the backers of the California idea have in mind.

If voters understand that the initiative is essentially an elaborate dirty trick posing as reform, they are likely to vote against it. But judging by the misleading name of their organization, the initiative's backers want to fool the public into thinking the change would make elections more fair. They are planning on putting it to a vote in June 2008, an election when there will be few other things on the ballot, and turnout is expected to be extremely low.

This bad-faith initiative is yet another example of the ways in which referenda can be used for mischief and a reminder of why they are a bad way to resolve complex public-policy issues.

Opponents of the initiative have announced that they are sponsoring their own, rival initiative, which would commit California to a national plan that aims to ensure that the winner of the national popular vote becomes president. That idea makes much more sense.

Leading Republicans, including Governor Arnold Schwarzenegger, have been silent about the initiative to split California's electoral votes, but they should be speaking out against it.

The fight isn't about Republicans vs. Democrats. It is about whether to twist the nation's system of electing presidents to give one party an unfair advantage. No principled elected official, or voter, of either party should support that.

Lehman to shut down subprime unit

Lehman to shut down subprime unit
By Ben White and Victoria Kim in New York
Copyright The Financial Times Limited 2007
Published: August 22 2007 19:46 | Last updated: August 23 2007 00:47

Lehman Brothers intends to shut down its subprime mortgage unit, BNC Mortgage, shedding 1,200 jobs and, at least temporarily, leaving a business that has been highly profitable across Wall Street in recent years.

Lehman’s decision raises questions about whether other investment banks that acquired subprime lenders in recent months will have to close them or take big losses. Merrill Lynch paid $1.3bn for First Franklin and other subprime businesses last September and Morgan Stanley paid $706m for Saxon Capital in December.

Thorold Barker on why the US hous­ing mar ket has not seen the last of its strug gles
Questions were raised at the time about the price of each deal, which were made as cracks in the subprime market were appearing. Bank executives replied that the platforms were flexible and could be scaled down if business were to decline.

Lehman will take a charge against earnings of about $52m (£26m) to dispose of BNC; most of it in the third quarter. The charge is small compared with those of other groups that have left the subprime business, but the larger question is impact on future earnings as Lehman ceases to package subprime mortgages into securities for sale to investors.

Lehman shares are down about 24 per cent this year. Shares in Bear Stearns, another player in mortgage securitisation, have fallen about 29 per cent. Lehman shares rose 2 per cent on Wednesday.

Lehman will continue to originate mortgages by its Aurora Loan Services platform that focuses on Alt-A mortgages, which are closer to meeting prime mortgage standards. If the subprime business improves, Lehman will be able to issue subprime loans through Aurora.

Lehman reports third-quarter earnings next month. It may offer further details of exposure to the subprime market to dispel rumours that have plagued it and other banks. Lehman had said subprime activities accounted for less than 3 per cent of revenues in recent quarters.

Lehman’s action on Wednesday came as Accredited Home Lenders, a subprime lender, and HSBC announced combined losses of more than 2,000 jobs.

Accredited Home Lenders said it would cut 1,600 jobs, more than 60 per cent of its workforce, to boost liquidity after private equity group Lone Star backed out of its $400m purchase of the company. HSBC said it would cut 600 jobs.