U.S. incarcerates more than any other nation: report

Thu Feb 28, 2008 5:13pm EST

By James Vicini

WASHINGTON (Reuters) - The United States incarcerates more people than any other country in the world and for the first time in the nation's history, more than one in every 100 American adults is confined in a prison or jail, according to a report released on Thursday.

The report by the Pew Center on the States said the American penal system held more than 2.3 million adults at the start of the year.

The far more populous nation of China ranked second with 1.5 million behind bars, with Russia a distant third with 890,000 inmates.

"Beyond the sheer number of inmates, America also is the global leader in the rate at which it incarcerates its citizenry, outpacing nations like South Africa and Iran," according to the report.

Tough sentencing laws, record numbers of drug offenders and high crime rates have contributed to the United States having the largest prison population and the highest rate of incarceration in the world, criminal justice experts say.

The latest report tracked similar findings on the U.S. prison population by the Justice Department and various private groups. A report in November by a criminal justice research group found the number of people in U.S. prison had risen eight-fold since 1970.

The new report said that the national prison population has nearly tripled between 1987 and 2007.

"The number of people behind bars in the United States continued to climb in 2007, saddling cash-strapped states with soaring costs they can ill afford and failing to have a clear impact either on recidivism or overall crime," it said.

States last year spent more than $44 billion on corrections, the report said, compared with $10.6 billion in 1987, the report said, adding that the rate of increase for prison costs was six times greater than for higher education spending.

The report said the current prison growth has not been driven mainly by a parallel increase in crime or a corresponding surge in the nation's population.

"Rather, it flows principally from a wave of policy choices that are sending more lawbreakers to prison and, through the popular 'three-strikes' measures and other sentencing enhancements, keeping them there longer," it said.

The report said some states, such as Texas and Kansas, have acted to slow their prison population growth, with greater use of community supervision for lower-risk offenders and sanctions other than prison for minor probation and parole violations, such as missing a counseling session.

FDIC to Add Staff as

By DAMIAN PALETTA
February 26, 2008; Page A2

WASHINGTON -- The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

• Out of Retirement: The FDIC is recruiting 25 of its retirees experienced in handling insolvent financial institutions.

• The Reasoning: The agency is preparing for an increase in failed financial institutions as the housing and credit markets worsen.

• What's Next: The FDIC will give an update today on the number of "problem" institutions that regulators are watching most closely.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas.

The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.

In public, policy makers are debating what role the government should play in trying to stabilize the housing market and minimize foreclosures. Meanwhile, regulators have worked discreetly behind the scenes to closely monitor the growing number of troubled banks and thrifts considered at risk.

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

In job postings on its Web site, the FDIC said it is looking for people with "skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions." Such positions would require "very frequent overnight travel," the posting said, and would pay up to $180,770.

"The notion of bringing back some people who have been through it before is very smart," said William Isaac, who was FDIC chairman from 1981 until 1985. All told, the FDIC has roughly 4,600 employees, far fewer than the about 15,000 it had as recently as 1992.

On Sunday, the FDIC ran a newspaper ad seeking companies that could service commercial loans, mortgages and student loans in the event of a bank failure. It didn't say how much a company could earn in this area.

The FDIC rated 65 banks and thrifts as "problem" institutions at the end of the third quarter of 2007, up from 47 institutions a year earlier. Both figures are low by historical standards. At the end of 1993, there were 572 "problem" banks and thrifts. The FDIC is expected to update its data on "problem" institutions today.

Before the housing market soured, the banking industry was enjoying one of its most profitable stretches in U.S. history. There wasn't a single bank failure from July 2005 through January 2007, an unprecedented span.

There have only been four bank failures in the past 12 months, a rate the FDIC has easily been able to handle.

In many parts of the country, the housing-market decline has hamstrung banks, and regulators have reported weakening performance of commercial real estate, small business and credit-card loans. Exacerbating the situation is a cash-flow crunch, which makes it harder for banks to obtain funding to originate new loans.

FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Reich have warned of a pickup in bank failures. Last week, Mr. Reich reported that the thrift industry lost a record $5.2 billion in the fourth quarter.

The FDIC was created by Congress in the 1930s after a series of bank runs during the Great Depression. At the end of 2007, it had $52.4 billion in its fund that backstops the nation's insured deposits.

Write to Damian Paletta at damian.paletta@dowjones.com¹

Oil Hits a High; Some See $4 Gas by Spring

February 26, 2008

By JAD MOUAWAD

Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel.

The increases could not come at a worse time for the economy. With growth slowing, high energy prices that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could exacerbate the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.

“The effect of high oil prices today could be the difference between having a recession and not having a recession,” said Kenneth S. Rogoff, a Harvard University economist.

The depth of the nation’s economic problems became clearer Tuesday with the release of figures showing that prices at the producer level rose 1 percent in January, driven in large measure by energy costs. Compared with a year ago, prices were up 7.4 percent, the worst producer price inflation in the United States since 1981.

Other new figures showed that home prices around the country are falling at an accelerating pace, suggesting no end is in sight for the housing meltdown. As of Tuesday, regular gasoline was selling at a nationwide average of $3.14 a gallon, according to AAA, the automobile club, up from $2.35 a year ago. The price has jumped 19 cents a gallon in two weeks. Energy specialists predict that as demand picks up further this spring and summer, retail prices will surpass the high of $3.23 a gallon set last Memorial Day weekend.

On Tuesday, diesel prices rose to a record $3.60 a gallon, compared with $2.62 a gallon last year.

For a decade, rising oil prices had failed to dent global economic growth. In the United States, consumers absorbed the higher costs thanks to easy credit and rising prosperity, while in developing countries, government subsidies helped ease the pain. The rise in energy prices was a result of growing demand around the world.

The price of oil has quadrupled in six years, and Tuesday’s close was not far below the inflation-adjusted all-time high set in April 1980, after the Iranian revolution. That record, $39.50 a barrel, equals $103.76 in today’s money.

As oil prices spiked last fall, low wintertime gasoline demand helped keep prices in check. But now, experts say, the price of oil is finally showing up at the pump.

For Americans like Phyllis Berry, a 31-year-old General Motors factory worker in Cleveland, gasoline costs are starting to hurt.

“I used to fill it up pretty regularly, but now I drive it until the tank is almost empty, looking for the cheapest place to buy gas,” said Ms. Berry, who drives a beat-up Dodge Caravan. She said that she used to take her four children to the movies four or five times a month. But with the cost of gas, tickets, popcorn and soda adding up to $70, they now go only once a month.Still, things are not quite as bad as during the 1970s and 1980s oil shocks. In the early 1980s, at the height of the last energy crisis, energy accounted for more than 8 percent of household spending. As prices fell and the economy became less energy intensive, energy costs fell under 4 percent of household spending in the early 1990s.

With the run-up in prices in recent years, economists say energy’s share of disposable income is slowly creeping up again. Last December, that figure reached 6.1 percent, the highest level since 1985. The increase of two percentage points — amounting to $200 billion — is a huge sum, a little less than half what Americans spend each year on new cars and automobile parts.

“You’re adding an oil shock on top of a crunch on credit and a housing collapse,” said Nigel Gault, an economist at Global Insight. “Even the U.S. economy cannot withstand all of that at the same time.”

American consumers have responded belatedly by cutting back on their energy use. Oil demand in the United States grew by just 0.4 percent in 2007 and is expected to be flat in 2008.

But global oil demand, the relentless driver behind higher prices, is still expected to increase by 1.4 million barrels a day this year, analysts estimate. That growth, from China and the Middle East, may help keep prices up, whatever happens to the American economy.

According to the Energy Department’s latest forecast, gasoline prices should peak near $3.40 a gallon this spring. That figure would match the inflation-adjusted record price for gasoline that was reached in early 1981.

But many outside analysts consider the government’s forecast conservative, foreseeing a sharper spike as refiners come out of the seasonal maintenance period and start producing summer-grade gasoline in March and April.

“We’ve gone this high without the normal summer dynamics,” said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. “That’s when I think we will have the big jump — of 50 cents to 75 cents a gallon.”

Mr. Kloza said he expects gasoline to peak around $3.50 to $3.75 a gallon nationwide. Geoff Sundstrom, AAA’s spokesman, echoed that view and added that $4-a-gallon gasoline is possible this summer. “We’ve gone from a worrying situation for gasoline to one that is quite alarming,” Mr. Sundstrom said.

Oil prices are unlikely to drop any time soon, analysts said. Barclays Capital recently raised its long-term prediction, saying prices could reach $137 a barrel in 2015, up from a previous target of $93 a barrel.

“The remorseless move up in long-run prices has not yet fully played out,” Barclays analysts said in a note to investors.

While demand keeps growing, producers are struggling to catch up. They are not replacing the oil they are pumping out of the ground fast enough because of various restrictions on access to fields, as well as rising costs. Meanwhile, demand from China, India and the Middle East is expected to push oil consumption up by more than 1 million barrels a day, each year, for the next decade.

“An oil crisis is coming in the next 10 years,” John Hess, the chairman of Hess Corporation, said at a recent conference in Houston hosted by Cambridge Energy Research Associates. “It’s not a matter of demand. It’s not a matter of supplies. It’s both.”

Christopher Maag contributed reporting.

11 reasons Bernanke's recession lasts till 2011 - PAUL B. FARRELL

11 reasons Bernanke's recession lasts till 2011

Timing the next bull: Kick-start it in 2008? Or is it a long secular bear?

By Paul B. Farrell, MarketWatch

Last update: 7:32 p.m. EST Feb. 25, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- Remember that hot 1973 Stealer's Wheel song marking the end of the Nixon era? "'Cause I don't think that I can take anymore. Clowns to the left of me, jokers to the right, here I am stuck in the middle with you!"

It's still a perfect metaphor. Testifying before Congress: Fed Chairman Ben Bernanke on the left. Treasury Secretary Henry Paulson on the right. The American public stuck in the middle.

Last summer they assured us the subprime-credit crisis was "contained." We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: "America will avoid a recession." New data tells a different story.

Clowns to the left ... jokers right ... stuck in the middle ... can't take it anymore.

But we have to, we have to hang on at least 10 months more, praying they won't do too much more damage. But I'm afraid they will: more lies, blunders and incompetence will drag out this bear. Like the song says: "Got a feeling something ain't right."

Read the new InvestmentNews, a professional journal for financial advisers. The lead headline grabs you: "Bad times for stocks could last many years." A long secular bear.

Do you believe it? That's the big question today: When's the next bull? How long will the bear last? And forget Washington's rhetoric about "no recession." The truth is, you can call it a "bear," "slow growth," a "downturn," a "recession" -- call it whatever you want. Timing's the real question. How long will it last? When will it bottom? 2008? 2011?

Test your timing skill. You tell us, what'll drag this out 30 months, like in 2000-2002? Or shorten it? Here are 11 critical factors for your timing equation, things that could make this bear-recession shorter or longer. You tell us. Add a comment. What's your prediction: How long before the next bull?

1. Stagflation: Bernanke's no-win Achilles heel

Reading Fed-watcher William Fleckenstein's new book, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve," you get the feeling that for 18 years America's banking system was run like a "new age" hippy commune, by a Ayn Rand free spirit who believed "anything goes."

Now the Fed's run by a college professor and Fleckenstein says he's "in over his head." Except this is the real world, a $13 trillion economy in a $48 trillion world, not a college seminar on economic theory.

In the 1970s Nixon faced a similar problem, convinced then by Fed Chairman Arthur Burns: "No one ever lost an election on account of inflation." Wrong! Low rates generated inflation not growth. That stagflation triggered a bear/recession. Is Professor Ben trapped, repeating history?

2. Housing-credit meltdown: We've got a long way to go!

It's far from over folks and still spreading: Years of inventory, foreclosures, building slowdown, risky bond insurers, weak rating agencies, funds holding bad debt, freezing exits and fuzzy math on values. Yet Bernanke and Paulson still live in a Washington bubble of wishful-thinking fantasies.

Economic realists say what's needed is a massive $1.6 trillion demand-driven program (that's the record cash Corporate America's hoarding) not a dinky $160 billion supply-side "appease the voters" giveaway that ends up increasing the odds of a lengthy Nixon/Burns style bear-recession.

3. Commodities: World's new reserve 'currency,' not dollars

Forget paper money and IOUs. Commodities are the world's new "currency:" Hard stuff like oil, grains, metals, gold. And that means America is financing the growth of our enemies, surrendering our long-term economic power for short-term oil-guzzlers and plastic toys. We are responsible for making Russia and China into threatening world powers. Buffett warned us. We're selling the farm, piece by piece.

4. Toxic derivatives: World's $516 trillion ticking time bomb

Derivatives are great for deal-by-deal risk management in a $48 trillion GDP world. But leverage them 10 times over across the globe and we got a financial "weapon of mass economic destruction."

Bill Gross warns that the world's new unregulated "shadow banking system" is printing new money, now at $516 trillion, out of thin air, with no "central banks of last resort" backing up the "Frankenstein" monsters they've created.

5. Massive debt: Everywhere, trade, federal, states, local

America's Comptroller General David Walker, Congress's head accountant who is leaving his position next month, warns our government is "bankrupting America." Using unethical accounting worse than Enron's. Fiscal responsibility lost. He sees "striking similarities" with Rome. Both parties are gluttons in a spending orgy.

We spend-spend, load debt on future generations, then use accounting gimmicks to hide our greedy excesses: Hidden earmarks. Supplemental war appropriations. Meaningless IOUs after stealing from Social Security.

6. America's new 'pushers:' Banks feeding consumer addicts

Trader's Daily captured it perfectly: "Never underestimate the power of the superpsycho, hyper-spending American consumer. Where there is no cash, they will sell their soul. Or just charge it. Let's just not think about what it all means for credit-card debt down the road."

Meanwhile, the credit meltdown is making banks desperate for money. A recent Chase credit-card commercial fuels consumer addictions: Wife wants bigger television. Husband smiles. They shop to the pounding drumbeat of Queen's hit 80s song: "I want it all, I want it all, I want it all ... and I want it now!" Tag line: "Chase what matters!" Yes, Chase debt, all you addicts. Forget saving, spend like there's no tomorrow.

7. More wars: Pentagon predicts bigger, costlier conflicts

The Pentagon's internal studies see a perfect storm accelerating wars worldwide: Global population growth, limited natural resources and global warming. Our war machine is exploding. The Pentagon gets over 50% in the new federal budget. We're only 21% of the world's GDP, yet spend 47% of the world's total military expenditures.

Our power-hungry mindset is becoming self-destructive, suicidal. Remember Nixon strategist Kevin Phillips' warning: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."

8. Greed: Wall Street and Corporate America's defining 'value'

Values start at the top. But the top won't change for 10 months. Leadership, statesmanship and character are vanishing. Five short years ago Corporate America and the mutual fund industry were consumed by greed. How quickly we forget.

It's worse today. We see greed consuming not just Wall Street's clueless CEOs, but the entire industry: Outrageous bonuses of $38 billion amid mega-billion write-offs. Fire sales of billions more American equity to sovereign nations.

From the top down, greed is driving America from bubble to bubble. Wall Street's already fueling the next bubble, trading on a volatile market.

9. Democracy failing: America now run by 35,000 lobbyists!

Forget government "of the people, by the people, and for the people." Adam Smith's "invisible hand" is now a small group of 35,000 highly paid, greedy lobbyists demanding handouts. They run America from the shadows, for those at the top of the economic food chain and vastly outnumber Washington's 537 elected officials.

Nationally there's an estimated quarter million lobbyists, with hundreds of millions of dollars to buy favors in campaign contributions. Politicians talk "change," but America's lobbyists will still be working for their special interest clients in 2009. And they'll fight all "changes."

10. America's already in a recession, and in denial

This year's elections will be a huge factor in lengthening the recession. Our lame-duck government will delay action on critical issues. It reminds me of my days counseling addicts and alcoholics. Change never happens until they admit they have a problem. Same here.

Paulson and Bernanke cannot admit there's a recession. They'd have to take blame for America's failed policies. And congressional Democrats are weak co-conspirators in this meltdown. Nobody has the guts to take responsibility. They're all like addicts and alcoholics, in denial, giving lip-service to "change," while they blame the other guys and support ineffectual stimulus plans.

Vote for whomever, but this lame-duck mindset plus lingering partisan rancor will push any recovery at least into 2009, probably delay the next bull till 2010 or 2011.

11. Class warfare: Superrich vs. Main Street America

No matter who wins, the presidential campaign is warning us: A major battle's coming between "the rich and the rest;" over taxes, benefits, cuts, power.

For years the media collaborated with Wall Street and Corporate America, hyping "Ownership, the New American Dream," where everyone benefits, shares the wealth, gains a piece-of-the-action, ownership in "The Dream" through the magic of housing, stocks, growth, profits, retirement plans. But the housing-credit contagion killed the dream.

Yes, the superrich did get richer. But "the rest" didn't. And they're waking up to a widening gap. A backlash is brewing and will explode ... delaying a recovery and a new bull.

Clowns to the left, jokers right, we're stuck in the middle. Can't take it anymore? Add a timing comment. Tell us: When's the recovery? Next bull? Late 2008? Not till 2011?

Commodities Boom Sends French Food Prices Rocketing

Mon Feb 25, 2008 8:06pm GMT

PARIS (Reuters) - Prices of grain and milk-based food products have surged in France in recent months due to booming commodities prices, a French consumer group said in a report.

A monitoring of over 1,000 products between the end of November and early January in five supermarkets showed that yoghurt, milk and pasta had most suffered from the surge in many agricultural commodities that started last year.

"They're not rising, they've caught fire," monthly 60 Millions de Consommateurs said in its March report, circulated ahead of publication on Tuesday.

"Everywhere since the start of the year, spaghetti, yoghurt, camembert cheeses, have seen staggering rises in prices," it said, stressing that the surge had hit all types of products, famous brands as well as supermarket own-brands.

Two hundred products saw a rise of more than 10 percent over six weeks, with the packs of spaghetti reviewed rising between 31 and 45 percent, plain yoghurts between 17 and 40 pct and bottled milk between 20 and 37 pct.

Prices of agriculture products have surged across the board this year, hitting everything from cereals to milk and meat. Some economists have labeled the rise "agflation," attributing it to tight stocks and surging demand from emerging countries.

U.S. Army Battling To Save Equipment

Gear Piles Up at Depots, Awaiting Repair

By Ann Scott Tyson
Washington Post Staff Writer
Tuesday, December 5, 2006; A01

ANNISTON, Ala. -- Field upon field of more than 1,000 battered M1 tanks, howitzers and other armored vehicles sit amid weeds here at the 15,000-acre Anniston Army Depot -- the idle, hulking formations symbolic of an Army that is wearing out faster than it is being rebuilt.

The Army and Marine Corps have sunk more than 40 percent of their ground combat equipment into the wars in Iraq and Afghanistan, according to government data. An estimated $17 billion-plus worth of military equipment is destroyed or worn out each year, blasted by bombs, ground down by desert sand and used up to nine times the rate in times of peace. The gear is piling up at depots such as Anniston, waiting to be repaired.

The depletion of major equipment such as tanks, Bradley Fighting Vehicles, and especially helicopters and armored Humvees has left many military units in the United States without adequate training gear, officials say. Partly as a result of the shortages, many U.S. units are rated "unready" to deploy, officials say, raising alarm in Congress and concern among military leaders at a time when Iraq strategy is under review by the White House and the bipartisan Iraq Study Group.

Gen. Peter J. Schoomaker, the Army's chief of staff, is lobbying hard for more money to repair what he calls the "holes" in his force, saying current war funding is inadequate to make the Army "well." Asked in a congressional hearing this past summer whether he was comfortable with the readiness levels of non-deployed Army units, Schoomaker replied: "No."

Lt. Col. Mike Johnson, a senior Army planner, said: "Before, if a unit was less than C-1," or fully ready, "someone would get fired." Now, he said, that is accepted as combat-zone rotations are sapping all units of gear and manpower. "It's a cost of continuous operations. You can't be ready all the time," he said.

Across the military, scarce equipment is being shifted from unit to unit for training. For example, a brigade of 3,800 soldiers from the 3rd Infantry Division that will deploy to Iraq next month has been passing around a single training set of 44 Humvees, none of which has the added armor of the Humvees they will drive in Iraq.

The military's ground forces are only beginning the vast and costly job of replacing, repairing and upgrading combat equipment -- work that will cost an estimated $17 billion to $19 billion annually for several more years, regardless of any shift in Iraq strategy. The Army alone has 280,000 major pieces of equipment in combat zones that will eventually have to be fixed or replaced. Before the war, the Army spent $2.5 billion to $3 billion a year on wear and tear.

At Anniston, the sprawling lots of tanks and other armored vehicles are just the start of a huge backlog in broken-down gear.

"There's stuff, stuff everywhere," Joan Gustafson, a depot official, said as she wheeled her brown Chevrolet van through a landscape of rolling hills lined with armadas of mobile guns.

"There's another field of M1s," she said, motioning toward a swath of M1A1 Abrams tanks next to the winding road. "We're just waiting for someone to tell us what to do with them."

The Army's five depots carry out the highest level of maintenance for Army gear ranging from rifles and other small arms to tanks, helicopters and missile systems. Since the U.S.-led invasion of Iraq in 2003, the Army has left behind hundreds of thousands of pieces of equipment in Iraq and has relied heavily on field maintenance facilities in Kuwait.

But as the war has continued, Army leaders have recognized that they cannot afford to wait for a drawdown of troops before they begin overhauling equipment -- some of it 20 years old -- that is being used at extraordinary rates. Helicopters are flying two or three times their planned usage rates. Tank crews are driving more than 4,000 miles a year -- five times the normal rate. Truck fleets that convoy supplies down Iraq's bomb-laden roads are running at six times the planned mileage, according to Army data.

Equipment shipped back from Iraq is stacking up at all the Army depots: More than 530 M1 tanks, 220 M88 wreckers and 160 M113 armored personnel carriers are sitting at Anniston. The Red River Army Depot in Texas has 700 Bradley Fighting Vehicles and 450 heavy and medium-weight trucks, while more than 1,000 Humvees are awaiting repair at the Letterkenny Army Depot in Pennsylvania.

Despite the work piling up, the Army's depots have been operating at about half their capacity because of a lack of funding for repairs. In the spring, a funding gap caused Anniston and other depots to lose about a month's worth of work, said Brig. Gen. Robert Radin, deputy chief of staff for operations at the Army Materiel Command at Fort Belvoir.

"Last year we spent as much time trying to find available money as managing our program," he said. "We don't want to go into the next rotation . . . with equipment that's at the far end of its expected life."

Responding to urgent requests from the Army and Marine Corps, Congress approved an extra $23.8 billion in October to replace worn-out equipment in fiscal 2007. With the money, the Army plans to double the workload at its depots, which will repair and upgrade 130,000 pieces in 2007, up from 63,000 last year. This will include a quadrupling of the number of tanks, Bradleys and other tracked vehicles overhauled, from 1,000 to 4,000.

At Anniston, which will handle 1,800 combat vehicles in fiscal 2007, a cavernous 250,000-square-foot repair shop is humming as damaged tanks are rolled in one by one and disassembled with the help of giant cranes. Removing an M1 tank's turret alone takes a day and a half, and the entire overhaul requires 54 days and costs about $1 million, said Ted A. Law, the depot's vehicle manager.

Earnest Linn, 58, a heavy-mobile-equipment mechanic who as of January will have worked at Anniston for 30 years, said that "it's never been like this" since the end of the Vietnam War.

In October, Anniston became the official repair facility for the Army's newest armored vehicle, the Stryker. Repairs for those vehicles will soar from eight in fiscal 2006 to 75 this fiscal year -- including 58 that received some level of battle damage, said Gregory McMath, program manager for Stryker repair.

"This one hit a triple-stacked land mine," he said, peering up into the underbelly of a Stryker ripped open by the blast. Some of the Strykers are coming in with 40,000 miles on their odometers, he said.

Workers at Anniston take pride in patching, rebuilding and testing the broken-down gear and returning it to like-new condition. Often, they must innovate by taking parts from wrecked vehicles if new parts do not exist or have not been ordered in time.

"The supply system can't keep up with us," said Rodney Brodeur, division chief for turbine engines, speaking over the clang and whir of his workshop. It is projected that in 2007, Anniston will rebuild 1,400 turbine engines for M1 tanks, compared with 800 this year.

Fine sand and heavy use erode the blades on the tank engine rotors, eventually leading the blades to snap off and stall the engines. Such erosion, which is invisible to the Army's field mechanics, can lead to catastrophic failure without timely maintenance.

"If your Cadillac stops by the side of the road, that's an inconvenience," Brodeur said. "If the tank quits in the middle of the fight, that's a hard target."

Surprise move reveals global crisis' depth; holders decry action

Alistair Macdonald And Carrick Mollenkamp, Wall Street Journal
18 Feb 2008 05:31

LONDON -- The U.K. government has decided to take full control of troubled mortgage lender Northern Rock PLC, in a surprise move that reflects the depth of the global credit crisis and represents an embarrassment for Prime Minister Gordon Brown.

After a tense weekend of last-minute negotiations with two bidders -- a consortium led by entrepreneur Richard Branson's Virgin Group Ltd. and Northern Rock's own board -- the government decided that it could best serve the interests of taxpayers and consumers by "temporarily" nationalizing the bank, Chancellor of the Exchequer Alistair Darling told a hastily called news conference yesterday. He said the government would introduce the necessary legislation this morning, and that a new management team led by former Lloyd's insurance market Chief Executive Ron Sandler would assume operational control of the bank immediately.

"I wanted to see a private-sector solution, but it had to be on the right terms," said Mr. Darling. "Governments have to see these things through." He said the bank would continue to operate as usual, making loans and taking deposits, but that its shares would be delisted before trading opened today on the London Stock Exchange.

Taking full responsibility for one of the country's largest mortgage lenders is a politically treacherous move for the government, which has faced strident criticism for its role in the affair since September, when its announcement of an emergency bailout package triggered the U.K.'s first bank run in more than a century. The decision amounts to a bet that it can manage the lender -- which owes the government some £25 billion ($49 billion) -- and then sell it at a better price sometime later, when financial markets improve. Mr. Darling said he still hopes to find a private owner for Northern Rock as soon as possible, though he declined to set any target dates.

"The government took credit for the economy's strength and now its reputation has been damaged by hasty decisions made on the hoof," said Stuart Thomson, a fixed-income fund manager and economist at Resolution Asset Management in Glasgow. Opposition leaders and analysts said the decision to nationalize could be a prelude to a slow winding down of Northern Rock's business, as loans and depositors are gradually paid off.

Mr. Sandler, speaking at the news conference, suggested that some downsizing -- including job cuts -- will be necessary.

The government's inability to find a private-sector buyer for Northern Rock highlights the severity of the global financial crisis, which has slammed banks and made funding for all kinds of private deals difficult to obtain. While Northern Rock is the first bank to be nationalized in the current crisis, many others have had to turn to governments and outside investors for emergency support. The German government, for example, has pledged more than €1 billion ($1.47 billion) to prop up IKB Deutsche Industriebank, which became the first notable European victim of the U.S. subprime-mortgage crisis last summer. Some of the world's largest banks -- including UBS AG, Citigroup Inc. and Merrill Lynch & Co. -- have turned to Asian and Middle Eastern investors for billions of dollars in capital infusions after suffering heavy losses on mortgage investments.

The government's move immediately drew harsh criticism from Northern Rock's shareholders, who had been supporting the bid from the bank's board in the hopes that it would put a better value on their shares. Mr. Darling said the bank's shares will be valued by an independent arbiter, on the basis that the company doesn't have government support. That could leave shareholders with next to nothing.

"It's appalling and very disappointing, and I think the government is in for a load of trouble," said Roger Lawson, communications director at the U.K. Shareholders Association, which represents the interests of about 100,000 individual Northern Rock shareholders. "There will almost certainly be shareholder litigation." Two hedge funds that collectively control nearly 20% of the shares -- SRM Global Fund, a fund of Monaco-based SRM Advisers, and RAB Special Situations, operated by London's RAB Capital PLC -- also had thrown their support behind the management bid. An RAB spokesman declined to comment, while officials at SRM weren't available for comment.

Mr. Branson, the Virgin Group chairman, said he was "very disappointed" by the government's decision to nationalize the bank.

The recent history of nationalizations in the U.K. suggests the experience could be painful for the government. In October 2001, then-Transport Minister Stephen Byers put the operator of the country's rail infrastructure, Railtrack Group PLC, into receivership after years of providing it with state subsidies. Eight months later, Mr. Byers quit his post amid criticism of his management style and shareholder lawsuits demanding compensation. London's High Court rejected the shareholders' demands in October 2005, but the case forced the government to endure years of negative attention.

The main opposition Conservative party immediately denounced the move. "Now the taxpayer will bear the full risk of lending £100 billion of mortgages in an uncertain housing market," said the party's "shadow" chancellor, George Osborne.

Northern Rock first ran into trouble in August of last year, when the short-term lending markets on which it depended for financing froze up amid broader turmoil in credit markets. An attempt to engineer a takeover by U.K. bank Lloyd's TSB failed after the Bank of England refused to provide financing for the deal at a preferential rate. To calm a run on the bank that broke out after the bailout package was announced, the government took the unusual step of guaranteeing all deposits.

The government had been in negotiations with various bidders since last fall, but as the global financial crisis deepened and funding became a problem, the list of viable suitors dwindled to two. A consortium led by Virgin Group and Northern Rock's board had each been in talks with the government about making offers, although discussions had stalled owing to uncertainty over financing.

The government had threatened to nationalize Northern Rock if a private-sector bid failed to meet its requirements, stressing that it would put the interests of taxpayers and consumers over those of the bank's shareholders. It agreed to guarantee new bonds that would be issued by the revamped Northern Rock in order to pay off the government loans, and said it wanted an "appropriate share" of any potential upside equity returns.

Both bidders made last-minute efforts to sweeten their offers late last week, but as of yesterday those offers were still very far from what the government wanted, said people familiar with the situation. Under the Virgin bid, for instance, Northern Rock's total value would need to rise to at least £2.7 billion -- several times its current level -- before the government would reap any financial benefit. The government also felt the management proposal wouldn't raise enough new cash to protect taxpayers -- the bank's largest creditors -- from the risk of losses.

"When we looked at the two proposals that we had from Virgin and from Northern Rock as compared to the option of a temporary period of public ownership, simply, the numbers didn't stack up," Mr. Darling said. "The better deal was for a temporary period of public ownership."

People familiar with the matter said Mr. Darling made his final decision after 2 p.m. local time yesterday, after consulting with Mr. Brown and his advisers at Goldman Sachs. Mr. Branson learned of the decision at 3 p.m., according to a person familiar with the matter.

To oversee Northern Rock, the government has turned to Mr. Sandler, a veteran of London's financial community with experience in putting out financial fires. The former consultant -- he got his start in 1976 with Boston Consulting Group and later worked with Booz, Allen & Hamilton -- helped restructure the Lloyd's of London insurance market in the 1990s after investors were hit with billions of pounds in losses, the result of natural disasters and asbestos and pollution liabilities. In 1999, banking company National Westminster PLC hired him to lead a defense against a hostile takeover bid from Bank of Scotland PLC. Royal Bank of Scotland Group PLC ultimately ended up buying the bank.

At yesterday's news conference, Mr. Sandler said he planned to arrive at Northern Rock's office in Newcastle today. He surfaced as a potential head of a nationalized Northern Rock in mid-January, an early signal that the government saw the institutional takeover as a possibility.

Some Homeless Squat in Foreclosed Houses

Sunday February 17, 2:26 pm ET
By Thomas J. Sheeran, Associated Press Writer Some Homeless People Turn to Empty Houses for Shelter Amid Nation's Foreclosure Crisis CLEVELAND (AP) -- The nation's foreclosure crisis has led to a painful irony for homeless people: On any given night they are outnumbered in some cities by vacant houses. Some street people are taking advantage of the opportunity by becoming squatters.

Foreclosed homes often have an advantage over boarded-up and dilapidated houses abandoned because of rundown conditions: Sometimes the heat, lights and water are still working.

"That's what you call convenient," said James Bertan, 41, an ex-convict and self-described "bando," or someone who lives in abandoned houses.

While no one keeps numbers of below-the-radar homeless finding shelter in properties left vacant by foreclosure, homeless advocates agree the locations -- even with utilities cut off -- would be inviting to some. There are risks for squatters, including fires from using candles and confrontations with drug dealers, prostitutes, copper thieves or police.

"Many homeless people see the foreclosure crisis as an opportunity to find low-cost housing (FREE!) with some privacy," Brian Davis, director of the Northeast Ohio Coalition for the Homeless, said in the summary of the latest census of homeless sleeping outside in downtown Cleveland.

The census had dropped from 40 to 17 people. Davis, a board member of the National Coalition for the Homeless, cited factors including the availability of shelter in foreclosed homes, aggressive sidewalk and street cleaning and the relocation of a homeless feeding site. He said there are an average 4,000 homeless in Cleveland on any given night. There are an estimated 15,000 single-family homes vacant due to foreclosure in Cleveland and suburban Cuyahoga County.

In Texas, Larry James, president and chief executive officer of Central Dallas Ministries, said he wasn't surprised that homeless might be taking advantage of vacant homes in residential neighborhoods beyond the reach of his downtown agency.

"There are some campgrounds and creek beds and such where people would be tempted to walk across the street or climb out of the creek bed and sneak into a vacant house," he said.

Bertan, who doesn't like shelters because of the rules, said he has been homeless or in prison for drugs and other charges for the past nine years. He has noticed the increased availability of boarded-up homes amid the foreclosure crisis.

He said a "fresh building" -- recently foreclosed -- offered the best prospects to squatters.

"You can be pretty comfortable for a little bit until it gets burned out," he said as he made the rounds of the annual "stand down" where homeless in Cleveland were offered medical checkups, haircuts, a hot meal and self-help information.

Shelia Wilson, 50, who was homeless for years because of drug abuse problems, also has lived in abandoned homes, and for the same reason as Bertan: She kept getting thrown out of shelters for violating rules. "Every place, I've been kicked out of because of drugs," she said.

Michael Stoops, acting executive director of the National Coalition for the Homeless, hasn't seen evidence of increased homeless moving into foreclosed homes but isn't surprised. He said anecdotal evidence -- candles burning in boarded-up homes, a squatter killed by a fire set to keep warm -- shows the determination of the homeless to find shelter.

Davis said Cleveland's high foreclosure rate and the proximity of downtown shelters to residential neighborhoods has given the city a lead role in the homeless/foreclosure phenomenon.

Many cities roust homeless from vacant homes, which more typically will be used by drug dealers or prostitutes than a homeless person looking for a place to sleep, Stoops said.

Police across the country must deal with squatters and vandalism involving vacant homes:

-- In suburban Shaker Heights, which has $1 million homes on wide boulevards, poorer neighborhoods with foreclosed homes get extra police attention.

-- East of San Francisco, a man was arrested in November on a code violation while living without water service in a vacant home in Manteca, Calif., which has been hit hard by the foreclosure crisis.

-- In Cape Coral, Fla., a man arrested in September in a foreclosed home said he had been living there since helping a friend move out weeks earlier.

Bertan and Wilson agreed that squatting in a foreclosed home can be dangerous because the locations can attract drug dealers, prostitutes and, eventually, police.

William Reed, 64, a homeless man who walks with a cane, thumbed through a shoulder bag holding a blue-bound Bible, notebooks with his pencil drawings and a plastic-wrapped piece of bread as he sat on a retainer wall in the cold outside St. John Cathedral in downtown Cleveland. He's gone inside empty homes but thinks it's too risky to spend the night.

Even the inviting idea of countless foreclosed empty homes didn't overcome the possible risk of entering a crack house.

"Their brains could be burned up," said Reed, who didn't want to detail where he sleeps at night.

Sometimes it's hard to track where the homeless go.

In Philadelphia, the risk is too great to send case workers into vacant homes to check for homeless needing help, said Ed Speedling, community liaison with Project H.O.M.E. "We're very, very wary of going inside. There's danger. I mean, if the floor caves in. There's potential danger: Sometimes they are still owned by someone," Speedling said.

William Walker, 57, who was homeless for seven years and now counsels drifters at a sprawling warehouse-turned-shelter overlooking Lake Erie, has seen people living in foreclosed homes in his blue-collar neighborhood in Cleveland. He estimated that three or four boarded-up homes in his neighborhood have homeless living there from time to time.

Sometimes homeless men living in tents in a nearby woods disappear from their makeshift homes, Walker said. "The guys who were there last year are not there now. Are they in the (foreclosed) homes? I don't know. They are just not in their places," Walker said.

Britain nationalises troubled Northern Rock bank

LONDON (AFP) — Britain announced on Sunday the nationalisation of troubled bank Northern Rock six months after it was hit by the global credit crunch, in an embarrassing blow for Prime Minister Gordon Brown's government.

"The government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership," finance minister Alistair Darling said during a surprise press conference at the Treasury in London.

The move -- the first official nationalisation in Britain since the 1970s -- is likely to deal a serious blow to the government's reputation for economic competence.

The government had delayed making a decision about the future of Northern Rock since problems emerged last August in the hope of finding a private sector solution to the lender's woes.

The centre-left Labour government had wanted to avoid nationalisation, which has a stigma in Britain and harks back to the 1970s when the Labour party earned a reputation for disastrous management of the economy.

Darling said the government had rejected two private takeover bids for Northern Rock from entrepreneur Richard Branson's Virgin Group and the bank's own management team.

Darling said this was because "in the current market conditions, we do not believe that the two proposals deliver sufficient value for money for the taxpayer."

He stressed that Sunday's move was temporary, saying that the "long-term future of this bank must lie in the private sector" and pledging to transfer ownership back to the private sector "when it is right to do so."

But Branson said the government's decision was "not the right answer," and expressed his disappointment in a statement in which he argued that "a commercial solution would have been the best way forward."

The government has recruited Ron Sandler, the former chief executive of underwriters Lloyds of London, to run the nationalised Northern Rock.

Based in the north-east city of Newcastle, Northern Rock was plunged into a severe crisis last August when the global credit squeeze forced it to request emergency help from the Bank of England (BoE), Britain's central bank.

The turbulence prompted customers to queue in the thousands to withdraw savings from branches across the country, in turn affecting consumer confidence in the banking sector as a whole.

The BoE has lent the troubled bank about 25 billion pounds (33.4 billion euros, 49.4 billion dollars) in emergency funding since September to keep it afloat.

"Northern Rock will continue operating as a bank on a commercial basis. It will be open for business as usual tomorrow morning and thereafter," Darling added at the press conference.

"Importantly, savers and depositors' money remains safe and secure."

The move was immediately criticised by the main opposition Conservatives, whose finance spokesman George Osborne described it as a "panic decision" and "catastrophic."

Nationalisation would give a "very damaging signal that Britain is returning to a 1970s style of managing the economy," he told Sky News television, adding: "This is the day that the government's reputation for economic competence effectively died."

Last month, the government unveiled plans to keep Northern Rock in the private sector but said it could still be nationalised.

Over the weekend, Northern Rock's board submitted a revised offer increasing the amount of cash it was prepared to pump in to the troubled lender.

Branson had planned to relaunch Northern Rock under the name Virgin Bank and provide a 1.25-billion-pound injection of fresh capital, including 500 million pounds generated through a rights issue priced at 25 pence per share.

Commentators say that both Brown and Darling will likely suffer politically as a result of the move.

Brown worked with former premier Tony Blair to build up the ruling Labour party's reputation for economic competence when he was finance minister for 10 years from 1997 to last year, when he replaced Blair.

And Darling's personal credibility has been seriously hit by the crisis -- a poll published Sunday by the Sunday Times newspaper said that 44 percent of respondents no longer thought he should be finance minister.

He is due to make a full statement on the situation to the House of Commons Monday, while Brown will likely face questioning on the issue at his monthly press conference, also on Monday.

China Didn’t Check Drug Supplier, Files Show

By WALT BOGDANICH and JAKE HOOKER

A Chinese factory that supplies much of the active ingredient for a brand of a blood thinner that has been linked to four deaths in the United States is not certified by China’s drug regulators to make pharmaceutical products, according to records and interviews.

Because the plant, Changzhou SPL, has no drug certification, China’s drug agency did not inspect it. The United States Food and Drug Administration said this week that it had not inspected the plant either — a violation of its own policy — before allowing the company to become a major supplier of the blood thinner, heparin, to Baxter International in the United States.

Baxter announced Monday that it was suspending sales of its multidose vials of heparin after 4 patients died and 350 suffered complications. Why the heparin caused these problems — and whether the active ingredient in the drug, derived from pig intestines, was responsible — has not been determined.

The plant in Changzhou, west of Shanghai, appears to fall into the type of regulatory void that American and Chinese health officials are trying to close — in which chemical companies export pharmaceutical ingredients without a Chinese drug license.

China provides a growing proportion of the active pharmaceutical ingredients used in drugs sold in the United States. And Chinese drug regulators have said that all producers of those ingredients are required to obtain certification by the State Food and Drug Administration. However, some of the active ingredients that China exports are made by chemical companies, which do not fall under the Chinese drug agency’s jurisdiction.

In December, American and Chinese regulators signed an agreement under which China promised to begin registering at least some of the thousands of chemical companies that sell drug ingredients. Some of these companies are the source of counterfeit or diluted drugs, including those used to treat malaria.

Discussions that led to the accord began after an unlicensed chemical plant in China made a tainted drug ingredient that poisoned more than 170 people in Panama, killing at least 115.

The heparin plant in China has not been accused of providing a harmful product. The American majority owner of that plant, Scientific Protein Laboratories, also owns a plant in Wisconsin that produces the active ingredient in heparin for Baxter.

In response to questions, Scientific Protein issued a statement confirming that its Chinese plant had no license from the Chinese agency, but said that its raw ingredients come from a licensed supplier.

The statement added that an “independent private U.S. validation company” had found the plant to be in compliance with good manufacturing practices. And a spokeswoman for Baxter, which buys heparin’s active ingredient from Scientific Protein, said it had inspected the China plant less than six months ago.

A spokesman for China’s State Food and Drug Administration, Shen Chen, said Friday that “as far as we know, it is not a drug manufacturer — it is a producer of chemical ingredients.”

Eric S. Langer, managing partner of BioPlan Associates, which prepares and publishes reports on the biopharmaceutical and biotechnology industry, said he found it hard to believe that a company exporting the heparin ingredient would not be licensed by Chinese drug regulators.

“Being able to produce a pharmaceutical or a biologic in the U.S. or anywhere without having regulatory oversight really doesn’t happen,” Mr. Langer said, adding, “I find it surprising from a regulatory perspective, and I find it surprising from a business perspective.”

Karen Riley, a spokeswoman for the United States Food and Drug Administration, said inspectors from that agency would be visiting the Changzhou plant soon. Ms. Riley said she could not be more specific. Earlier in the week she described her agency’s failure to inspect the plant as a “glitch.”

Congress has criticized the oversight by the Food and Drug Administration of bulk pharmaceutical ingredients made by foreign manufacturers and sold in the United States. A growing number of those ingredients now come from China. Of the 700 approved Chinese drug plants, the United States agency has inspected only 10 to 20 each year.

Baxter makes roughly half of the United States supply of heparin, which is used widely for surgical and dialysis patients. Problems with Baxter’s heparin were first noticed late last year when four children undergoing dialysis in Missouri had severe allergic reactions minutes after being injected with the drug.

The F.D.A. then allowed Baxter to deliver heparin that it was in the midst of shipping, for fear that a total recall would lead to a shortage of the drug, but cautioned doctors to use as little of it as possible and to administer it very slowly.

The agency also suggested that doctors give steroids or antihistamines with the Baxter heparin to help prevent allergic reactions.

Erin Gardiner, a spokeswoman for Baxter, defended Scientific Protein, saying it had been making the heparin ingredient for more than 30 years. “They have been a good supplier,” she said.

Although the cause of the adverse reactions has yet to be determined, she said tests performed by her company had detected unspecified differences between some lots of the ingredient. She did not say whether the lots had come from China or from the Wisconsin plant, which Scientific Protein also owns.

Those differences had not turned up in routine testing that the company does on active ingredients, Ms. Gardiner said, but she said Baxter had used “advanced testing techniques” to find the differences. She added that it was unclear whether the finding was significant.

Two Congressional committees have asked the Food and Drug Administration for more information about inspections of plants making the active ingredient of heparin.

Andrew W. Lehren contributed reporting.

The Chicken Doves: Elected to end the war, Democrats have surrendered to Bush on Iraq by Matt Taibbi

Quietly, while Hillary Clinton and Barack Obama have been inspiring Democrats everywhere with their rolling bitchfest, congressional superduo Harry Reid and Nancy Pelosi have completed one of the most awesome political collapses since Neville Chamberlain. At long last, the Democratic leaders of Congress have publicly surrendered on the Iraq War, just one year after being swept into power with a firm mandate to end it.

Solidifying his reputation as one of the biggest pussies in U.S. political history, Reid explained his decision to refocus his party's energies on topics other than ending the war by saying he just couldn't fit Iraq into his busy schedule. "We have the presidential election," Reid said recently. "Our time is really squeezed."

There was much public shedding of tears among the Democratic leadership, as Reid, Pelosi and other congressional heavyweights expressed deep sadness that their valiant charge up the hill of change had been thwarted by circumstances beyond their control — that, as much as they would love to continue trying to end the catastrophic Iraq deal, they would now have to wait until, oh, 2009 to try again. "We'll have a new president," said Pelosi. "And I do think at that time we'll take a fresh look at it."

Pelosi seemed especially broken up about having to surrender on Iraq, sounding like an NFL coach in a postgame presser, trying with a straight face to explain why he punted on first-and-goal. "We just didn't have any plays we liked down there," said the coach of the 0-15 Dems. "Sometimes you just have to play the field-position game...."

In reality, though, Pelosi and the Democrats were actually engaged in some serious point-shaving. Working behind the scenes, the Democrats have systematically taken over the anti-war movement, packing the nation's leading group with party consultants more interested in attacking the GOP than ending the war. "Our focus is on the Republicans," one Democratic apparatchik in charge of the anti-war coalition declared. "How can we juice up attacks on them?"

The story of how the Democrats finally betrayed the voters who handed them both houses of Congress a year ago is a depressing preview of what's to come if they win the White House. And if we don't pay attention to this sorry tale now, while there's still time to change our minds about whom to nominate, we might be stuck with this same bunch of spineless creeps for four more years. With no one but ourselves to blame.

The controversy over the Democratic "strategy" to end the war basically comes down to whom you believe. According to the Reid-Pelosi version of history, the Democrats tried hard to force President Bush's hand by repeatedly attempting to tie funding for the war to a scheduled withdrawal. Last spring they tried to get him to eat a timeline and failed to get the votes to override a presidential veto. Then they retreated and gave Bush his money, with the aim of trying again after the summer to convince a sufficient number of Republicans to cross the aisle in support of a timeline.

But in September, Gen. David Petraeus reported that Bush's "surge" in Iraq was working, giving Republicans who might otherwise have flipped sufficient cover to continue supporting the war. The Democrats had no choice, the legend goes, but to wait until 2009, in the hopes that things would be different under a Democratic president.

Democrats insist that the reason they can't cut off the money for the war, despite their majority in both houses, is purely political. "George Bush would be on TV every five minutes saying that the Democrats betrayed the troops," says Sen. Bernie Sanders of Vermont. Then he glumly adds another reason. "Also, it just wasn't going to happen."

Why it "just wasn't going to happen" is the controversy. In and around the halls of Congress, the notion that the Democrats made a sincere effort to end the war meets with, at best, derisive laughter. Though few congressional aides would think of saying so on the record, in private many dismiss their party's lame anti-war effort as an absurd dog-and-pony show, a calculated attempt to score political points without ever being serious about bringing the troops home.

"Yeah, the amount of expletives that flew in our office alone was unbelievable," says an aide to one staunchly anti-war House member. "It was all about the public show. Reid and Pelosi would say they were taking this tough stand against Bush, but if you actually looked at what they were sending to a vote, it was like Swiss cheese. Full of holes."

In the House, some seventy Democrats joined the Out of Iraq caucus and repeatedly butted heads with Reid and Pelosi, arguing passionately for tougher measures to end the war. The fight left some caucus members bitter about the party's failure. Rep. Barbara Lee of California was one of the first to submit an amendment to cut off funding unless it was tied to an immediate withdrawal. "I couldn't even get it through the Rules Committee in the spring," Lee says.

Rep. Lynn Woolsey, a fellow caucus member, says Democrats should have refused from the beginning to approve any funding that wasn't tied to a withdrawal. "If we'd been bold the minute we got control of the House — and that's why we got the majority, because the people of this country wanted us out of Iraq — if we'd been bold, even if we lost the votes, we would have gained our voice."

An honest attempt to end the war, say Democrats like Woolsey and Lee, would have involved forcing Bush to execute his veto and allowing the Republicans to filibuster all they wanted. Force a showdown, in other words, and use any means necessary to get the bloodshed ended.

"Can you imagine Tom DeLay and Denny Hastert taking no for an answer the way Reid and Pelosi did on Iraq?" asks the House aide in the expletive-filled office. "They'd find a way to get the votes. They'd get it done somehow."

But any suggestion that the Democrats had an obligation to fight this good fight infuriates the bund of hedging careerists in charge of the party. In fact, nothing sums up the current Democratic leadership better than its vitriolic criticisms of those recalcitrant party members who insist on interpreting their 2006 mandate as a command to actually end the war. Rep. David Obey, chair of the House Appropriations Committee and a key Pelosi-Reid ally, lambasted anti-war Democrats who "didn't want to get specks on those white robes of theirs." Obey even berated a soldier's mother who begged him to cut off funds for the war, accusing her and her friends of "smoking something illegal."

Rather than use the vast power they had to end the war, Democrats devoted their energy to making sure that "anti-war activism" became synonymous with "electing Democrats." Capitalizing on America's desire to end the war, they hijacked the anti-war movement itself, filling the ranks of peace groups with loyal party hacks. Anti-war organizations essentially became a political tool for the Democrats — one operated from inside the Beltway and devoted primarily to targeting Republicans.

This supposedly grass-roots "anti-war coalition" met regularly on K Street, the very capital of top-down Beltway politics. At the forefront of the groups are Thomas Matzzie and Brad Woodhouse of Americans Against the Escalation in Iraq, the leader of the anti-war lobby. Along with other K Street crusaders, the two have received iconic treatment from The Washington Post and The New York Times, both of which depicted the anti-war warriors as young idealist-progressives in shirtsleeves, riding a mirthful spirit into political combat — changing the world is fun!

But what exactly are these young idealists campaigning for? At its most recent meeting, the group eerily echoed the Reid-Pelosi "squeezed for time" mantra: Retreat from any attempt to end the war and focus on electing Democrats. "There was a lot of agreement that we can draw distinctions between anti-war Democrats and pro-war Republicans," a spokeswoman for Americans Against the Escalation in Iraq announced.

What the Post and the Times failed to note is that much of the anti-war group's leadership hails from a consulting firm called Hildebrand Tewes — whose partners, Steve Hildebrand and Paul Tewes, served as staffers for the Democratic Senatorial Campaign Committee (DSCC). In addition, these anti-war leaders continue to consult for many of the same U.S. senators whom they need to pressure in order to end the war. This is the kind of conflict of interest that would normally be an embarrassment in the activist community.

Worst of all is the case of Woodhouse, who came to Hildebrand Tewes after years of working as the chief mouthpiece for the DSCC, where he campaigned actively to re-elect Democratic senators who supported the Iraq War in the first place. Anyone bothering to look — and clearly the Post and the Times did not before penning their ardent bios of Woodhouse — would have found the youthful idealist bragging to newspapers before the Iraq invasion about the pro-war credentials of North Carolina candidate Erskine Bowles. "No one has been stronger in this race in supporting President Bush in the War on Terror and his efforts to effect a regime change in Iraq," boasted the future "anti-war" activist Woodhouse.

With guys like this in charge of the anti-war movement, much of what has passed for peace activism in the past year was little more than a thinly veiled scheme to use popular discontent over the war to unseat vulnerable Republicans up for re-election in 2008. David Sirota, a former congressional staffer whose new book, The Uprising, excoriates the Democrats for their failure to end the war, expresses disgust at the strategy of targeting only Republicans. "The whole idea is based on this insane fiction that there is no such thing as a pro-war Democrat," he says. "Their strategy allows Democrats to take credit for being against the war without doing anything to stop it. It's crazy."

Justin Raimondo, the uncompromising editorial director of Antiwar.com, regrets contributing twenty dollars to Americans Against the Escalation in Iraq. "Not only did they use it to target Republicans," he says, "they went after the ones who were on the fence about Iraq." The most notorious case involved Lincoln Chafee, a moderate from Rhode Island who lost his Senate seat in 2006. Since then, Chafee has taken shots at Democrats like Reid, Hillary Clinton and Chuck Schumer, all of whom campaigned against him despite having voted for the war themselves.

"Look, I understand partisan politics," says Chafee, who now concedes that voters were correct to punish him for his war vote. "I just find it amusing that those who helped get us into this mess now say we need to change the Senate — because we're in a mess."

The really tragic thing about the Democratic surrender on Iraq is that it's now all but guaranteed that the war will be off the table during the presidential campaign. Once again — it happened in 2002, 2004 and 2006 — the Democrats have essentially decided to rely on the voters to give them credit for being anti-war, despite the fact that, for all the noise they've made to the contrary, in the end they've done nothing but vote for war and cough up every dime they've been asked to give, every step of the way.

Even beyond the war, the Democrats have repeatedly gone limp-dick every time the Bush administration so much as raises its voice. Most recently, twelve Democrats crossed the aisle to grant immunity to phone companies who participated in Bush's notorious wiretapping program. Before that, Democrats caved in and confirmed Mike Mukasey as attorney general after he kept his middle finger extended and refused to condemn waterboarding as torture. Democrats fattened by Wall Street also got cold feet about upsetting the country's gazillionaires, refusing to close a tax loophole that rewarded hedge-fund managers with a tax rate less than half that paid by ordinary citizens.

But the war is where they showed their real mettle. Before the 2006 elections, Democrats told us we could expect more specifics on their war plans after Election Day. Nearly two years have passed since then, and now they are once again telling us to wait until after an election to see real action to stop the war. In the meantime, of course, we're to remember that they're the good guys, the Republicans are the real enemy, and, well, go Hillary! Semper fi! Yay, team!

How much of this bullshit are we going to take? How long are we supposed to give the Reids and Pelosis and Hillarys of the world credit for wanting, deep down in their moldy hearts, to do the right thing?

Look, fuck your hearts, OK? Just get it done. Because if you don't, sooner or later this con is going to run dry. It may not be in '08, but it'll be soon. Even Americans can't be fooled forever.

Noose tightening around Clemens

February 13, 2008

Damaging Information Said to Await Clemens

By DUFF WILSON and MICHAEL S. SCHMIDT

WASHINGTON — Roger Clemens will be confronted with a new and damaging affidavit from Andy Pettitte when he appears before the House Committee on Oversight and Government Reform on Wednesday to testify about allegations that he used performance-enhancing drugs, two lawyers familiar with the matter said late Tuesday.

Clemens will also be asked about corroborating information that committee staff members developed on their own that ties Clemens to such drugs, the lawyers said. That information, they said, stands separate and apart from the assertions made about Clemens by his former personal trainer, Brian McNamee, who contends that he injected Clemens with steroids and human growth hormone from 1998 to 2001.

The two lawyers familiar with what may be confronting Clemens at the hearing spoke on condition of anonymity because they were not authorized to speak publicly. They would not reveal details of the new Pettitte affidavit or of the new information obtained apart from McNamee’s assertions.

“The committee is not messing around and has other damaging evidence against Roger,” one of the lawyers said.

The other lawyer said, “Andy said enough to really hurt Roger.”

Clemens continued to insist on Tuesday that he never received injections. He made those denials while visiting privately with six more members of the committee, bringing his three-day lobbying total to 25 of the 40 committee members. But in many respects, it was the calm before a momentous clash for Clemens, the most decorated pitcher in baseball history.

On Wednesday, he will sit before the committee, with McNamee, in a nationally televised event that will begin at 10 a.m. in a wood-paneled hearing room in the Rayburn Office Building. They will be joined by one other person — the lawyer Charles P. Scheeler, who helped produce the report on baseball and drugs prepared by former Senator George J. Mitchell.

Scheeler will answer questions about the report but is also expected to sit between Clemens and McNamee. “That’s 99 percent of the reason he’s there,” a committee staff member said.

A Congressional staff member familiar with the recent events said that Pettitte gave the new affidavit — which is distinct from the two-and-a-half-hour deposition he provided last week — in lieu of appearing before the committee. Another staff member said the affidavit, which Pettitte signed, was being closely guarded by committee staff members and leadership, and had not been given to other members of the 40-member panel on Tuesday for fear it would be leaked.

Pettitte was excused from testifying after his lawyers said he did not want to provide negative information about Clemens, his former longtime friend, teammate and workout partner, in the glare of a national spotlight. Pettitte has admitted to taking injections of H.G.H., as McNamee has asserted, and it is believed that he made statements in his deposition that would not be helpful to Clemens’s cause.

The chairman of the committee, Henry A. Waxman, Democrat of California, is expected to read portions of Pettitte’s affidavit during the hearing and ask Clemens to respond, in what could be a dramatic and awkward moment for both players, and, for that matter, the entire sport.

Clemens, 45, of Houston, gave a five-hour sworn deposition to the committee on Feb. 5 and, his lawyer says, he wants to testify publicly in a bid to restore his reputation as one of the game’s greatest pitchers.

Clemens even wrote his own opening statement to the committee, one of his lawyers, Lanny A. Breuer, said in a phone interview Tuesday night.

“It’s completely Roger speaking from the heart,” he said. “We look forward to the committee and the country judging this man.”

McNamee, 40, gave a seven-hour deposition on Thursday. He has told investigators and Mitchell that he injected Clemens with steroids at least 12 times in 1998, 2000 and 2001, and at least four times with H.G.H. in 2000. But he has added vivid details to his account this year. He also handed over syringes and bloody gauze that he said were used when injecting Clemens in 2001 and had been saved since then.

McNamee’s newer details raise the issue of whether he violated the proffer agreement he signed last summer with federal prosecutors to tell them the truth in order to avoid prosecution. McNamee’s lawyers said the prosecutors accepted his new information as merely having been omitted, rather than as being untrue. The prosecutors declined comment.

“We’ve got the truth on our side,” Richard Emery, a lawyer for McNamee, said in a phone interview Tuesday. “It should be unequivocally clear that Roger, if he contradicts Brian, will not be telling the truth.”

Assuming that the testimony of Clemens and McNamee continues to collide Wednesday, the committee is unlikely to make a referral to the Department of Justice to investigate either one of them for lying under oath, a committee staff member said Tuesday. Instead, it will allow the Department of Justice to make its own determination.

“The D.O.J. can do what it wants,” the staff member said.

Last month, Waxman and Tom Davis, Republican of Virginia, formally asked the Department of Justice to investigate shortstop Miguel Tejada for suspected false statements in 2005. That referral was made in part because Tejada made his statements during a private interview with committee staff members in 2005. Those statements would not have been known to other federal authorities, including the Justice Department, the staff member said.

But the Clemens and McNamee testimony will be on plain view for all to see — including Jeff Novitzky, the I.R.S. special agent from California who has led the federal government’s investigations into the distribution of performance-enhancing drugs and who is expected to be in attendance at the hearing.

Irwin Rogers, another I.R.S. agent, and Heather Young, an F.B.I. agent, are also expected to attend the hearing. Their presence underlines the dangerous path Clemens could be on as he continues to insist that McNamee is lying.

Meanwhile, Clemens visited six more members of the committee in their offices on Tuesday afternoon. It brought his three-day total to 14 of the 22 Democrats and 11 of the 18 Republicans. Mark Souder, a Republican from Indiana, refused to meet with Clemens. “They were very persistent,” he said in an interview on Tuesday. “I had to tell them, ‘It’s not a scheduling problem — it’s that I don’t want to meet with him.’ ”

Souder added of Clemens: “He’s wandering around the Hill like it’s a campaign. It’s unseemly.”

Diane E. Watson, Democrat of California, emerged from a meeting with Clemens saying it was mostly anecdotal but would help her evaluate his testimony.

“My staff told me, ‘Don’t do this,’ but I said, ‘No, I really want to,’ ” she said.

Asked about Clemens’s motives for meeting her, Watson said, “I found him, you know, very charming.

“I’ve been in public life for a quarter of a century, and I’ve had every lobbyist in the world in front of me,” she said.

Earlier Tuesday, the committee held a two-hour hearing on growth hormone and vitamin B12. Four medical experts testified that H.G.H. could be harmful if used for illegal uses like bodybuilding or so-called anti-aging. Side effects may include diabetes, joint pain and cancer.

“Doctors who are prescribing the drug to enhance performance or to reverse aging are actually breaking the law,” Waxman said.

The law will be at issue again on Wednesday, but this time the question will be who is telling the truth, who is lying and who is risking a possible perjury charge.

Alan Schwarz contributed reporting.

Senate let's phone companies off the hook

Senate Moves to Shield Phone Companies on Eavesdropping

By ERIC LICHTBLAU

WASHINGTON — After more than a year of heated political wrangling, the Senate handed the White House a major victory Tuesday by voting to broaden the government’s spy powers and to give legal protection to phone companies that cooperated in President Bush’s warrantless eavesdropping program.

The Senate rejected a series of amendments that would have restricted the government’s surveillance powers and eliminated immunity for the phone carriers, and it voted in convincing fashion — 69 to 29 — to end debate and bring the issue to a final vote. That vote is expected later this afternoon, with the result all but assured. On the vote to end debate, 28 Democrats and Senator Bernie Sanders, independent of Vermont, opposed the measure. Senators Hillary Rodham Clinton and Lindsey Graham did not vote.

The House has already rejected the idea of immunity for the phone companies, and Democratic leaders reacted angrily to the Senate vote. But Congressional officials said it appeared that the House would ultimately be forced to accept some sort of legal protection for the phone carriers in negotiations between the two chambers this week.

The Senate vote amounted to a proxy on the president’s warrantless wiretapping program, which allowed the National Security Agency to eavesdrop on Americans’ international communications without a court warrant if they were suspected of having terrorist ties.

With resistance led by Democratic Senators Russ Feingold of Wisconsin and Christopher J. Dodd of Connecticut, critics of the administration’s plan argued that it effectively rewarded phone companies by providing them with legal insulation for actions that violated longstanding law and their own fiduciary responsibilities to their customers. Immunity would protect the phone companies from some 40 lawsuits now pending that charge the firms broke the law by taking part in the program.

But supporters of the plan said the phone carriers acted out of patriotism after the Sept. 11 attacks in complying with what they believed in good faith was a legally binding order from the president. Republicans were able to garner the support of 19 Democrats and Senator Joseph I. Lieberman of Connecticut. Democratic leaders charged that the tactics the Republicans used smacked of fear-mongering.

“This, I believe, is the right way to go for the security of the nation,” said Senator John D. Rockefeller IV, the West Virginia Democrat who leads the intelligence committee and who was a pivotal supporter of the White House-backed plan approved Tuesday.

Beyond the immunity provision, the Senate measure would also widen the executive branch’s surveillance powers by allowing the National Security Agency and intelligence agencies to use broad orders — without getting court orders in advance — to eavesdrop on groups of overseas targets, rather than using individualized warrants.

Crider

Case study of employment results of a large ICE raid on a poultry plant

The Wall Street Journal ran an informative article today on the effect of a major ICE raid upon employer – employee relations. Evan Pérez and Corey Dade wrote the article. I posted on the raid of Crider Inc., a Stillmore, GA, poultry plant in May, 2006. The WSJ article describes the before and after:

BEFORE: employees mostly Hispanic. Workers provided company housing. Black employment since late 1990s had declined from 70% to 16%. High productivity, poor benefits and working conditions, and few employee complaints. Wages barely above minimum wage. Parking lot wage payments, in which checks were issued and immediately cashed by the employee, preventing any record of employment history. I infer that worker savings probably sent to Mexico.

AFTER: Wages increased 30% - 50%. Workforce is 65% black, 30% white, 5% Hispanic. Workers provided company housing. Much of workforce converted to independent recruiting contractor status and/or engaged through employee hiring firm. Productivity sags 10%. More complaints about worker health and safety. Labor shortages. Company searches across U.S. for people willing to work, such as Hmong migrant workers. I infer that worker savings now put into local housing, cars.

NATIONALLY, WHAT A GUEST WORKER PROGRAM WOULD DO: Boost wages by at least 30%. Prohibit independent contractor abuses. Better health and safety. Remove vulnerability of Hispanic workers to fear of deportation. Worker shortages. More investment in technology to reduce workforces.

Excerpts from the article, with some notes by me:

Do immigrant workers lower pay and working conditions? At Crider, yes. -- PFR

The sudden reversal of economic fortunes in Stillmore underscores some of the most complex aspects of the pitched debate over immigration: Do illegal immigrants take jobs from low-skilled American workers? The answer in Stillmore initially appeared to be yes.

But in the months since Crider began hiring hundreds of African-Americans, the answer has become more complex. The plant has struggled with high turnover among black workers, lower productivity and pay disputes between the new employees and labor contractors. The allure of compliant Latino workers willing to accept grueling conditions despite rock-bottom pay has proved a difficult habit for Crider to shake, particularly because the local, native-born workers who replaced them are more likely to complain about working conditions and aggressively assert what they believe to be legal pay and workplace rights.

The company was "taken aback" when federal agents showed up in May asserting that about 700 of its workers were suspected of having false work documents, Mr. Purtle says. Two Crider employees were among four men arrested for allegedly running a document mill, churning out fake green cards and other fake documents.

The story of Germaine Royals, an African-American, who was hired then fired by Crider -- PFR

For Mr. Royals, the new opportunities at Crider amounted to a windfall after months of erratic work through a temporary labor agency. A high-school dropout who earned his General Education Diploma two years ago, Mr. Royals previously worked nights at a succession of factory jobs. He had just been laid off for the second time in a month when Ms. Germain Paulk came home with word of the Crider recruiter.

Mr. Royals went to Crider with a plan to work as many hours as possible -- he sometimes worked 17 hours a day -- and earn enough to save for a new home and pay off bills. His wife recently took a full-time job as a private nurse for an elderly woman and attends classes at a technical college to earn a license as a practical nurse.

But for some of the African-American workers who surged into the plant, the unexpected chance to work at Crider didn't turn out well. They described long, arduous schedules, alleged health and safety hazards, and unrelenting supervisors. A Crider spokeswoman says the allegations are the sentiment of "people who are not intent on working."

Payroll abuse by Crider – PFR:

Since the illegal immigrants were run out of the plant, Crider no longer directly employs many entry-level workers. Instead, Mr. Royals and many others are classified as independent contractors, working under an agreement between Crider and Allen Peacock, an African-American owner of a recruiting business.

Every Friday, Mr. Peacock pulled into the parking lot of the dormitory complex and handed out checks, most of which he cashed on the spot -- leaving his employees with no documentation of how much they received in wages or paid in taxes, according to several workers.

After a few weeks on the job, Mr. Royals and other black workers claimed Mr. Peacock was short changing them on hours worked. They said taxes were being deducted even though workers never filled out federal and state tax forms. At one point, Ms. Paulk, Mr. Royals's wife, telephoned Mr. Peacock and demanded an explanation about the paychecks.

Mr. Peacock denied mishandling their wages. "Everybody has to pay taxes," he said in an interview. Mr. Peacock said his workers were all being fully paid and that their taxes were properly collected.

Despite his frustrations, Mr. Royals vowed to keep working. But one morning, Mr. Peacock arrived at the Crider dormitory complex and several workers gathered to register their complaints about wages. In front of the other employees, Mr. Royals says, Mr. Peacock fired him.

Since the raids, African-Americans have made up about 65% of Crider's work force, while whites are 30% and Hispanics 5%, according to the company. Turnover has been high. The population of workers hired since last September's immigration raids has turned over three times, according to Crider.

Workers shortage persist -- PFR

Still struggling to fill its ranks, Crider began busing in felons on probation from a state prison and residents of a homeless mission from nearby Macon. Crider also hired another labor contractor who specializes in Hispanic workers. But Crider is still about 300 people short of its work force before the immigration raids. It is now bringing Laotian Hmong immigrant workers and their families from Minnesota and Wisconsin, with hopes that they'll stay on the job and build new roots in Stillmore.

Posted by Peter Rousmaniere on January 17, 2007 11:20 AM | Permalink