By ROBERT WELLER, Associated Press WriterMon Jun 30, 4:56 AM ET
A nearly 700-page study released Sunday by the Army found that "in the euphoria of early 2003," U.S.-based commanders prematurely believed their goals in Iraq had been reached and did not send enough troops to handle the occupation.
President George W. Bush's statement on May 1, 2003, that major combat operations were over reinforced that view, the study said.
It was written by Donald P. Wright and Col. Timothy R. Reese of the Contemporary Operations Study Team at Fort Leavenworth, Kan., who said that planners who requested more troops were ignored and that commanders in Baghdad were replaced without enough of a transition and lacked enough staff.
Gen. William S. Wallace, commanding general of U.S. Army Training and Doctrine Command, said in a foreword that it's no surprise that a report with these conclusions was written.
"One of the great and least understood qualities of the United States Army is its culture of introspection and self-examination," he wrote.
The report said that the civilian and military planning for a post-Saddam Iraq was inadequate, and that the Army should have pushed the Joint Chiefs of Staff for better planning and preparation.
Retired military leaders, members of Congress, think tanks and others have already concluded that the occupation was understaffed.
At least 4,113 U.S. military members have died in Iraq, according to a count by The Associated Press.
Hundreds of commanders and other soldiers and officials were interviewed for the report released Sunday. The Army ordered the study to review what happened in the 18 months after the toppling of Saddam Hussein's regime. A report on the invasion was released earlier.
The report said that after Saddam's regime was removed from power, most commanders and units expected to transition to stability and support operations, similar to what was seen in Bosnia and Kosovo.
Commanders with the mindset that victory had already been achieved believed that a post-combat Iraq would require "only a limited commitment by the U.S. military and would be relatively peaceful and short as Iraqis quickly assumed responsibility," the study said.
"Few commanders foresaw that full spectrum operations in Iraq would entail the simultaneous employment of offense, defense, stability, and support operations by units at all echelons of command to defeat new, vicious, and effective enemies," it added.
The report said the first Bush administration and its advisers had assumed incorrectly that the Saddam regime would collapse after the first Gulf War.
When Saddam was so quickly defeated in 2003, there was an absence of authority that led to widespread looting and violence, the report said. Soldiers initially had no plan to deal with that. The administration's decision to remove Saddam's followers entirely from power caused governmental services to collapse, "fostering a huge unemployment problem," it said.
Planners in the Iraq headquarters said 300,000 troops would be needed for the occupation. Even before the invasion, some planners had called for 300,000 troops to be sent for the invasion and occupation.
During an April 16, 2003, visit to Baghdad, coalition commander Gen. Tommy Franks told his subordinate leaders to prepare to move most of their forces out of Iraq by September of that year, the report noted.
"In line with the prewar planning and general euphoria at the rapid crumbling of the Saddam regime, Franks continued to plan for a very limited role for U.S. ground forces in Iraq," the report said.
The report said it wasn't until July 16, 2003, that Franks' successor, Gen. John Abizaid, said coalition forces were facing a classic guerrilla insurgency.
Even so, the coalition made some progress, only to have its optimism dashed after the insurgency boiled over in April 2004, when Sunni Arab insurgents and Shiite militias launched violent assaults in many parts of Iraq, the report said.
The authors said the Army had considerable experience and training for guerrilla wars but had not been in one like Iraq since 1992 in Somalia. They said former Secretary of State Colin Powell warned Franks "that he thought too few troops were envisioned in the (invasion) plan."
Some commanders told the authors they asked about plans for making the country stable and got no answers.
The "post-war situation in Iraq was severely out of line with the suppositions made at nearly every level before the war," the report said.
Its writers said it was clear in January 2005 that the Army would remain in Iraq for some time, the writers concluded. The report covered the period from May 2003 to January 2005.
___
On the Net:
Army report: http://tinyurl.com/56dyob
Copyright © 2008 The Associated Press
http://news.yahoo.com/s/ap/20080630/ap_on_re_us/army_iraq_report&printer=1;_ylt=AqvnUu2EABR3BB9c0YOVE1hH2ocA
Monday, June 30, 2008
9 in 10 see rising gas prices causing family hardship
By ALAN FRAM, Associated Press Writer
WASHINGTON (AP) — Four dollar a gallon gas has stolen a beach vacation in South Carolina from Julie Jacobs' family and exotic bath washes from Angela Crawford. Phil English had to sell his beloved but fuel-guzzling red pickup.
Like a plague that does not discriminate by economic class, race or age, soaring gas prices are inflicting pain throughout the U.S. Nine in 10 are expecting the ballooning costs to squeeze them financially over the next half year, an Associated Press-Yahoo! News poll said Monday.
Nearly half think that hardship will be serious. To cope, most are driving less, easing off the air conditioning and heating at home and cutting corners elsewhere. Half are curtailing vacation plans; nearly as many are considering buying cars that burn less gas.
As the price has spiraled upward so, too, has the public's ire.
Two-thirds consider gas prices an extremely important issue, edging the economy and outpacing health care and Iraq as the country's most distressing problem. In November, when gas cost about $1 a gallon less than today, just under half rated it extremely important.
"Do you think there's an end in sight? I don't," said the 33-year-old Crawford, a Dallas homemaker, said in an interview.
She says switching to bar soap from a favored lotion is one of many "little small luxuries" she has given up, along with fewer restaurant meals and new clothes. She also has talked with her husband, a flooring contractor, about finding a job involving less long-distance driving with his heavy van.
"It's depressing and it makes you nervous," she said.
The AP-Yahoo! News poll, conducted by Knowledge Networks, has tracked the same 2,000 people since last fall to see how their views change during the presidential campaign. The latest survey shows how the price of gas has caught or eclipsed every other issue, not just as a political topic but as a problem in peoples' lives.
"You're saddened prices are going up and you can't do the extra things you would have done," said Amy Pysarenko, 35, of San Antonio, whose concern about gas prices has grown since November. She says while her family has cut back on amusement park visits and saving for their children, "I feel fortunate because maybe someone else eats beans instead of hamburgers."
The 47 percent in the most recent survey who expect higher gas costs to cause serious hardship is about the same as in last year's poll, but an increase from the 30 percent who said so in an AP-Ipsos poll in June 2004. Then, regular gas averaged $1.97 a gallon nationally, according to the federal Energy Information Administration.
Lower-income people, of course, are bearing the brunt of it. As higher prices push grocery, pizza delivery and other costs upward, just over half of those without college degrees — and about the same number earning less than $50,000 a year — are expecting serious personal financial problems to result.
"We just don't do as much," said William Fisk, 39, a former dishwasher in Freeport, Maine. "We used to go out to have dinner, but we're cutting way back on that."
Yet significant numbers of the better-off are feeling pain, too. Four in 10 people in families earning $50,000 to $100,000 annually, and one in six earning more than that expect serious financial hardships from rising gas costs, as do one in three college graduates.
Many lower-earning families are responding by easing their use of air conditioning and heating, trimming vacation plans and cutting other spending. But higher-income people are often not far behind.
Two-thirds earning under $25,000 a year are cooling and heating their homes less, as are nearly six in 10 people earning more than $100,000. Just over four in 10 of the lowest earners are cutting vacation spending — only slightly likelier than those earning at least six figures to do so.
Rich or poor, black or white, young and old, nearly everyone is looking to drive less: A nearly uniform seven in 10 say they are reducing driving. That compares with six in 10 who said so in an April 2005 AP-AOL survey.
Jacobs, a homemaker and mother of three in Baltimore, said gas costs forced her to turn down two summer trips — a cousin's wedding in North Carolina and a vacation with her parents in Myrtle Beach, S.C.
"My parents said `Come down, spend a week with us,'" said Jacobs, 35. "But when you add on the expense of gas, it's just not worth it."
Ironically, Jacobs plans to begin taking lessons this week for her first driver's license. "Just as prices go through the roof," she said.
Four in 10 are considering buying a vehicle that gets better gas mileage than their current one. That is about the same number who said so three years ago.
Some have already taken that step. English of Papillion, Neb., sold his 1998 Ford pickup, which got about 13 miles per gallon, for a more fuel-efficient convertible.
"It was a nice truck," said English, 43, an aircraft mechanic. "It didn't feel good" to get rid of it "and it still doesn't," he said.
Midwesterners are among the likeliest to think rising gas costs will cause them serious personal hardship; Southerners are among the more willing to reduce driving.
As a political issue in the presidential campaign, gas prices provide a slight edge to Democrat Barack Obama. More prefer him over Republican John McCain to handle it, 28 percent to 20 percent, while additional 18 percent trust both equally.
There also is a strong sense of powerlessness. One-third do not think either candidate can deal with the problem. That includes half of independents, one-third of Republicans and one-quarter of Democrats.
The AP-Yahoo! News survey of 1,759 adults was conducted from June 13-23 and had an overall margin of sampling error of plus or minus 2.3 percentage points. Included were interviews with 844 Democrats and 637 Republicans, for whom the margins of sampling error were plus or minus 3.4 points and 3.9 points, respectively.
The poll was conducted over the Internet by Knowledge Networks, which initially contacted people using traditional telephone polling methods and followed with online interviews. People chosen for the study who had no Internet access were given it for free.
— AP Director of Surveys Trevor Tompson and AP News Survey Specialist Dennis Junius contributed to this report.
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Democratic National Committee - official site of the Democratic Party, news, voter information and multimedia.
Republican National Committee - official site of the Republican Party, news, voter information and multimedia.
PollingReport.com: Election 2008 - collection of national polls covering the 2008 presidential general election, and Democratic and Republican nominations.
Yahoo! Video: Election 2008 - video covering all angles of the 2008 U.S. presidential election.
C-SPAN: Road to the White House - collection of video from the 2008 campaign trail.
League of Women Voters - includes local outreach groups and a ballot list of issues.
PolitiFact.com: Truth-O-Meter - provides analysis of candidates' speeches, TV ads, and interviews to determine their accuracy.
Wikipedia: 2008 U.S. Presidential Election - includes a timeline of events leading to the elections and a list of potential candidates.
Get Involved
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http://news.yahoo.com/page/election-2008-political-pulse-gas-prices
WASHINGTON (AP) — Four dollar a gallon gas has stolen a beach vacation in South Carolina from Julie Jacobs' family and exotic bath washes from Angela Crawford. Phil English had to sell his beloved but fuel-guzzling red pickup.
Like a plague that does not discriminate by economic class, race or age, soaring gas prices are inflicting pain throughout the U.S. Nine in 10 are expecting the ballooning costs to squeeze them financially over the next half year, an Associated Press-Yahoo! News poll said Monday.
Nearly half think that hardship will be serious. To cope, most are driving less, easing off the air conditioning and heating at home and cutting corners elsewhere. Half are curtailing vacation plans; nearly as many are considering buying cars that burn less gas.
As the price has spiraled upward so, too, has the public's ire.
Two-thirds consider gas prices an extremely important issue, edging the economy and outpacing health care and Iraq as the country's most distressing problem. In November, when gas cost about $1 a gallon less than today, just under half rated it extremely important.
"Do you think there's an end in sight? I don't," said the 33-year-old Crawford, a Dallas homemaker, said in an interview.
She says switching to bar soap from a favored lotion is one of many "little small luxuries" she has given up, along with fewer restaurant meals and new clothes. She also has talked with her husband, a flooring contractor, about finding a job involving less long-distance driving with his heavy van.
"It's depressing and it makes you nervous," she said.
The AP-Yahoo! News poll, conducted by Knowledge Networks, has tracked the same 2,000 people since last fall to see how their views change during the presidential campaign. The latest survey shows how the price of gas has caught or eclipsed every other issue, not just as a political topic but as a problem in peoples' lives.
"You're saddened prices are going up and you can't do the extra things you would have done," said Amy Pysarenko, 35, of San Antonio, whose concern about gas prices has grown since November. She says while her family has cut back on amusement park visits and saving for their children, "I feel fortunate because maybe someone else eats beans instead of hamburgers."
The 47 percent in the most recent survey who expect higher gas costs to cause serious hardship is about the same as in last year's poll, but an increase from the 30 percent who said so in an AP-Ipsos poll in June 2004. Then, regular gas averaged $1.97 a gallon nationally, according to the federal Energy Information Administration.
Lower-income people, of course, are bearing the brunt of it. As higher prices push grocery, pizza delivery and other costs upward, just over half of those without college degrees — and about the same number earning less than $50,000 a year — are expecting serious personal financial problems to result.
"We just don't do as much," said William Fisk, 39, a former dishwasher in Freeport, Maine. "We used to go out to have dinner, but we're cutting way back on that."
Yet significant numbers of the better-off are feeling pain, too. Four in 10 people in families earning $50,000 to $100,000 annually, and one in six earning more than that expect serious financial hardships from rising gas costs, as do one in three college graduates.
Many lower-earning families are responding by easing their use of air conditioning and heating, trimming vacation plans and cutting other spending. But higher-income people are often not far behind.
Two-thirds earning under $25,000 a year are cooling and heating their homes less, as are nearly six in 10 people earning more than $100,000. Just over four in 10 of the lowest earners are cutting vacation spending — only slightly likelier than those earning at least six figures to do so.
Rich or poor, black or white, young and old, nearly everyone is looking to drive less: A nearly uniform seven in 10 say they are reducing driving. That compares with six in 10 who said so in an April 2005 AP-AOL survey.
Jacobs, a homemaker and mother of three in Baltimore, said gas costs forced her to turn down two summer trips — a cousin's wedding in North Carolina and a vacation with her parents in Myrtle Beach, S.C.
"My parents said `Come down, spend a week with us,'" said Jacobs, 35. "But when you add on the expense of gas, it's just not worth it."
Ironically, Jacobs plans to begin taking lessons this week for her first driver's license. "Just as prices go through the roof," she said.
Four in 10 are considering buying a vehicle that gets better gas mileage than their current one. That is about the same number who said so three years ago.
Some have already taken that step. English of Papillion, Neb., sold his 1998 Ford pickup, which got about 13 miles per gallon, for a more fuel-efficient convertible.
"It was a nice truck," said English, 43, an aircraft mechanic. "It didn't feel good" to get rid of it "and it still doesn't," he said.
Midwesterners are among the likeliest to think rising gas costs will cause them serious personal hardship; Southerners are among the more willing to reduce driving.
As a political issue in the presidential campaign, gas prices provide a slight edge to Democrat Barack Obama. More prefer him over Republican John McCain to handle it, 28 percent to 20 percent, while additional 18 percent trust both equally.
There also is a strong sense of powerlessness. One-third do not think either candidate can deal with the problem. That includes half of independents, one-third of Republicans and one-quarter of Democrats.
The AP-Yahoo! News survey of 1,759 adults was conducted from June 13-23 and had an overall margin of sampling error of plus or minus 2.3 percentage points. Included were interviews with 844 Democrats and 637 Republicans, for whom the margins of sampling error were plus or minus 3.4 points and 3.9 points, respectively.
The poll was conducted over the Internet by Knowledge Networks, which initially contacted people using traditional telephone polling methods and followed with online interviews. People chosen for the study who had no Internet access were given it for free.
— AP Director of Surveys Trevor Tompson and AP News Survey Specialist Dennis Junius contributed to this report.
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Parties and Politics
Democratic National Committee - official site of the Democratic Party, news, voter information and multimedia.
Republican National Committee - official site of the Republican Party, news, voter information and multimedia.
PollingReport.com: Election 2008 - collection of national polls covering the 2008 presidential general election, and Democratic and Republican nominations.
Yahoo! Video: Election 2008 - video covering all angles of the 2008 U.S. presidential election.
C-SPAN: Road to the White House - collection of video from the 2008 campaign trail.
League of Women Voters - includes local outreach groups and a ballot list of issues.
PolitiFact.com: Truth-O-Meter - provides analysis of candidates' speeches, TV ads, and interviews to determine their accuracy.
Wikipedia: 2008 U.S. Presidential Election - includes a timeline of events leading to the elections and a list of potential candidates.
Get Involved
Declare yourself is an organization that encourages young people without a voice to step forward with their vote. Register to vote now!
www.declareyourself.org
http://news.yahoo.com/page/election-2008-political-pulse-gas-prices
Friday, June 27, 2008
Pandering To Big Oil
President Bush, "reversing a longstanding position," called yesterday for an end to the federal ban on offshore oil drilling and reaffirmed his call to drill in the Arctic National Wildlife Refuge in Alaska. Bush's flip-flop followed an even more egregious policy shift by Sen. John McCain (R-AZ), who pushed for offshore drilling in a speech before oil executives in Houston on Tuesday, though he had campaigned against it as recently as three weeks ago. Following Bush and McCain's lead, a number of conservatives reversed their former opposition to offshore drilling, including Florida's Gov. Charlie Crist (R), Sen. Mel Martinez (R) and Rep. Connie Mack (R).
Former House Speaker Newt Gingrich has been leading the charge to expand domestic drilling, with his "Drill Here, Drill Now, Pay Less" campaign. Yet the election-year gimmick of expanding offshore drilling does nothing to solve America's energy crisis, nor will it have an ameliorating effect on soaring gas prices. Under McCain's assumption of 21 billion barrels of oil in the banned areas -- higher than the Department of Energy's estimation of 18 billion barrels -- there is still only enough to support America's total consumption, at 7.5 billion barrels per year, for three years. The bottom line is that America consumes 25 percent of the world's oil but has just 3 percent of the world's reserves, as Senate Majority Leader Harry Reid (D-NV) pointed out. "We cannot drill our way out of this problem," he said. David Sandalow, a Brookings Institution energy expert, said of offshore drilling, "It's like walking an extra 20 feet a day to lose weight. It's just not enough to make a difference."
ACCOMPLISHES NOTHING: Over two years ago, Bush declared, "America is addicted to oil." But the latest Bush-McCain proposal will do nothing to solve that problem. "Feeding that addiction by tapping another vein just drills us into a deeper hole," said Sen. Bob Menendez (D-NJ). Bush declared that expanded drilling would "bring enormous benefits to the American people." In his Tuesday speech, McCain explained his flip-flop by saying he wanted to "address the concerns of Americans, who are struggling right now to pay for gasoline." Yet as the New York Times writes today of expanding offshore drilling, "This is worse than a dumb idea. It is cruelly misleading."
The Energy Information Administration (EIA) predicted that "access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." Even McCain's own top economic adviser Douglas Holtz-Eakin said offshore drilling would have "no immediate effect" on gas prices. Just yesterday, McCain seemed to reverse his long-standing opposition to drilling in the Arctic National Wildlife Refuge -- something Bush continued to push for in his speech -- even as he declared Tuesday that the "next president must be willing to break with the energy policies...of the current Administration."
Bush's own Department of Energy estimated that drilling in the Arctic refuge would cut oil prices by only about 75 cents a barrel. What's more, even if the refuge were opened this year, its extracted oil would not reach the market for 10 years. FALSE ARGUMENTS: Bush blamed "Democrats on Capitol Hill" who he said "have rejected virtually every proposal" to increase oil production, adding "now Americans are paying the price at the pump for this obstruction." Congress is not blocking domestic drilling. In fact, the number of drilling permits both on- and off-shore has exploded from 3,802 five years ago to 7,561 in 2007.
Congress and the Bush administration have opened up so much land to drilling that oil companies can't keep up: In the last four years, the government has issued 28,776 permits to drill on public land, yet only 18,954 wells were actually drilled. Congressional obstruction is just one of the false arguments conservatives are peddling. Another is the idea that we can drill and still "ensure that our environment is protected." McCain declared drilling is so "safe" that "not even Hurricane Katrina and Rita could cause significant spillage from battered rigs off the coasts of New Orleans and Houston." This is patently false. Hurricane Katrina caused 44 oil spills, resulting in more than seven million gallons of oil spilled, according to the Coast Guard., nearing the nine million gallons spilled in the 1989 Exxon-Valdez disaster.
BOON FOR BIG OIL: "The only real beneficiaries will be the oil companies that are trying to lock up every last acre of public land before their friends in power -- Mr. Bush and Vice President Dick Cheney -- exit the political stage," the New York Times writes today. It is not surprising that oil executives praised the idea when McCain presented it to them on Tuesday. Houston-based Anadarko Petroleum Corp. CEO Jim Hackett called McCain's drilling plan "a positive development for American consumers," adding, "We need to get serious about producing our own resources for the benefit of Americans." Larry Nichols, CEO of Oklahoma City-based Devon Energy, called McCain's proposals a "truly honest assessment of what our energy policies have been and need to be." Big Oil has also vigorously backed McCain's campaign. McCain ranks second in the Senate for donations from the energy industry and has raised over $700,000 from oil and gas this election season alone.
ETHICS -- JUSTICE DEPARTMENT GRANTS BEING INVESTIGATED FOR FAVORITISM: The Justice Department (DOJ) Inspector General and the House Oversight Committee are investigating millions of dollars of DOJ Office of Juvenile Justice and Delinquency Prevention (OJJDP) grant money for evidence of favoritism, the Washington Post reports. Last year, Congress approved more than $150 million in 2007 in grant funds for the DOJ to distribute freely. But "according to documents and three sources familiar with events," DOJ officials "disregarded independent reviews and steered awards to favored groups."
The OJJDP passed over programs that were ranked high on a DOJ merit scale -- including the National Child Protection Training Center and the Rape Abuse and Incest National Network -- to instead reward politically-favored groups, such as thepro-abstienence Best Friends program, even though it ranked 53rd on a list of 104 applicants. The program's founder and president is Elayne Bennett, the wife of former Republican administration official and conservative pundit Bill Bennett. Best Friends, which was awarded double the money they had originally requested, had previously held "pricey society fundraisers" that OJJDP administrator J. Robert Flores and his top aides often attend. Flores is set to testify today before the House Oversight Committee.
CONGRESS -- FEITH CHICKENS OUT OF CONGRESSIONAL HEARING ON TORTURE, REFUSES TO APPEAR WITH WILKERSON: Former Undersecretary of Defense Douglas Feith withdrew from a scheduled appearance before a House Judiciary subcommittee hearing on torture yesterday because he did not want to to appear with Colin Powell's former chief of staff Col. Lawrence Wilkerson, who was also testifying. Feith was to speak about his role in helping the Bush administration evade the Geneva conventions, but informed the committee through his counsel that he "would not appear today because he is not willing to appear alongside one of our other witnesses," said Chairman Jerrold Nadler (D-NY). "Mr. Feith's unwillingness to attend voluntarily and provide the truth about this government's actions shows a fundamental disrespect for Congress and the American people," Nadler said. Wilkerson, who left the Bush administration in protest over Bush policies, has criticized Feith's competence, saying "seldom in my life have I met a dumber man."
Seated next to Feith's empty chair, Wilkerson testified that Vice President Cheney probably knew that the U.S. was using torture at Guantanamo Bay and in Iraq . "At what level did American leadership fail?" Wilkerson asked. "I believe it failed at the highest levels of the Pentagon, in the Vice President's Office and perhaps even in the Oval Office."
TORTURE -- MEDICAL EXAMS BACK UP CLAIMS OF DETAINEE ABUSE UNDER U.S. CUSTODY: In an interview with the New York Times, Lt. Cmdr. William C. Kuebler, military lawyer for a Guantanamo detainee and Canadian citizen Omar Khadr, said "the Bush administration's war crimes system 'is designed to get criminal convictions' with 'no real evidence.'" Military prosecutors "launder evidence derived from torture," Kuebler said, adding, "You put the whole package together and it stinks." At the same time, a report released yesterday by the Physicians for Human Rights gives credibility to Kuebler's claim of detainee abuse.
"The first extensive medical examinations of former detainees in U.S. military jails offer corroboration for prisoners' claims of physical and psychological abuse at the hands of their American captors," the report found. "The assessments of 11 men formerly held in U.S. detention camps overseas revealed scars and other injuries consistent with their accounts of beatings, electric shocks, shackling and, in at least one case, sodomy." Physicians for Human Rights used "teams of medical specialists" to conduct the "physical and psychological tests, including exams intended to assess if the subjects were lying." In a statement, ret. Maj. Gen. Antonio M. Taguba, "who led the Army's first official investigation on Abu Ghraib, said the new evidence suggested a 'systematic regime of torture' inside U.S.-run detention camps."
In an interview with the New York Times, Lt. Cmdr. William C. Kuebler, the military lawyer for Guantánamo detainee Omar Khadr, said "the Bush administration's war crimes system 'is designed to get criminal convictions' with 'no real evidence' and that military prosecutors "launder evidence derived from torture." "You put the whole package together and it stinks," Kuebler said.
Under a wiretapping bill set to be approved by the House, U.S. phone companies would receive immunity and "be shielded from potentially billions of dollars in lawsuits." As a "compromise," the bill would also "allow a federal district court to dismiss a suit if the company was provided written assurances that Bush authorized their participation in the spy program and that it was legal."
The New York Times reports that there is currently a "shortage of ships used for deep-water offshore drilling," meaning that any attempts to lift the offshore drilling ban would have little near-term effect. The "world's existing drill-ships are booked solid for the next five years," and shipbuilders have raised prices since last year "by as much as $100 million a vessel to about half a billion dollars."
"Former Gov. Jeb Bush, who negotiated the federal-state compromise to keep drilling away from Florida shores, said in an email to the Miami Herald" that he now supports drilling off Florida with restrictions.
At a gay-rights panel discussion at the Center for American Progress Action Fund last week, Sen. Gordon Smith (R-OR) linked the issues of polygamy and same-sex marriage. He has since apologized. "My remarks referenced a point in time when a few of my ancestors were persecuted for not adhering to that belief," Smith said. "It was an unfortunate reference, and I apologize for making it."
"Six years and $16.5 billion later, the U.S. still lacks a solid plan to create a self-sustaining security force in Afghanistan," according to an audit by the Government Accountability Office.
In an increasingly gloomy assessment of the U.S. economy, chief executives polled by Business Roundtable "expect employment at their companies to decline in coming months and rising costs to pinch their profits." The group “whose outlook is usually relatively upbeat, has become pessimistic amid mounting energy prices and housing-market worries."
And finally: Last week, President Bush made headlines while in Germany for praising the country's asparagus after a dinner with Chancellor Angela Merkel. "The German asparagus are fabulous," Bush said. In response, Sen. Patty Murray (D-WA) and Rep. Doc Hastings (R-WA) have had 10 pounds of Washington state asparagus delivered to the White House. "Mr. President, if you liked the German variety, we guarantee you will love the Washington state variety," Murray and Hastings wrote in their letter. Murray added that it is the "best in the world."
House leaders in both parties struck a deal on a long-overdue war supplemental bill that includes billions for emergency flood relief, an extension of unemployment benefits and expanded GI Bill college benefits for veterans.
CALIFORNIA: California Supreme Court set to "decide another potentially landmark civil rights case: whether doctors can refuse to treat certain patients for religious reasons."ARIZONA: Lawmakers passed another bill creating penalties for doctors who perform late-term abortions, which is likely to be vetoed by the governor.MAINE: "Maine's governor and members of the state's congressional delegation Wednesday unanimously opposed President Bush's plan to allow expanded offshore oil drilling."
THINK PROGRESS: Ex-State Dept. official: Hundreds of detainees died in U.S. custody, at least 25 murdered.WONK ROOM: Public health plans should compete with private policies.MEDIA MATTERS: CNN's Glenn Beck inflated estimated Arctic National Wildlife Refuge oil production by 7,000 percent.INFORMED COMMENT: Iraqi re-Baathification law touted by conservatives as a success has yet to be implemented.
"I don't think that administration officials purposely overstated [the threat of Iraq]. I do think there were errors made in the presentation."-- Iraq war architect Doug Feith, 6/18/08VERSUS"A long-delayed Senate report...has concluded that President Bush and his aides built the public case for war against Iraq by exaggerating available intelligence and by ignoring disagreements among spy agencies."-- New York Times, 6/5/08, on a Senate Intelligence Committee report
http://app.mx3.americanprogressaction.org/e/er.aspx?s=785&lid=216&elq=6EFB2012722146BC8355456A88C25672
The Progress Report"
Former House Speaker Newt Gingrich has been leading the charge to expand domestic drilling, with his "Drill Here, Drill Now, Pay Less" campaign. Yet the election-year gimmick of expanding offshore drilling does nothing to solve America's energy crisis, nor will it have an ameliorating effect on soaring gas prices. Under McCain's assumption of 21 billion barrels of oil in the banned areas -- higher than the Department of Energy's estimation of 18 billion barrels -- there is still only enough to support America's total consumption, at 7.5 billion barrels per year, for three years. The bottom line is that America consumes 25 percent of the world's oil but has just 3 percent of the world's reserves, as Senate Majority Leader Harry Reid (D-NV) pointed out. "We cannot drill our way out of this problem," he said. David Sandalow, a Brookings Institution energy expert, said of offshore drilling, "It's like walking an extra 20 feet a day to lose weight. It's just not enough to make a difference."
ACCOMPLISHES NOTHING: Over two years ago, Bush declared, "America is addicted to oil." But the latest Bush-McCain proposal will do nothing to solve that problem. "Feeding that addiction by tapping another vein just drills us into a deeper hole," said Sen. Bob Menendez (D-NJ). Bush declared that expanded drilling would "bring enormous benefits to the American people." In his Tuesday speech, McCain explained his flip-flop by saying he wanted to "address the concerns of Americans, who are struggling right now to pay for gasoline." Yet as the New York Times writes today of expanding offshore drilling, "This is worse than a dumb idea. It is cruelly misleading."
The Energy Information Administration (EIA) predicted that "access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030." Even McCain's own top economic adviser Douglas Holtz-Eakin said offshore drilling would have "no immediate effect" on gas prices. Just yesterday, McCain seemed to reverse his long-standing opposition to drilling in the Arctic National Wildlife Refuge -- something Bush continued to push for in his speech -- even as he declared Tuesday that the "next president must be willing to break with the energy policies...of the current Administration."
Bush's own Department of Energy estimated that drilling in the Arctic refuge would cut oil prices by only about 75 cents a barrel. What's more, even if the refuge were opened this year, its extracted oil would not reach the market for 10 years. FALSE ARGUMENTS: Bush blamed "Democrats on Capitol Hill" who he said "have rejected virtually every proposal" to increase oil production, adding "now Americans are paying the price at the pump for this obstruction." Congress is not blocking domestic drilling. In fact, the number of drilling permits both on- and off-shore has exploded from 3,802 five years ago to 7,561 in 2007.
Congress and the Bush administration have opened up so much land to drilling that oil companies can't keep up: In the last four years, the government has issued 28,776 permits to drill on public land, yet only 18,954 wells were actually drilled. Congressional obstruction is just one of the false arguments conservatives are peddling. Another is the idea that we can drill and still "ensure that our environment is protected." McCain declared drilling is so "safe" that "not even Hurricane Katrina and Rita could cause significant spillage from battered rigs off the coasts of New Orleans and Houston." This is patently false. Hurricane Katrina caused 44 oil spills, resulting in more than seven million gallons of oil spilled, according to the Coast Guard., nearing the nine million gallons spilled in the 1989 Exxon-Valdez disaster.
BOON FOR BIG OIL: "The only real beneficiaries will be the oil companies that are trying to lock up every last acre of public land before their friends in power -- Mr. Bush and Vice President Dick Cheney -- exit the political stage," the New York Times writes today. It is not surprising that oil executives praised the idea when McCain presented it to them on Tuesday. Houston-based Anadarko Petroleum Corp. CEO Jim Hackett called McCain's drilling plan "a positive development for American consumers," adding, "We need to get serious about producing our own resources for the benefit of Americans." Larry Nichols, CEO of Oklahoma City-based Devon Energy, called McCain's proposals a "truly honest assessment of what our energy policies have been and need to be." Big Oil has also vigorously backed McCain's campaign. McCain ranks second in the Senate for donations from the energy industry and has raised over $700,000 from oil and gas this election season alone.
ETHICS -- JUSTICE DEPARTMENT GRANTS BEING INVESTIGATED FOR FAVORITISM: The Justice Department (DOJ) Inspector General and the House Oversight Committee are investigating millions of dollars of DOJ Office of Juvenile Justice and Delinquency Prevention (OJJDP) grant money for evidence of favoritism, the Washington Post reports. Last year, Congress approved more than $150 million in 2007 in grant funds for the DOJ to distribute freely. But "according to documents and three sources familiar with events," DOJ officials "disregarded independent reviews and steered awards to favored groups."
The OJJDP passed over programs that were ranked high on a DOJ merit scale -- including the National Child Protection Training Center and the Rape Abuse and Incest National Network -- to instead reward politically-favored groups, such as thepro-abstienence Best Friends program, even though it ranked 53rd on a list of 104 applicants. The program's founder and president is Elayne Bennett, the wife of former Republican administration official and conservative pundit Bill Bennett. Best Friends, which was awarded double the money they had originally requested, had previously held "pricey society fundraisers" that OJJDP administrator J. Robert Flores and his top aides often attend. Flores is set to testify today before the House Oversight Committee.
CONGRESS -- FEITH CHICKENS OUT OF CONGRESSIONAL HEARING ON TORTURE, REFUSES TO APPEAR WITH WILKERSON: Former Undersecretary of Defense Douglas Feith withdrew from a scheduled appearance before a House Judiciary subcommittee hearing on torture yesterday because he did not want to to appear with Colin Powell's former chief of staff Col. Lawrence Wilkerson, who was also testifying. Feith was to speak about his role in helping the Bush administration evade the Geneva conventions, but informed the committee through his counsel that he "would not appear today because he is not willing to appear alongside one of our other witnesses," said Chairman Jerrold Nadler (D-NY). "Mr. Feith's unwillingness to attend voluntarily and provide the truth about this government's actions shows a fundamental disrespect for Congress and the American people," Nadler said. Wilkerson, who left the Bush administration in protest over Bush policies, has criticized Feith's competence, saying "seldom in my life have I met a dumber man."
Seated next to Feith's empty chair, Wilkerson testified that Vice President Cheney probably knew that the U.S. was using torture at Guantanamo Bay and in Iraq . "At what level did American leadership fail?" Wilkerson asked. "I believe it failed at the highest levels of the Pentagon, in the Vice President's Office and perhaps even in the Oval Office."
TORTURE -- MEDICAL EXAMS BACK UP CLAIMS OF DETAINEE ABUSE UNDER U.S. CUSTODY: In an interview with the New York Times, Lt. Cmdr. William C. Kuebler, military lawyer for a Guantanamo detainee and Canadian citizen Omar Khadr, said "the Bush administration's war crimes system 'is designed to get criminal convictions' with 'no real evidence.'" Military prosecutors "launder evidence derived from torture," Kuebler said, adding, "You put the whole package together and it stinks." At the same time, a report released yesterday by the Physicians for Human Rights gives credibility to Kuebler's claim of detainee abuse.
"The first extensive medical examinations of former detainees in U.S. military jails offer corroboration for prisoners' claims of physical and psychological abuse at the hands of their American captors," the report found. "The assessments of 11 men formerly held in U.S. detention camps overseas revealed scars and other injuries consistent with their accounts of beatings, electric shocks, shackling and, in at least one case, sodomy." Physicians for Human Rights used "teams of medical specialists" to conduct the "physical and psychological tests, including exams intended to assess if the subjects were lying." In a statement, ret. Maj. Gen. Antonio M. Taguba, "who led the Army's first official investigation on Abu Ghraib, said the new evidence suggested a 'systematic regime of torture' inside U.S.-run detention camps."
In an interview with the New York Times, Lt. Cmdr. William C. Kuebler, the military lawyer for Guantánamo detainee Omar Khadr, said "the Bush administration's war crimes system 'is designed to get criminal convictions' with 'no real evidence' and that military prosecutors "launder evidence derived from torture." "You put the whole package together and it stinks," Kuebler said.
Under a wiretapping bill set to be approved by the House, U.S. phone companies would receive immunity and "be shielded from potentially billions of dollars in lawsuits." As a "compromise," the bill would also "allow a federal district court to dismiss a suit if the company was provided written assurances that Bush authorized their participation in the spy program and that it was legal."
The New York Times reports that there is currently a "shortage of ships used for deep-water offshore drilling," meaning that any attempts to lift the offshore drilling ban would have little near-term effect. The "world's existing drill-ships are booked solid for the next five years," and shipbuilders have raised prices since last year "by as much as $100 million a vessel to about half a billion dollars."
"Former Gov. Jeb Bush, who negotiated the federal-state compromise to keep drilling away from Florida shores, said in an email to the Miami Herald" that he now supports drilling off Florida with restrictions.
At a gay-rights panel discussion at the Center for American Progress Action Fund last week, Sen. Gordon Smith (R-OR) linked the issues of polygamy and same-sex marriage. He has since apologized. "My remarks referenced a point in time when a few of my ancestors were persecuted for not adhering to that belief," Smith said. "It was an unfortunate reference, and I apologize for making it."
"Six years and $16.5 billion later, the U.S. still lacks a solid plan to create a self-sustaining security force in Afghanistan," according to an audit by the Government Accountability Office.
In an increasingly gloomy assessment of the U.S. economy, chief executives polled by Business Roundtable "expect employment at their companies to decline in coming months and rising costs to pinch their profits." The group “whose outlook is usually relatively upbeat, has become pessimistic amid mounting energy prices and housing-market worries."
And finally: Last week, President Bush made headlines while in Germany for praising the country's asparagus after a dinner with Chancellor Angela Merkel. "The German asparagus are fabulous," Bush said. In response, Sen. Patty Murray (D-WA) and Rep. Doc Hastings (R-WA) have had 10 pounds of Washington state asparagus delivered to the White House. "Mr. President, if you liked the German variety, we guarantee you will love the Washington state variety," Murray and Hastings wrote in their letter. Murray added that it is the "best in the world."
House leaders in both parties struck a deal on a long-overdue war supplemental bill that includes billions for emergency flood relief, an extension of unemployment benefits and expanded GI Bill college benefits for veterans.
CALIFORNIA: California Supreme Court set to "decide another potentially landmark civil rights case: whether doctors can refuse to treat certain patients for religious reasons."ARIZONA: Lawmakers passed another bill creating penalties for doctors who perform late-term abortions, which is likely to be vetoed by the governor.MAINE: "Maine's governor and members of the state's congressional delegation Wednesday unanimously opposed President Bush's plan to allow expanded offshore oil drilling."
THINK PROGRESS: Ex-State Dept. official: Hundreds of detainees died in U.S. custody, at least 25 murdered.WONK ROOM: Public health plans should compete with private policies.MEDIA MATTERS: CNN's Glenn Beck inflated estimated Arctic National Wildlife Refuge oil production by 7,000 percent.INFORMED COMMENT: Iraqi re-Baathification law touted by conservatives as a success has yet to be implemented.
"I don't think that administration officials purposely overstated [the threat of Iraq]. I do think there were errors made in the presentation."-- Iraq war architect Doug Feith, 6/18/08VERSUS"A long-delayed Senate report...has concluded that President Bush and his aides built the public case for war against Iraq by exaggerating available intelligence and by ignoring disagreements among spy agencies."-- New York Times, 6/5/08, on a Senate Intelligence Committee report
http://app.mx3.americanprogressaction.org/e/er.aspx?s=785&lid=216&elq=6EFB2012722146BC8355456A88C25672
The Progress Report"
Monday, June 23, 2008
The Trade That Brought Us $100/bbl Oil Teaches Us to Be Afraid, Be Very Afraid
BY Raymond J. Learsy
On January 2nd a single trade on the New York Mercantile Exchange pushed the price of oil to the psychologically freighted $100 a barrel. That trade made newspaper headlines or the front pages of newspapers throughout the world.
The trade itself was for a single futures contract of 1000 barrels of crude. The price quotation on the exchange prior to the fateful $100 trade was $99.53 so that the when that one contract at $100/bbl crossed the ticker, it jumped the market price of crude oil everywhere by nearly one half percent or 47 cents per barrel to be exact. At that moment that was the price on which all transactions of crude oil were based. The next trade on the exchange, that is the price at which the $100 contract could have been immediately resold, would have incurred a trading loss of $600 to the trader who executed the trade, understood to be one Mr. Richard Arens. Thus Mr. Arens, by being the first trader to have closed a $100/bbl trade on the NYMerc purchased a slice of immortality at a cost of but $600.
http://www.huffingtonpost.com/raymond-j-learsy/the-trade-that-brought-us_b_80149.html
But then consider the following. By making that trade at some fifty cents above the going market Mr. Arens, by himself with an an investment of $6750, the margin required by the exchange for an oil futures contract, was able to move the market dramatically. At that moment of time and as long as the $100 marker was on the trading board, all oil produced, or shipped, bought or sold in the United States and given their close interrelationship, on markets throughout the world, that forty-seven cent jump was reflected in virtually all transactions. With some 85 million barrels of oil being produced and shipped each day, that trade alone increased the value of oil by over $40 million at that moment in time. All that based on one trade, requiring only $6750 as a margin deposit. An incredible and frightening degree of leverage. Thus we have been shown the clearest, most up to date, real time example of the risks inherent in basing the world price of oil on the vicissitudes of the commodity trading floor.
On these postings I have repeatedly tried to alert the field that the trading in oil futures on world commodity exchanges (electronic, New York , London, Singapore and on) is not a straight forward, unencumbered market (Please see "Energy Trading Oversight Awakens From Its Slumber With Anticipated BP Settlement" 10.25.07; "Oil Prices Pushed Ever Higher By Manipulating Oil Futures Trading", 04.05.06). That it is riddled with special interests (pushing up oil prices to levels as high as they will be tolerated) and oil patch agendas, or as in this case, reaching for an historic breakthrough. This argumentation has been met with considerable skepticism by the press ("the market sets the price") and outright hostility by those who have a vested interest in high oil prices, the oil industry and its friends in government.
Yet here is a prima facie evidence of the of the susceptibility by the commodity trading markets to play out specific agendas, and the ability of the trading markets to facilitate those agendas. Mr. Arens, with one oil futures contract representing 1000 barrels of oil, necessitating a deposit of only $6750, was able to bullseye the $100/bbl mark.
Now consider the following. Saudi Arabia, Kuwait, the United Arab Emirates, Russia all have Sovereign Wealth Funds. Saudia Arabia alone has $900 billion to invest, or to trade or to go dancing with. We don't know how these funds are spent or invested, because their activities and goals are completely opaque. The exception being when a Citigroup or Merrill Lynch go knocking at their door. For these countries oil is the core of their economy, and the higher the price of oil, the fatter those Sovereign Wealth Funds. It is the price of oil on the commodity exchanges that determines the price at which the physical product is bought and sold. Is it then unreasonable to assume, given the market's susceptibility to direction, as witnessed by that first $100/bbl tick, that a portion of that ocean of money in the hands of the world's most important oil producers is being used to trade oil prices toward the highest levels that the world's oil consuming economies can either bear or tolerate. What I'm trying to say in a perhaps overly long winded way, if a single trader with only $6750 can move the market, how can you expect those with billions at their disposal not to do the same as well!
It is long overdue that our government institutions, preferably conjointly with their international counterparts, take a seriously close look at commodity trading practices as they are currently structured. This to determine the likelihood and extent of manipulation, and the cost of that manipulation to the world at large. Somehow we must find ways to bring these markets back to becoming accurate and honest price mechanisms, reflecting real supply and demand. Otherwise we are participating in a game of loaded dice with purveyors of a basic commodity that exerts enormous influence on our fiscal, environmental and social well-being. Certainly anything less than a fully hands on, transparent, and effective oversight, will inevitably portend economic, social and environmental disaster.
Be afraid, be very afraid!
On January 2nd a single trade on the New York Mercantile Exchange pushed the price of oil to the psychologically freighted $100 a barrel. That trade made newspaper headlines or the front pages of newspapers throughout the world.
The trade itself was for a single futures contract of 1000 barrels of crude. The price quotation on the exchange prior to the fateful $100 trade was $99.53 so that the when that one contract at $100/bbl crossed the ticker, it jumped the market price of crude oil everywhere by nearly one half percent or 47 cents per barrel to be exact. At that moment that was the price on which all transactions of crude oil were based. The next trade on the exchange, that is the price at which the $100 contract could have been immediately resold, would have incurred a trading loss of $600 to the trader who executed the trade, understood to be one Mr. Richard Arens. Thus Mr. Arens, by being the first trader to have closed a $100/bbl trade on the NYMerc purchased a slice of immortality at a cost of but $600.
http://www.huffingtonpost.com/raymond-j-learsy/the-trade-that-brought-us_b_80149.html
But then consider the following. By making that trade at some fifty cents above the going market Mr. Arens, by himself with an an investment of $6750, the margin required by the exchange for an oil futures contract, was able to move the market dramatically. At that moment of time and as long as the $100 marker was on the trading board, all oil produced, or shipped, bought or sold in the United States and given their close interrelationship, on markets throughout the world, that forty-seven cent jump was reflected in virtually all transactions. With some 85 million barrels of oil being produced and shipped each day, that trade alone increased the value of oil by over $40 million at that moment in time. All that based on one trade, requiring only $6750 as a margin deposit. An incredible and frightening degree of leverage. Thus we have been shown the clearest, most up to date, real time example of the risks inherent in basing the world price of oil on the vicissitudes of the commodity trading floor.
On these postings I have repeatedly tried to alert the field that the trading in oil futures on world commodity exchanges (electronic, New York , London, Singapore and on) is not a straight forward, unencumbered market (Please see "Energy Trading Oversight Awakens From Its Slumber With Anticipated BP Settlement" 10.25.07; "Oil Prices Pushed Ever Higher By Manipulating Oil Futures Trading", 04.05.06). That it is riddled with special interests (pushing up oil prices to levels as high as they will be tolerated) and oil patch agendas, or as in this case, reaching for an historic breakthrough. This argumentation has been met with considerable skepticism by the press ("the market sets the price") and outright hostility by those who have a vested interest in high oil prices, the oil industry and its friends in government.
Yet here is a prima facie evidence of the of the susceptibility by the commodity trading markets to play out specific agendas, and the ability of the trading markets to facilitate those agendas. Mr. Arens, with one oil futures contract representing 1000 barrels of oil, necessitating a deposit of only $6750, was able to bullseye the $100/bbl mark.
Now consider the following. Saudi Arabia, Kuwait, the United Arab Emirates, Russia all have Sovereign Wealth Funds. Saudia Arabia alone has $900 billion to invest, or to trade or to go dancing with. We don't know how these funds are spent or invested, because their activities and goals are completely opaque. The exception being when a Citigroup or Merrill Lynch go knocking at their door. For these countries oil is the core of their economy, and the higher the price of oil, the fatter those Sovereign Wealth Funds. It is the price of oil on the commodity exchanges that determines the price at which the physical product is bought and sold. Is it then unreasonable to assume, given the market's susceptibility to direction, as witnessed by that first $100/bbl tick, that a portion of that ocean of money in the hands of the world's most important oil producers is being used to trade oil prices toward the highest levels that the world's oil consuming economies can either bear or tolerate. What I'm trying to say in a perhaps overly long winded way, if a single trader with only $6750 can move the market, how can you expect those with billions at their disposal not to do the same as well!
It is long overdue that our government institutions, preferably conjointly with their international counterparts, take a seriously close look at commodity trading practices as they are currently structured. This to determine the likelihood and extent of manipulation, and the cost of that manipulation to the world at large. Somehow we must find ways to bring these markets back to becoming accurate and honest price mechanisms, reflecting real supply and demand. Otherwise we are participating in a game of loaded dice with purveyors of a basic commodity that exerts enormous influence on our fiscal, environmental and social well-being. Certainly anything less than a fully hands on, transparent, and effective oversight, will inevitably portend economic, social and environmental disaster.
Be afraid, be very afraid!
Sunday, June 22, 2008
The Great Oil Swindle (The Enron Type Shell Game)
by Mike Whitney / June 2nd, 2008
The Commodity Futures and Trading Commission (CFTC) is investigating trading in oil futures to determine whether the surge in prices to record levels is the result of manipulation or fraud. They might want to take a look at wheat, rice and corn futures while they’re at it. The whole thing is a hoax cooked up by the investment banks and hedge funds who are trying to dig their way out of the trillion dollar mortgage-backed securities (MBS) mess that they created by turning garbage loans into securities. That scam blew up in their face last August and left them scrounging for handouts from the Federal Reserve. Now the billions of dollars they’re getting from the Fed is being diverted into commodities which is destabilizing the world economy, driving gas prices to the moon and triggering food riots across the planet.
For months we’ve been told that the soaring price of oil has been the result of Peak Oil, fighting in Iraq, attacks on oil facilities in Nigeria, labor problems in Norway, and (the all-time favorite) growth in China. It’s all baloney. Just like Goldman Sachs prediction of $200 per barrel oil is baloney. If oil is about to skyrocket then why has G-Sax kept a neutral rating on some of its oil holdings like Exxon-Mobile? Could it be that they know that oil is just another mega-inflated equity bubble — like housing, corporate bonds and dot.com stocks — that is about to crash to earth as soon as the big players grab a parachute?
There are three things that are driving up the price of oil: the falling dollar, speculation and buying on margin.
The dollar is tanking because of the Federal Reserve’s low-interest monetary policies that have kept interest rates below the rate of inflation for most of the last decade. Add that to the $700 billion current account deficit and a National Debt that has increased from $5.8 trillion when Bush first took office to over $9 trillion today and it’s a wonder the dollar hasn’t gone “Poof” already.
According to a January 4 editorial in the Wall Street Journal: “If the dollar had remained ‘as good as gold’ since 2001, oil today would be selling at about $30 per barrel, not $99. ($126 per barrel today) The decline of the dollar against gold and oil suggests a US monetary that is supplying too many dollars.”
The price of oil has more than quadrupled since 2001, from roughly $30 per barrel to $126, WITHOUT ANY DISRUPTIONS TO SUPPLY. There’s no shortage; it’s just gibberish.
As far as “buying on margin” consider this summary from author William Engdahl:
A conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today’s price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.
So the investment banks and their trading partners at the hedge funds can game the system for a mere eight bucks per barrel or 16-to-1 leverage. Not bad, eh?
Is it possible that gambling on oil futures might be a temptation for banks that are already underwater from a trillion dollars worth of mortgage-related deals that have “gone south” leaving the banking system essentially bankrupt?
And if the banks and hedgies are not playing this game, then where is the money coming from? I have compiled charts and graphs that show that nearly two-thirds of the big investment banks’ revenue came from the securitization of commercial and residential real estate loans. That market is frozen. Besides, this is not just a matter of “loan delinquencies” or MBS that have to be written off. The banks are “revenue starved.” How are they filling the coffers? They’re either neck-deep in interest rate swaps, derivatives trading, or gaming the futures market. Which is it?
Of course, there is one other possibility, but if that possibility turned out to be right than it would cast doubt on the legitimacy of the entire financial system. In fact, it would prove that the system is being rigged from the top-down by our friends at the Banking Politburo, the Federal Reserve. Here goes:
What if the investment banks are trading their worthless MBS and CDOs at the Fed’s auction facilities and using the money ($400 billion) to drive up the price of raw materials like rice, corn, wheat, and oil?
Could it be? Could the Fed really be looking the other way so it can bail out its banking buddies while they drive prices skyward?
If it is true; (and I suspect it is) it hasn’t done much good. As the Associated Press reported on Friday:
The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets. The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.
Another $225 billion for the bankers and not a dime for the struggling homeowner! The Fed is bankrupting the country with their permanent rotating loans to keep reckless speculators from going under. So much for moral hazard.
As far as speculation, there is ample evidence that the system is being manipulated. According to MarketWatch:
“Speculative activity in commodity markets has grown “enormously” over the past several years, the Homeland Security and Governmental Affairs Committee said in a news release. It pointed out that in five years, from 2003 to 2008, investment in the index funds tied to commodities has grown by 20-fold — to $260 billion from $13 billion.”
And here’s a revealing clip from the testimony of Michael W. Masters of Masters Capital Management, LLC, who addressed the issue of “Commodities Speculation” before the Committee on Homeland Security and Governmental Affairs this week:
Today, Index Speculators are pouring billions of dollars into the commodities futures markets, speculating that commodity prices will increase. . . . In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels. Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels. THE INCREASE IN DEMAND FROM INDEX SPECULATORS IS ALMOST EQUAL TO THE INCREASE IN DEMAND FROM CHINA.
Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.
Today, in many commodities futures markets, they are the single largest force.15 The huge growth in their demand has gone virtually undetected by classically-trained economists who almost never analyze demand in futures markets.
As money pours into the markets, two things happen concurrently: the markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing. The CFTC has taken deliberate steps to allow CERTAIN SPECULATORS VIRTUALLY UNLIMITED ACCESS TO THE COMMODITIES FUTURES MARKETS. The CFTC has granted Wall Street banks an exemption from speculative position limits when these banks hedge over-the-counter swaps transactions. This has effectively opened a loophole for unlimited speculation. When Index Speculators enter into commodity index swaps, which 85-90% of them do, they face no speculative position limits. . . . The result is a gross distortion in data that effectively hides the full impact of Index Speculation. (Thanks to Mish’s Global Economic Trend Analysis, the one “indispensable” financial blog on the Internet. Emphasis mine.)
Masters adds that the CFTC is pressing to make “Index Speculators exempt from all position limits” so they can make “unlimited” bets on the futures which are wreaking havoc on the global economy and pushing millions towards starvation. Of course, these things pale in comparison to the higher priority of fatting the bottom line of the parasitic investor class.
Brimming oil tankers are presently sitting off the coasts of Iran and Louisiana. The Strategic Petroleum Reserve has been filled. Demand is flat. The world’s biggest consumer of energy (guess who?) is cutting back . As CNN reports:
“At a time when gas prices are at an all-time high, Americans have curtailed their driving at a historic rate. The Department of Transportation said figures from March show the steepest decrease in driving ever recorded. Compared with March a year earlier, Americans drove an estimated 4.3 percent less — that’s 11 billion fewer miles, the DOT’s Federal Highway Administration said Monday, calling it “the sharpest yearly drop for any month in FHWA history.” (CNN)
The great oil crunch is another fabricated crisis, another “smoke and mirrors” fiasco, another Enron-type shell game engineered by banksters and hedge fund managers. Once again, the bloody footprints can be traced right back to the front door of the Federal Reserve. Don’t expect help from the regulators either; they’ve all been replaced with business reps like Harvey Pitt or Hank Paulson. The only time anyone in the Bush administration finds their conscience is when they’re offered a multi-million dollar “tell all” book deal.
Can you hear me, Scotty?
Mike Whitney lives in Washington state
http://www.dissidentvoice.org/2008/06/the-great-oil-swindle/
-----------------------------------------------------------------------------------------------
The Trade That Brought Us $100/bbl Oil Teaches Us to Be Afraid, Be Very Afraid
by Raymond J. Learsy Posted January 7, 2008
On January 2nd a single trade on the New York Mercantile Exchange pushed the price of oil to the psychologically freighted $100 a barrel. That trade made newspaper headlines or the front pages of newspapers throughout the world.
The trade itself was for a single futures contract of 1000 barrels of crude. The price quotation on the exchange prior to the fateful $100 trade was $99.53 so that the when that one contract at $100/bbl crossed the ticker, it jumped the market price of crude oil everywhere by nearly one half percent or 47 cents per barrel to be exact. At that moment that was the price on which all transactions of crude oil were based. The next trade on the exchange, that is the price at which the $100 contract could have been immediately resold, would have incurred a trading loss of $600 to the trader who executed the trade, understood to be one Mr. Richard Arens. Thus Mr. Arens, by being the first trader to have closed a $100/bbl trade on the NYMerc purchased a slice of immortality at a cost of but $600.
But then consider the following. By making that trade at some fifty cents above the going market Mr. Arens, by himself with an an investment of $6750, the margin required by the exchange for an oil futures contract, was able to move the market dramatically. At that moment of time and as long as the $100 marker was on the trading board, all oil produced, or shipped, bought or sold in the United States and given their close interrelationship, on markets throughout the world, that forty-seven cent jump was reflected in virtually all transactions. With some 85 million barrels of oil being produced and shipped each day, that trade alone increased the value of oil by over $40 million at that moment in time. All that based on one trade, requiring only $6750 as a margin deposit. An incredible and frightening degree of leverage. Thus we have been shown the clearest, most up to date, real time example of the risks inherent in basing the world price of oil on the vicissitudes of the commodity trading floor.
On these postings I have repeatedly tried to alert the field that the trading in oil futures on world commodity exchanges (electronic, New York , London, Singapore and on) is not a straight forward, unencumbered market (Please see "Energy Trading Oversight Awakens From Its Slumber With Anticipated BP Settlement" 10.25.07; "Oil Prices Pushed Ever Higher By Manipulating Oil Futures Trading", 04.05.06). That it is riddled with special interests (pushing up oil prices to levels as high as they will be tolerated) and oil patch agendas, or as in this case, reaching for an historic breakthrough. This argumentation has been met with considerable skepticism by the press ("the market sets the price") and outright hostility by those who have a vested interest in high oil prices, the oil industry and its friends in government.
Yet here is a prima facie evidence of the of the susceptibility by the commodity trading markets to play out specific agendas, and the ability of the trading markets to facilitate those agendas. Mr. Arens, with one oil futures contract representing 1000 barrels of oil, necessitating a deposit of only $6750, was able to bullseye the $100/bbl mark.
Now consider the following. Saudi Arabia, Kuwait, the United Arab Emirates, Russia all have Sovereign Wealth Funds. Saudia Arabia alone has $900 billion to invest, or to trade or to go dancing with. We don't know how these funds are spent or invested, because their activities and goals are completely opaque. The exception being when a Citigroup or Merrill Lynch go knocking at their door. For these countries oil is the core of their economy, and the higher the price of oil, the fatter those Sovereign Wealth Funds. It is the price of oil on the commodity exchanges that determines the price at which the physical product is bought and sold. Is it then unreasonable to assume, given the market's susceptibility to direction, as witnessed by that first $100/bbl tick, that a portion of that ocean of money in the hands of the world's most important oil producers is being used to trade oil prices toward the highest levels that the world's oil consuming economies can either bear or tolerate. What I'm trying to say in a perhaps overly long winded way, if a single trader with only $6750 can move the market, how can you expect those with billions at their disposal not to do the same as well!
It is long overdue that our government institutions, preferably conjointly with their international counterparts, take a seriously close look at commodity trading practices as they are currently structured. This to determine the likelihood and extent of manipulation, and the cost of that manipulation to the world at large. Somehow we must find ways to bring these markets back to becoming accurate and honest price mechanisms, reflecting real supply and demand. Otherwise we are participating in a game of loaded dice with purveyors of a basic commodity that exerts enormous influence on our fiscal, environmental and social well-being. Certainly anything less than a fully hands on, transparent, and effective oversight, will inevitably portend economic, social and environmental disaster.
Be afraid, be very afraid!
http://www.huffingtonpost.com/raymond-j-learsy/the-trade-that-brought-us_b_80149.html
The Commodity Futures and Trading Commission (CFTC) is investigating trading in oil futures to determine whether the surge in prices to record levels is the result of manipulation or fraud. They might want to take a look at wheat, rice and corn futures while they’re at it. The whole thing is a hoax cooked up by the investment banks and hedge funds who are trying to dig their way out of the trillion dollar mortgage-backed securities (MBS) mess that they created by turning garbage loans into securities. That scam blew up in their face last August and left them scrounging for handouts from the Federal Reserve. Now the billions of dollars they’re getting from the Fed is being diverted into commodities which is destabilizing the world economy, driving gas prices to the moon and triggering food riots across the planet.
For months we’ve been told that the soaring price of oil has been the result of Peak Oil, fighting in Iraq, attacks on oil facilities in Nigeria, labor problems in Norway, and (the all-time favorite) growth in China. It’s all baloney. Just like Goldman Sachs prediction of $200 per barrel oil is baloney. If oil is about to skyrocket then why has G-Sax kept a neutral rating on some of its oil holdings like Exxon-Mobile? Could it be that they know that oil is just another mega-inflated equity bubble — like housing, corporate bonds and dot.com stocks — that is about to crash to earth as soon as the big players grab a parachute?
There are three things that are driving up the price of oil: the falling dollar, speculation and buying on margin.
The dollar is tanking because of the Federal Reserve’s low-interest monetary policies that have kept interest rates below the rate of inflation for most of the last decade. Add that to the $700 billion current account deficit and a National Debt that has increased from $5.8 trillion when Bush first took office to over $9 trillion today and it’s a wonder the dollar hasn’t gone “Poof” already.
According to a January 4 editorial in the Wall Street Journal: “If the dollar had remained ‘as good as gold’ since 2001, oil today would be selling at about $30 per barrel, not $99. ($126 per barrel today) The decline of the dollar against gold and oil suggests a US monetary that is supplying too many dollars.”
The price of oil has more than quadrupled since 2001, from roughly $30 per barrel to $126, WITHOUT ANY DISRUPTIONS TO SUPPLY. There’s no shortage; it’s just gibberish.
As far as “buying on margin” consider this summary from author William Engdahl:
A conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today’s price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.
So the investment banks and their trading partners at the hedge funds can game the system for a mere eight bucks per barrel or 16-to-1 leverage. Not bad, eh?
Is it possible that gambling on oil futures might be a temptation for banks that are already underwater from a trillion dollars worth of mortgage-related deals that have “gone south” leaving the banking system essentially bankrupt?
And if the banks and hedgies are not playing this game, then where is the money coming from? I have compiled charts and graphs that show that nearly two-thirds of the big investment banks’ revenue came from the securitization of commercial and residential real estate loans. That market is frozen. Besides, this is not just a matter of “loan delinquencies” or MBS that have to be written off. The banks are “revenue starved.” How are they filling the coffers? They’re either neck-deep in interest rate swaps, derivatives trading, or gaming the futures market. Which is it?
Of course, there is one other possibility, but if that possibility turned out to be right than it would cast doubt on the legitimacy of the entire financial system. In fact, it would prove that the system is being rigged from the top-down by our friends at the Banking Politburo, the Federal Reserve. Here goes:
What if the investment banks are trading their worthless MBS and CDOs at the Fed’s auction facilities and using the money ($400 billion) to drive up the price of raw materials like rice, corn, wheat, and oil?
Could it be? Could the Fed really be looking the other way so it can bail out its banking buddies while they drive prices skyward?
If it is true; (and I suspect it is) it hasn’t done much good. As the Associated Press reported on Friday:
The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets. The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.
Another $225 billion for the bankers and not a dime for the struggling homeowner! The Fed is bankrupting the country with their permanent rotating loans to keep reckless speculators from going under. So much for moral hazard.
As far as speculation, there is ample evidence that the system is being manipulated. According to MarketWatch:
“Speculative activity in commodity markets has grown “enormously” over the past several years, the Homeland Security and Governmental Affairs Committee said in a news release. It pointed out that in five years, from 2003 to 2008, investment in the index funds tied to commodities has grown by 20-fold — to $260 billion from $13 billion.”
And here’s a revealing clip from the testimony of Michael W. Masters of Masters Capital Management, LLC, who addressed the issue of “Commodities Speculation” before the Committee on Homeland Security and Governmental Affairs this week:
Today, Index Speculators are pouring billions of dollars into the commodities futures markets, speculating that commodity prices will increase. . . . In the popular press the explanation given most often for rising oil prices is the increased demand for oil from China. According to the DOE, annual Chinese demand for petroleum has increased over the last five years from 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels. Over the same five-year period, Index Speculatorsʼ demand for petroleum futures has increased by 848 million barrels. THE INCREASE IN DEMAND FROM INDEX SPECULATORS IS ALMOST EQUAL TO THE INCREASE IN DEMAND FROM CHINA.
Index Speculators have now stockpiled, via the futures market, the equivalent of 1.1 billion barrels of petroleum, effectively adding eight times as much oil to their own stockpile as the United States has added to the Strategic Petroleum Reserve over the last five years.
Today, in many commodities futures markets, they are the single largest force.15 The huge growth in their demand has gone virtually undetected by classically-trained economists who almost never analyze demand in futures markets.
As money pours into the markets, two things happen concurrently: the markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing. The CFTC has taken deliberate steps to allow CERTAIN SPECULATORS VIRTUALLY UNLIMITED ACCESS TO THE COMMODITIES FUTURES MARKETS. The CFTC has granted Wall Street banks an exemption from speculative position limits when these banks hedge over-the-counter swaps transactions. This has effectively opened a loophole for unlimited speculation. When Index Speculators enter into commodity index swaps, which 85-90% of them do, they face no speculative position limits. . . . The result is a gross distortion in data that effectively hides the full impact of Index Speculation. (Thanks to Mish’s Global Economic Trend Analysis, the one “indispensable” financial blog on the Internet. Emphasis mine.)
Masters adds that the CFTC is pressing to make “Index Speculators exempt from all position limits” so they can make “unlimited” bets on the futures which are wreaking havoc on the global economy and pushing millions towards starvation. Of course, these things pale in comparison to the higher priority of fatting the bottom line of the parasitic investor class.
Brimming oil tankers are presently sitting off the coasts of Iran and Louisiana. The Strategic Petroleum Reserve has been filled. Demand is flat. The world’s biggest consumer of energy (guess who?) is cutting back . As CNN reports:
“At a time when gas prices are at an all-time high, Americans have curtailed their driving at a historic rate. The Department of Transportation said figures from March show the steepest decrease in driving ever recorded. Compared with March a year earlier, Americans drove an estimated 4.3 percent less — that’s 11 billion fewer miles, the DOT’s Federal Highway Administration said Monday, calling it “the sharpest yearly drop for any month in FHWA history.” (CNN)
The great oil crunch is another fabricated crisis, another “smoke and mirrors” fiasco, another Enron-type shell game engineered by banksters and hedge fund managers. Once again, the bloody footprints can be traced right back to the front door of the Federal Reserve. Don’t expect help from the regulators either; they’ve all been replaced with business reps like Harvey Pitt or Hank Paulson. The only time anyone in the Bush administration finds their conscience is when they’re offered a multi-million dollar “tell all” book deal.
Can you hear me, Scotty?
Mike Whitney lives in Washington state
http://www.dissidentvoice.org/2008/06/the-great-oil-swindle/
-----------------------------------------------------------------------------------------------
The Trade That Brought Us $100/bbl Oil Teaches Us to Be Afraid, Be Very Afraid
by Raymond J. Learsy Posted January 7, 2008
On January 2nd a single trade on the New York Mercantile Exchange pushed the price of oil to the psychologically freighted $100 a barrel. That trade made newspaper headlines or the front pages of newspapers throughout the world.
The trade itself was for a single futures contract of 1000 barrels of crude. The price quotation on the exchange prior to the fateful $100 trade was $99.53 so that the when that one contract at $100/bbl crossed the ticker, it jumped the market price of crude oil everywhere by nearly one half percent or 47 cents per barrel to be exact. At that moment that was the price on which all transactions of crude oil were based. The next trade on the exchange, that is the price at which the $100 contract could have been immediately resold, would have incurred a trading loss of $600 to the trader who executed the trade, understood to be one Mr. Richard Arens. Thus Mr. Arens, by being the first trader to have closed a $100/bbl trade on the NYMerc purchased a slice of immortality at a cost of but $600.
But then consider the following. By making that trade at some fifty cents above the going market Mr. Arens, by himself with an an investment of $6750, the margin required by the exchange for an oil futures contract, was able to move the market dramatically. At that moment of time and as long as the $100 marker was on the trading board, all oil produced, or shipped, bought or sold in the United States and given their close interrelationship, on markets throughout the world, that forty-seven cent jump was reflected in virtually all transactions. With some 85 million barrels of oil being produced and shipped each day, that trade alone increased the value of oil by over $40 million at that moment in time. All that based on one trade, requiring only $6750 as a margin deposit. An incredible and frightening degree of leverage. Thus we have been shown the clearest, most up to date, real time example of the risks inherent in basing the world price of oil on the vicissitudes of the commodity trading floor.
On these postings I have repeatedly tried to alert the field that the trading in oil futures on world commodity exchanges (electronic, New York , London, Singapore and on) is not a straight forward, unencumbered market (Please see "Energy Trading Oversight Awakens From Its Slumber With Anticipated BP Settlement" 10.25.07; "Oil Prices Pushed Ever Higher By Manipulating Oil Futures Trading", 04.05.06). That it is riddled with special interests (pushing up oil prices to levels as high as they will be tolerated) and oil patch agendas, or as in this case, reaching for an historic breakthrough. This argumentation has been met with considerable skepticism by the press ("the market sets the price") and outright hostility by those who have a vested interest in high oil prices, the oil industry and its friends in government.
Yet here is a prima facie evidence of the of the susceptibility by the commodity trading markets to play out specific agendas, and the ability of the trading markets to facilitate those agendas. Mr. Arens, with one oil futures contract representing 1000 barrels of oil, necessitating a deposit of only $6750, was able to bullseye the $100/bbl mark.
Now consider the following. Saudi Arabia, Kuwait, the United Arab Emirates, Russia all have Sovereign Wealth Funds. Saudia Arabia alone has $900 billion to invest, or to trade or to go dancing with. We don't know how these funds are spent or invested, because their activities and goals are completely opaque. The exception being when a Citigroup or Merrill Lynch go knocking at their door. For these countries oil is the core of their economy, and the higher the price of oil, the fatter those Sovereign Wealth Funds. It is the price of oil on the commodity exchanges that determines the price at which the physical product is bought and sold. Is it then unreasonable to assume, given the market's susceptibility to direction, as witnessed by that first $100/bbl tick, that a portion of that ocean of money in the hands of the world's most important oil producers is being used to trade oil prices toward the highest levels that the world's oil consuming economies can either bear or tolerate. What I'm trying to say in a perhaps overly long winded way, if a single trader with only $6750 can move the market, how can you expect those with billions at their disposal not to do the same as well!
It is long overdue that our government institutions, preferably conjointly with their international counterparts, take a seriously close look at commodity trading practices as they are currently structured. This to determine the likelihood and extent of manipulation, and the cost of that manipulation to the world at large. Somehow we must find ways to bring these markets back to becoming accurate and honest price mechanisms, reflecting real supply and demand. Otherwise we are participating in a game of loaded dice with purveyors of a basic commodity that exerts enormous influence on our fiscal, environmental and social well-being. Certainly anything less than a fully hands on, transparent, and effective oversight, will inevitably portend economic, social and environmental disaster.
Be afraid, be very afraid!
http://www.huffingtonpost.com/raymond-j-learsy/the-trade-that-brought-us_b_80149.html
Nick J. Rahall (D-WV) to Big Oil: Use It or Lose It
CONTACT: Allyson Groff or Blake Androff, 202-226-9019Washington, D.C. -
In an effort to compel oil and gas companies to produce on the 68 million acres of federal lands, both onshore and offshore, that are leased but sitting idle, House Natural Resources Committee Chairman Nick J. Rahall (D-WV) today introduced legislation that gives Big Oil one option - either "use it or lose it.""Big Oil, as many Americans already suspect, are perfectly fine with high gasoline prices at the pump while they hold back domestic production on federal leases and enjoy world record profits. I am calling them on the carpet. I am calling their bluff. We are not going to continue to allow them to speculate and profiteer with public resources to the detriment of the American people," Rahall said.The Responsible Federal Oil and Gas Lease Act of 2008 (H.R. 6251) is a direct response to the facts outlined in the recent House Natural Resources Committee Majority Staff report, "The Truth About America's Energy: Big Oil Stockpiles Supplies and Pockets Profits", that illustrate how energy companies are not using the federal lands and waters that are already open to drilling.
The legislation is co-sponsored by Reps. Rahm Emanuel (D-IL), Maurice Hinchey (D-NY), Ed Markey (D-MA), and John Yarmuth (D-KY).
The 68 million acres of leased but inactive federal land have the potential to produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day. This would nearly double total U.S. oil production, and increase natural gas production by 75 percent. It would also cut U.S. oil imports by more than one-third, reducing America's dependency on foreign oil.The Rahall bill would force oil and gas companies to either produce or give up federal onshore and offshore leases they are stockpiling by barring the companies from obtaining any more leases unless they can demonstrate that they are producing oil and gas, or are diligently developing the leases they already hold, during the initial term of the leases.Coal companies, which are issued leases for 20-year terms, are required, as a result of the Federal Coal Leasing Amendments Act of 1976 to show that they are diligently developing their leases during the initial lease term.
The law was enacted in an effort to end rampant speculation on federal coal as a result of the energy crises of the 1970's.Oil and gas companies, however, are not required to demonstrate diligent development. Because of this, oil and gas companies have been allowed to stockpile leases in a non-producing status, while leaving millions of acres of leased land untouched. The Rahall legislation directs the Secretary of the Interior to define what constitutes diligent development for oil and gas leases.Companies could avoid this new lease prohibition by relinquishing their non-producing leases, thus creating an opportunity for another company to explore for and perhaps produce oil and gas."As long as oil companies hold oil hostage, they will continue to get away with charging high prices and demanding a greater share of the public's land.
This bill forces their hand by compelling them to produce or hand the over their idle leases for someone who will," Rahall said.
Committee On Natural Resources :: 1324 Longworth Building :: Washington, DC 20515 :: t:202-225-6065 :: f:202-225-1931
"Responsible Federal Oil and Gas Lease Act of 2008" (Use IT or Lose IT)
Representatives Rahall, Markey, Hinchey, Emanuel and Yarmuth
The Problem
Currently, oil and gas companies hold leases on nearly 68 million acres of federal land (both onshore and under OCS waters) that they are not developing.
Generally speaking, oil and gas leases are issued for a 10-year term that can be renewed.
Coal leases are issued for 20 years and coal companies have to show that they are "diligently developing" their leases during the initial term of the lease.
While coal companies are required to diligently develop their leases, oil and gas companies are not required to do so.
Because there are no diligent development requirements, oil and gas companies can stockpile leases in a non-producing status.
This has encouraged oil and gas companies to hold nearly 68 million areas of federal land (both onshore and under OCS waters) without producing oil or gas.
The 68 million acres of leased but currently inactive federal land (both onshore and under OCS waters) could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.
That would nearly double total U.S. oil production, and increase natural gas production by 75%.
It would also cut U.S. oil imports by more than a third, and be more than six times the estimated peak production from the Arctic National Wildlife Refuge (ANWR).
By fostering prompt development of oil and gas leases, we will increase domestic production in areas already shown to appropriate for energy development.
The Solution
The "Responsible Federal Oil and Gas Lease Act of 2008" would compel oil and gas companies to either produce or give up federal onshore and OCS leases they are stockpiling by barring the companies from obtaining any more leases unless they can demonstrate that they are producing oil and gas, or are diligently developing the leases they already hold, during the initial term of the leases.
The bill directs the Interior Secretary to define what constitutes diligent development.
Companies could avoid this new lease prohibition by relinquishing their non-producing leases, creating an opportunity for another company to explore for and perhaps produce oil or gas from them. Under the bill, the terms of leases which are in production, or which can demonstrate diligent development, are extended.
Companies which lease federal coal resources are by law required to diligently develop their leases. This requirement has discouraged the rampant speculation that once existed in the federal coal leasing program. The same type of speculation that now appears to be plaguing the federal oil and gas leasing program.
http://resourcescommittee.house.gov/images/Documents/hr6251.pdf
In an effort to compel oil and gas companies to produce on the 68 million acres of federal lands, both onshore and offshore, that are leased but sitting idle, House Natural Resources Committee Chairman Nick J. Rahall (D-WV) today introduced legislation that gives Big Oil one option - either "use it or lose it.""Big Oil, as many Americans already suspect, are perfectly fine with high gasoline prices at the pump while they hold back domestic production on federal leases and enjoy world record profits. I am calling them on the carpet. I am calling their bluff. We are not going to continue to allow them to speculate and profiteer with public resources to the detriment of the American people," Rahall said.The Responsible Federal Oil and Gas Lease Act of 2008 (H.R. 6251) is a direct response to the facts outlined in the recent House Natural Resources Committee Majority Staff report, "The Truth About America's Energy: Big Oil Stockpiles Supplies and Pockets Profits", that illustrate how energy companies are not using the federal lands and waters that are already open to drilling.
The legislation is co-sponsored by Reps. Rahm Emanuel (D-IL), Maurice Hinchey (D-NY), Ed Markey (D-MA), and John Yarmuth (D-KY).
The 68 million acres of leased but inactive federal land have the potential to produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day. This would nearly double total U.S. oil production, and increase natural gas production by 75 percent. It would also cut U.S. oil imports by more than one-third, reducing America's dependency on foreign oil.The Rahall bill would force oil and gas companies to either produce or give up federal onshore and offshore leases they are stockpiling by barring the companies from obtaining any more leases unless they can demonstrate that they are producing oil and gas, or are diligently developing the leases they already hold, during the initial term of the leases.Coal companies, which are issued leases for 20-year terms, are required, as a result of the Federal Coal Leasing Amendments Act of 1976 to show that they are diligently developing their leases during the initial lease term.
The law was enacted in an effort to end rampant speculation on federal coal as a result of the energy crises of the 1970's.Oil and gas companies, however, are not required to demonstrate diligent development. Because of this, oil and gas companies have been allowed to stockpile leases in a non-producing status, while leaving millions of acres of leased land untouched. The Rahall legislation directs the Secretary of the Interior to define what constitutes diligent development for oil and gas leases.Companies could avoid this new lease prohibition by relinquishing their non-producing leases, thus creating an opportunity for another company to explore for and perhaps produce oil and gas."As long as oil companies hold oil hostage, they will continue to get away with charging high prices and demanding a greater share of the public's land.
This bill forces their hand by compelling them to produce or hand the over their idle leases for someone who will," Rahall said.
Committee On Natural Resources :: 1324 Longworth Building :: Washington, DC 20515 :: t:202-225-6065 :: f:202-225-1931
"Responsible Federal Oil and Gas Lease Act of 2008" (Use IT or Lose IT)
Representatives Rahall, Markey, Hinchey, Emanuel and Yarmuth
The Problem
Currently, oil and gas companies hold leases on nearly 68 million acres of federal land (both onshore and under OCS waters) that they are not developing.
Generally speaking, oil and gas leases are issued for a 10-year term that can be renewed.
Coal leases are issued for 20 years and coal companies have to show that they are "diligently developing" their leases during the initial term of the lease.
While coal companies are required to diligently develop their leases, oil and gas companies are not required to do so.
Because there are no diligent development requirements, oil and gas companies can stockpile leases in a non-producing status.
This has encouraged oil and gas companies to hold nearly 68 million areas of federal land (both onshore and under OCS waters) without producing oil or gas.
The 68 million acres of leased but currently inactive federal land (both onshore and under OCS waters) could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.
That would nearly double total U.S. oil production, and increase natural gas production by 75%.
It would also cut U.S. oil imports by more than a third, and be more than six times the estimated peak production from the Arctic National Wildlife Refuge (ANWR).
By fostering prompt development of oil and gas leases, we will increase domestic production in areas already shown to appropriate for energy development.
The Solution
The "Responsible Federal Oil and Gas Lease Act of 2008" would compel oil and gas companies to either produce or give up federal onshore and OCS leases they are stockpiling by barring the companies from obtaining any more leases unless they can demonstrate that they are producing oil and gas, or are diligently developing the leases they already hold, during the initial term of the leases.
The bill directs the Interior Secretary to define what constitutes diligent development.
Companies could avoid this new lease prohibition by relinquishing their non-producing leases, creating an opportunity for another company to explore for and perhaps produce oil or gas from them. Under the bill, the terms of leases which are in production, or which can demonstrate diligent development, are extended.
Companies which lease federal coal resources are by law required to diligently develop their leases. This requirement has discouraged the rampant speculation that once existed in the federal coal leasing program. The same type of speculation that now appears to be plaguing the federal oil and gas leasing program.
http://resourcescommittee.house.gov/images/Documents/hr6251.pdf
Why We're Suddenly Paying Through the Nose for Gas
By Michael T. Klare, The Nation. Posted June 21, 2008.
As the pain induced by higher oil prices spreads to an ever growing share of the American (and world) population, pundits and politicians have been quick to blame assorted villains -- greedy oil companies, heartless commodity speculators and OPEC. It's true that each of these parties has contributed to and benefited from the steep run-up. But the sharp growth in petroleum costs is due far more to a combination of soaring international demand and slackening supply -- compounded by the ruinous policies of the Bush Administration -- than to the behavior of those other actors.
Most, if not all, the damage was avoidable. Shortly after taking office, George W. Bush undertook a sweeping review of US energy policy aimed at expanding the nation's supply of vital fuels. The "reality is the nation has got a real problem when it comes to energy," he declared on March 14, 2001. "We need more sources of energy." At that time many of the problems evident today were already visible. Energy demand in mature industrial nations was continuing to grow as the rising economic dynamos of Asia, especially China, were beginning to make an impact. By 2002 the Energy Department was predicting that China would soon overtake Japan, becoming the world's second-largest petroleum consumer, and that developing Asia as a whole would account for about one-fourth of global consumption by 2020. Also evident was an unmistakable slowdown in the growth of world production, the telltale sign of an imminent "peaking" in global output [see Klare, "Beyond the Age of Petroleum," November 12, 2007].
With these trends in mind, many energy experts urged the White House to minimize future reliance on oil, emphasize conservation and rapidly develop climate-friendly alternatives, especially renewables like wind, solar, geothermal and biofuels. But Dick Cheney, who was overseeing the energy review, would have none of this. "Conservation may be a sign of personal virtue," the Vice President famously declared in April 2001, "but it is not a sufficient basis…for sound, comprehensive energy policy." After three months of huddling in secret with top executives of leading US energy companies, he released a plan on May 17 that, in effect, called for preserving the existing energy system, with its heavy reliance on oil, coal and natural gas.
Because continued reliance on oil would mean increased reliance on imported petroleum, especially from the Middle East, Bush sought to deflect public concern by calling for drilling in the Arctic National Wildlife Refuge and other protected areas. As a result, most public discourse on the Bush/Cheney plan focused on drilling in ANWR, and no attention was paid to the implications of increased dependence on imported oil -- even though oil from ANWR, in the most optimistic scenario, would reduce US need for imports (now about 60 percent) by just 4 percent.
But this produced another dilemma for Bush: increased reliance on imports meant increased vulnerability to disruptions in delivery due to wars and political upheavals. To address this danger, the Administration began planning for stepped-up military involvement in major overseas oil zones, especially the Persian Gulf. This was evident, for example, when then-Defense Secretary Donald Rumsfeld gave early priority to enhancement of American "power projection" to areas of instability in the developing world. Then came 9/11 and the "war on terror" -- giving the White House a perfect opportunity to accelerate the military expansion and to pursue other key objectives. High on the list was the elimination of Saddam Hussein, long considered the most potent challenger to US domination of the Gulf and its critical energy supplies.
But the invasion of Iraq -- intended to ensure US control of the Gulf and a stable environment for the expanded production and export of its oil -- has had exactly the opposite effect. Despite the many billions spent on oil infrastructure protection and the thousands of lives lost, production in Iraq is no higher today than it was before the invasion. Iraq has also become a rigorous training ground for extremists throughout the region, some of whom have now migrated to the oil kingdoms of the lower Gulf and begun attacking the facilities there -- generating some of the recent spikes in prices.
Then there is the dilemma posed by Iran. With Saddam out of the picture, the Islamic regime in Tehran is viewed in Washington as the greatest threat to US mastery of the Gulf. This threat rests largely on Iran's ability to attack oil shipping in the Gulf and ignite unrest among militant Shiite groups throughout the region, but its apparent pursuit of nuclear weapons has inflated the perceived menace significantly. To restrain Tehran's nuclear ambitions, Washington has imposed economic sanctions on Iran and forced key US allies to abandon plans for developing new oilfields there. As a result Iran, with the world's second-largest reserves after Saudi Arabia, is producing only about half the oil it could -- another reason for the global constriction of supply.
But the Administration's greatest contribution to the rising oil prices is its steady stream of threats to attack Iran if it does not back down on the nuclear issue. The Iranians have made it plain that they would retaliate by attempting to block the flow of Gulf oil and otherwise cause turmoil in the energy market. Most analysts assume, therefore, that an encounter will produce a global oil shortage and prices well over $200 per barrel. It is not surprising, then, that every threat by Bush/Cheney (or their counterparts in Israel) has triggered a sharp rise in prices. This is where speculators enter the picture. Believing that a US-Iranian clash is at least 50 percent likely, some investors are buying futures in oil at $140, $150 or more per barrel, thinking they'll make a killing if there's an attack and prices zoom over $200.
It follows, then, that while the hike in prices is due largely to ever increasing demand chasing insufficiently expanding supply, the Bush Administration's energy policies have greatly intensified the problem. By seeking to preserve our oil-based energy system at any cost, and by adding to the "fear factor" in international speculation through its bungled invasion of Iraq and bellicose statements on Iran, it has made a bad problem much worse.
What can be done to reverse this predicament? There is no realistic hope of substantially increasing the supply of oil -- drilling in offshore US waters, as favored by President Bush and Senator John McCain, will not reverse the long-term decline in US production -- so it is only by reducing demand that fundamental market forces can be addressed. This is best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of energy alternatives. It will take time for some of these efforts to have an impact on prices; others, like reducing speed limits and adding bus routes, would have a more rapid effect. And if this Administration truly wanted to spare Americans further pain at the pump, there is one thing it could do that would have an immediate effect: declare that military force is not an acceptable option in the struggle with Iran. Such a declaration would take the wind out of the sails of speculators and set the course for a drop in prices.
Michael T. Klare, Nation defense correspondent, is professor of peace and world security studies at Hampshire College. His latest book is Rising Powers, Shrinking Planet: The New Geopolitics of Energy.
http://www.alternet.org/healthwellness/88945/
© 2008 The Nation All rights reserved.
As the pain induced by higher oil prices spreads to an ever growing share of the American (and world) population, pundits and politicians have been quick to blame assorted villains -- greedy oil companies, heartless commodity speculators and OPEC. It's true that each of these parties has contributed to and benefited from the steep run-up. But the sharp growth in petroleum costs is due far more to a combination of soaring international demand and slackening supply -- compounded by the ruinous policies of the Bush Administration -- than to the behavior of those other actors.
Most, if not all, the damage was avoidable. Shortly after taking office, George W. Bush undertook a sweeping review of US energy policy aimed at expanding the nation's supply of vital fuels. The "reality is the nation has got a real problem when it comes to energy," he declared on March 14, 2001. "We need more sources of energy." At that time many of the problems evident today were already visible. Energy demand in mature industrial nations was continuing to grow as the rising economic dynamos of Asia, especially China, were beginning to make an impact. By 2002 the Energy Department was predicting that China would soon overtake Japan, becoming the world's second-largest petroleum consumer, and that developing Asia as a whole would account for about one-fourth of global consumption by 2020. Also evident was an unmistakable slowdown in the growth of world production, the telltale sign of an imminent "peaking" in global output [see Klare, "Beyond the Age of Petroleum," November 12, 2007].
With these trends in mind, many energy experts urged the White House to minimize future reliance on oil, emphasize conservation and rapidly develop climate-friendly alternatives, especially renewables like wind, solar, geothermal and biofuels. But Dick Cheney, who was overseeing the energy review, would have none of this. "Conservation may be a sign of personal virtue," the Vice President famously declared in April 2001, "but it is not a sufficient basis…for sound, comprehensive energy policy." After three months of huddling in secret with top executives of leading US energy companies, he released a plan on May 17 that, in effect, called for preserving the existing energy system, with its heavy reliance on oil, coal and natural gas.
Because continued reliance on oil would mean increased reliance on imported petroleum, especially from the Middle East, Bush sought to deflect public concern by calling for drilling in the Arctic National Wildlife Refuge and other protected areas. As a result, most public discourse on the Bush/Cheney plan focused on drilling in ANWR, and no attention was paid to the implications of increased dependence on imported oil -- even though oil from ANWR, in the most optimistic scenario, would reduce US need for imports (now about 60 percent) by just 4 percent.
But this produced another dilemma for Bush: increased reliance on imports meant increased vulnerability to disruptions in delivery due to wars and political upheavals. To address this danger, the Administration began planning for stepped-up military involvement in major overseas oil zones, especially the Persian Gulf. This was evident, for example, when then-Defense Secretary Donald Rumsfeld gave early priority to enhancement of American "power projection" to areas of instability in the developing world. Then came 9/11 and the "war on terror" -- giving the White House a perfect opportunity to accelerate the military expansion and to pursue other key objectives. High on the list was the elimination of Saddam Hussein, long considered the most potent challenger to US domination of the Gulf and its critical energy supplies.
But the invasion of Iraq -- intended to ensure US control of the Gulf and a stable environment for the expanded production and export of its oil -- has had exactly the opposite effect. Despite the many billions spent on oil infrastructure protection and the thousands of lives lost, production in Iraq is no higher today than it was before the invasion. Iraq has also become a rigorous training ground for extremists throughout the region, some of whom have now migrated to the oil kingdoms of the lower Gulf and begun attacking the facilities there -- generating some of the recent spikes in prices.
Then there is the dilemma posed by Iran. With Saddam out of the picture, the Islamic regime in Tehran is viewed in Washington as the greatest threat to US mastery of the Gulf. This threat rests largely on Iran's ability to attack oil shipping in the Gulf and ignite unrest among militant Shiite groups throughout the region, but its apparent pursuit of nuclear weapons has inflated the perceived menace significantly. To restrain Tehran's nuclear ambitions, Washington has imposed economic sanctions on Iran and forced key US allies to abandon plans for developing new oilfields there. As a result Iran, with the world's second-largest reserves after Saudi Arabia, is producing only about half the oil it could -- another reason for the global constriction of supply.
But the Administration's greatest contribution to the rising oil prices is its steady stream of threats to attack Iran if it does not back down on the nuclear issue. The Iranians have made it plain that they would retaliate by attempting to block the flow of Gulf oil and otherwise cause turmoil in the energy market. Most analysts assume, therefore, that an encounter will produce a global oil shortage and prices well over $200 per barrel. It is not surprising, then, that every threat by Bush/Cheney (or their counterparts in Israel) has triggered a sharp rise in prices. This is where speculators enter the picture. Believing that a US-Iranian clash is at least 50 percent likely, some investors are buying futures in oil at $140, $150 or more per barrel, thinking they'll make a killing if there's an attack and prices zoom over $200.
It follows, then, that while the hike in prices is due largely to ever increasing demand chasing insufficiently expanding supply, the Bush Administration's energy policies have greatly intensified the problem. By seeking to preserve our oil-based energy system at any cost, and by adding to the "fear factor" in international speculation through its bungled invasion of Iraq and bellicose statements on Iran, it has made a bad problem much worse.
What can be done to reverse this predicament? There is no realistic hope of substantially increasing the supply of oil -- drilling in offshore US waters, as favored by President Bush and Senator John McCain, will not reverse the long-term decline in US production -- so it is only by reducing demand that fundamental market forces can be addressed. This is best done through a comprehensive program of energy conservation, expanding public transit and accelerating development of energy alternatives. It will take time for some of these efforts to have an impact on prices; others, like reducing speed limits and adding bus routes, would have a more rapid effect. And if this Administration truly wanted to spare Americans further pain at the pump, there is one thing it could do that would have an immediate effect: declare that military force is not an acceptable option in the struggle with Iran. Such a declaration would take the wind out of the sails of speculators and set the course for a drop in prices.
Michael T. Klare, Nation defense correspondent, is professor of peace and world security studies at Hampshire College. His latest book is Rising Powers, Shrinking Planet: The New Geopolitics of Energy.
http://www.alternet.org/healthwellness/88945/
© 2008 The Nation All rights reserved.
Thursday, June 19, 2008
Charges at Bear Stearns linked to subprime debacle
By TOM HAYS, Associated Press Writer
Two former Bear Stearns managers were arrested Thursday on securities fraud and other charges linked to the collapse of a hedge fund that bet heavily on subprime mortgages before the market collapsed, federal authorities said.
Matthew Tannin was taken into custody outside his New Jersey home on Thursday morning and Ralph Cioffi was arrested at his New York City home, the FBI said. They became the first executives to be charged criminally in the wake of the subprime market debacle.
Yet the fall out is beginning to spread.
The FBI announced Thursday that it had arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.
One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion.
The Justice Department and FBI plan to announce the recent arrests — including apprehensions in Chicago, Atlanta, Miami, and suburban Maryland — at a news conference set for Thursday afternoon in Washington.
An indictment unsealed in federal court charged both men with securities and wire fraud, and Cioffi with insider trading. The U.S. attorney's office in Brooklyn planned a news conference later Thursday.
In a separate complaint also filed Thursday, the Securities and Exchange Commission alleges that in the first five months of 2007, Tannin and Cioffi "deceived their own investors, as well as the fund's institutional counterparts, by fraudulently concealing from them the full extent of the fund's deepening troubles."
The complaint says that in March 2007, Cioffi withdrew $2 million of his own money from a hedge fund without revealing to investors that he was substantially reducing his exposure to the toxic loans.
"Cioffi's clandestine redemption caused the Enhanced Leverage Fund to pay out $2 million at a time when the markets were weak and the fund was facing another month of losses, as well as escalating margin calls and forced sales," the SEC said.
"Although Cioffi had lost faith in the funds, as evidenced by his own redemption from the Enhanced Leverage Fund, he nonetheless falsely expressed his supposed confidence in the funds, encouraging investors to add money to the funds and attempting to dissuade them from redeeming," the complaint said.
The complaint alleges Cioffi and Tannin revealed their secret doubts about the survival of the funds in internal e-mails.
Tannin, the complaint says, sent one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, "Is Ralph doing what he should be doing right now?"
Around the same time, it adds, Cioffi wrote to a team economist, saying, "I'm fearful of these markets. ... As we discussed it may not be a meltdown for the general economy but in our world it will be. Wall Street will be hammered with lawsuits."
The complaint alleges violation of security laws and seeks an unspecified fine.
A law enforcement official told The Associated Press on Wednesday that an indictment naming the men was the result of a yearlong federal securities fraud investigation. The official spoke on condition of anonymity because the outcome of the investigation is pending.
Tannin "is innocent," said his attorney, Susan Brune. "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
Cioffi's attorney declined comment on Thursday.
The fallout from defaults on U.S. mortgages has rattled the global economy and the American housing market.
Subprime mortgages, those issued to people with shaky credit, were repackaged as securities and sold across the globe.
The implosion of the hedge funds foreshadowed Bear Stearns' own demise, with the Federal Reserve having to intervene earlier this year to bail out the beleaguered bank. Their collapse revealed how much damage had been done to the companies that bought, repackaged and sold the loans.
Despite positive assessments by Cioffi and Tannin, the Bear Stearns hedge funds failed in June 2007. The funds had more than $20 billion in assets before crashing.
Cioffi, 52, and Tannin, 46, already have been named in lawsuits brought last year by hedge fund investors, including Barclays Bank PLC, who allege they were purposely misled.
Barclays accused Bear Stearns of knowing for months that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund were worth "far less" than their stated values.
The bank alleged Bear Stearns managers "hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments."
The complaint said Bear Stearns told Barclays that the enhanced fund was up almost 6 percent through June 2007 — when "in reality, the portfolio's asset values were plummeting."
Last month, Bear Stearns shareholders approved JPMorgan Chase & Co.'s $2.2 billion buyout at about $10 a share. Back in January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns had traded at $171 a share.
___
Associated Press Writer Lara Jakes Jordan in Washington contributed to this report.
Copyright © 2008 The Associated Press
http://news.yahoo.com/s/ap/20080619/ap_on_bi_ge/bear_stearns_investigation&printer=1;_ylt=AnMK6dQ8n8swiq1vV0L_9h1v24cA
Two former Bear Stearns managers were arrested Thursday on securities fraud and other charges linked to the collapse of a hedge fund that bet heavily on subprime mortgages before the market collapsed, federal authorities said.
Matthew Tannin was taken into custody outside his New Jersey home on Thursday morning and Ralph Cioffi was arrested at his New York City home, the FBI said. They became the first executives to be charged criminally in the wake of the subprime market debacle.
Yet the fall out is beginning to spread.
The FBI announced Thursday that it had arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.
One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion.
The Justice Department and FBI plan to announce the recent arrests — including apprehensions in Chicago, Atlanta, Miami, and suburban Maryland — at a news conference set for Thursday afternoon in Washington.
An indictment unsealed in federal court charged both men with securities and wire fraud, and Cioffi with insider trading. The U.S. attorney's office in Brooklyn planned a news conference later Thursday.
In a separate complaint also filed Thursday, the Securities and Exchange Commission alleges that in the first five months of 2007, Tannin and Cioffi "deceived their own investors, as well as the fund's institutional counterparts, by fraudulently concealing from them the full extent of the fund's deepening troubles."
The complaint says that in March 2007, Cioffi withdrew $2 million of his own money from a hedge fund without revealing to investors that he was substantially reducing his exposure to the toxic loans.
"Cioffi's clandestine redemption caused the Enhanced Leverage Fund to pay out $2 million at a time when the markets were weak and the fund was facing another month of losses, as well as escalating margin calls and forced sales," the SEC said.
"Although Cioffi had lost faith in the funds, as evidenced by his own redemption from the Enhanced Leverage Fund, he nonetheless falsely expressed his supposed confidence in the funds, encouraging investors to add money to the funds and attempting to dissuade them from redeeming," the complaint said.
The complaint alleges Cioffi and Tannin revealed their secret doubts about the survival of the funds in internal e-mails.
Tannin, the complaint says, sent one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, "Is Ralph doing what he should be doing right now?"
Around the same time, it adds, Cioffi wrote to a team economist, saying, "I'm fearful of these markets. ... As we discussed it may not be a meltdown for the general economy but in our world it will be. Wall Street will be hammered with lawsuits."
The complaint alleges violation of security laws and seeks an unspecified fine.
A law enforcement official told The Associated Press on Wednesday that an indictment naming the men was the result of a yearlong federal securities fraud investigation. The official spoke on condition of anonymity because the outcome of the investigation is pending.
Tannin "is innocent," said his attorney, Susan Brune. "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
Cioffi's attorney declined comment on Thursday.
The fallout from defaults on U.S. mortgages has rattled the global economy and the American housing market.
Subprime mortgages, those issued to people with shaky credit, were repackaged as securities and sold across the globe.
The implosion of the hedge funds foreshadowed Bear Stearns' own demise, with the Federal Reserve having to intervene earlier this year to bail out the beleaguered bank. Their collapse revealed how much damage had been done to the companies that bought, repackaged and sold the loans.
Despite positive assessments by Cioffi and Tannin, the Bear Stearns hedge funds failed in June 2007. The funds had more than $20 billion in assets before crashing.
Cioffi, 52, and Tannin, 46, already have been named in lawsuits brought last year by hedge fund investors, including Barclays Bank PLC, who allege they were purposely misled.
Barclays accused Bear Stearns of knowing for months that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund were worth "far less" than their stated values.
The bank alleged Bear Stearns managers "hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments."
The complaint said Bear Stearns told Barclays that the enhanced fund was up almost 6 percent through June 2007 — when "in reality, the portfolio's asset values were plummeting."
Last month, Bear Stearns shareholders approved JPMorgan Chase & Co.'s $2.2 billion buyout at about $10 a share. Back in January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns had traded at $171 a share.
___
Associated Press Writer Lara Jakes Jordan in Washington contributed to this report.
Copyright © 2008 The Associated Press
http://news.yahoo.com/s/ap/20080619/ap_on_bi_ge/bear_stearns_investigation&printer=1;_ylt=AnMK6dQ8n8swiq1vV0L_9h1v24cA
Wednesday, June 18, 2008
U.S. gas now a big bargain in Mexico
Subsidized low price attracts lots of Americans
By LYNN BREZOSKYSan Antonio Express-News
LAREDO — With his sales down 40 percent and talk of border residents filling up in Mexico, Laredo Shell station owner Manuel Arechiga took his diesel pickup across the border to see what the story was.
Sure enough, he was able to fill his tank for about $70, as opposed to about $145 at his own station in Texas.
The kick is that the fuel is being refined in the United States and trucked across the border to Mexico, only to be sold at prices subsidized by the government there to protect the Mexican consumer prices that are now cutting into his business.
Arechiga brought some diesel back, put it in a clear bottle and compared it with his own product. It was identical.
Because of sagging business, he's already had to let two workers go and is looking to sell the stations he's been operating since the 1980s.
Gasoline just isn't profitable, and the breakfast tacos, snacks and other sundry items he sells aren't making up the difference.
"If domestic supply is already tight, why are you selling it to Mexico?" Arechiga wondered. "You create an artificial demand when you start selling to countries that are subsidizing."
U.S. Rep. Henry Cuellar, D-Laredo, said he plans to do some questioning in Washington.
"What can the United States do? Tell a country not to subsidize a product?" he said. "This could be a trade issue. ... Are they subsidizing to violate any trade agreement that the U.S. and Mexico might have?"
Arechiga wants to be able to take tankers into Mexico and bring fuel back for big customers such as Laredo's United Independent School District, which is straining financially to fill school buses and maintenance vehicles.
He's gotten all the U.S. permits. The final permit, from the secretary of commerce in Mexico, has been "virtually unobtainable," he said.
Cars with Texas platesAt an OXXO gas station last week in Nuevo Laredo, Mexico, attendant Oscar Sanchez estimated that business there was up 50 percent. He said many of the customers were Americans, but others were Mexicans heading to Monterrey and other inland points. In the old days, they would have fueled up in Texas, where prices had been about the same or slightly lower but quality was said to be better, with less risk of being shorted at the pump.
Now, the savings are clearly on the Mexican side.
"At times there are long lines," Sanchez said.
The station's pumps were temporarily down, but at another station every third or fourth vehicle had Texas plates.
Jimmy Ramirez, a craftsman from Laredo, said he frequently does business in Nuevo Laredo and makes a point of filling up his tank whenever he crosses.
"It's about 90 cents a gallon cheaper," he said.
Jorge Perez, 33, a Laredo plumber, said the hulking Suburban he bought a few months ago was eating too much of the family budget. He was making his first cross-border gas run to see how much he could save and how the vehicle performed.
"When it's empty it's around $120, $130," to fill up in Texas, he said. The tab in Mexico came to about $90.
"We can maybe pay one bill with $30," Perez said.
All gasoline in Mexico is distributed through a nationally owned monopoly known as Petróleos Mexicanos, or Pemex.
Pemex has traditionally been a great source of national pride, making Mexico one of the world's top oil producers and producing about a third of the government's revenue.
Imports 40% of its fuelBut its proven oil reserves are shrinking, and it lacks refining capacity, particularly for low-sulfur diesel being phased in under the North American Free Trade Agreement.
So even while the nation still exports crude oil, it imports about 40 percent of its fuel.
Gas savings may be deflected by hourlong waits to cross back to the United States on top of a few dollars in tolls. Still, news reports from Brownsville to San Diego, Calif., have documented Americans filling up across the border.
Internet message boards, such as one for sports fishermen, detail strategies to carry extra tanks from Mexico's Baja California.
After seeing a spike in extra tanks and containers, U.S. Customs and Border Protection published an advisory telling people that anything not in their vehicle's gas tank qualifies as a commercial import and must be brought in and documented through commercial lanes.
"We're not stopping people who are coming in with just one diesel tank, but we're looking at people who are coming in with several of them," CBP spokeswoman Mucia Dovalina said in a news release.
In a phone interview Thursday, Dovalina said the advisory applied to "anything that is not in actual use or that is not fitting to the vehicle that is in operation of the vehicle."
While border gas station owners may be hurting, American Petroleum Institute economist Ron Planting said he hadn't heard any industrywide complaints.
While Mexico is the biggest importer of U.S refined product, "In the overall scheme of things, it's not a huge number," Planting said.
He noted that Pemex in 1993 invested $1 billion in Shell Oil Co.'s Deer Park refinery to help process its oil.
The cross-border lure of low prices to U.S. consumers might not last.
Subsidy may go awayNewspapers throughout Mexico on Thursday published the government admission that it can no longer afford gasoline subsidies that are costing it almost $20 billion a year.
"It is best to gradually reduce the subsidy of these products to salvage the population's standard of living," Mexican Energy Secretary Georgina Kessel said in a news conference.
But John Bailey, director of the Mexico Project at the Center for Latin American Studies at Georgetown University, said Mexico and other poor countries were under increasing pressure to soften the impact of rising fuel and gas prices.
"The income distribution of Mexico is really terrible, and so the government does the best it can to cushion the blow," he said. Bailey said a sharp rise in fuel prices would likely spark strikes and uprisings, such as seen recently with truckers in Spain.
"I just see these price rises to hit very hard at the lower classes especially," he said.
lbrezosky@express-news.net
http://www.chron.com/disp/story.mpl/buzz/5841389.html
By LYNN BREZOSKYSan Antonio Express-News
LAREDO — With his sales down 40 percent and talk of border residents filling up in Mexico, Laredo Shell station owner Manuel Arechiga took his diesel pickup across the border to see what the story was.
Sure enough, he was able to fill his tank for about $70, as opposed to about $145 at his own station in Texas.
The kick is that the fuel is being refined in the United States and trucked across the border to Mexico, only to be sold at prices subsidized by the government there to protect the Mexican consumer prices that are now cutting into his business.
Arechiga brought some diesel back, put it in a clear bottle and compared it with his own product. It was identical.
Because of sagging business, he's already had to let two workers go and is looking to sell the stations he's been operating since the 1980s.
Gasoline just isn't profitable, and the breakfast tacos, snacks and other sundry items he sells aren't making up the difference.
"If domestic supply is already tight, why are you selling it to Mexico?" Arechiga wondered. "You create an artificial demand when you start selling to countries that are subsidizing."
U.S. Rep. Henry Cuellar, D-Laredo, said he plans to do some questioning in Washington.
"What can the United States do? Tell a country not to subsidize a product?" he said. "This could be a trade issue. ... Are they subsidizing to violate any trade agreement that the U.S. and Mexico might have?"
Arechiga wants to be able to take tankers into Mexico and bring fuel back for big customers such as Laredo's United Independent School District, which is straining financially to fill school buses and maintenance vehicles.
He's gotten all the U.S. permits. The final permit, from the secretary of commerce in Mexico, has been "virtually unobtainable," he said.
Cars with Texas platesAt an OXXO gas station last week in Nuevo Laredo, Mexico, attendant Oscar Sanchez estimated that business there was up 50 percent. He said many of the customers were Americans, but others were Mexicans heading to Monterrey and other inland points. In the old days, they would have fueled up in Texas, where prices had been about the same or slightly lower but quality was said to be better, with less risk of being shorted at the pump.
Now, the savings are clearly on the Mexican side.
"At times there are long lines," Sanchez said.
The station's pumps were temporarily down, but at another station every third or fourth vehicle had Texas plates.
Jimmy Ramirez, a craftsman from Laredo, said he frequently does business in Nuevo Laredo and makes a point of filling up his tank whenever he crosses.
"It's about 90 cents a gallon cheaper," he said.
Jorge Perez, 33, a Laredo plumber, said the hulking Suburban he bought a few months ago was eating too much of the family budget. He was making his first cross-border gas run to see how much he could save and how the vehicle performed.
"When it's empty it's around $120, $130," to fill up in Texas, he said. The tab in Mexico came to about $90.
"We can maybe pay one bill with $30," Perez said.
All gasoline in Mexico is distributed through a nationally owned monopoly known as Petróleos Mexicanos, or Pemex.
Pemex has traditionally been a great source of national pride, making Mexico one of the world's top oil producers and producing about a third of the government's revenue.
Imports 40% of its fuelBut its proven oil reserves are shrinking, and it lacks refining capacity, particularly for low-sulfur diesel being phased in under the North American Free Trade Agreement.
So even while the nation still exports crude oil, it imports about 40 percent of its fuel.
Gas savings may be deflected by hourlong waits to cross back to the United States on top of a few dollars in tolls. Still, news reports from Brownsville to San Diego, Calif., have documented Americans filling up across the border.
Internet message boards, such as one for sports fishermen, detail strategies to carry extra tanks from Mexico's Baja California.
After seeing a spike in extra tanks and containers, U.S. Customs and Border Protection published an advisory telling people that anything not in their vehicle's gas tank qualifies as a commercial import and must be brought in and documented through commercial lanes.
"We're not stopping people who are coming in with just one diesel tank, but we're looking at people who are coming in with several of them," CBP spokeswoman Mucia Dovalina said in a news release.
In a phone interview Thursday, Dovalina said the advisory applied to "anything that is not in actual use or that is not fitting to the vehicle that is in operation of the vehicle."
While border gas station owners may be hurting, American Petroleum Institute economist Ron Planting said he hadn't heard any industrywide complaints.
While Mexico is the biggest importer of U.S refined product, "In the overall scheme of things, it's not a huge number," Planting said.
He noted that Pemex in 1993 invested $1 billion in Shell Oil Co.'s Deer Park refinery to help process its oil.
The cross-border lure of low prices to U.S. consumers might not last.
Subsidy may go awayNewspapers throughout Mexico on Thursday published the government admission that it can no longer afford gasoline subsidies that are costing it almost $20 billion a year.
"It is best to gradually reduce the subsidy of these products to salvage the population's standard of living," Mexican Energy Secretary Georgina Kessel said in a news conference.
But John Bailey, director of the Mexico Project at the Center for Latin American Studies at Georgetown University, said Mexico and other poor countries were under increasing pressure to soften the impact of rising fuel and gas prices.
"The income distribution of Mexico is really terrible, and so the government does the best it can to cushion the blow," he said. Bailey said a sharp rise in fuel prices would likely spark strikes and uprisings, such as seen recently with truckers in Spain.
"I just see these price rises to hit very hard at the lower classes especially," he said.
lbrezosky@express-news.net
http://www.chron.com/disp/story.mpl/buzz/5841389.html
Monday, June 16, 2008
Booming, China Faults U.S. Policy on the Economy
By EDWARD WONG
Published: June 17, 2008
BEIJING — Not long ago, Chinese officials sat across conference tables from American officials and got an earful.
The Americans scolded the Chinese on mismanaging their economy, from state subsidies to foreign investment regulations to the valuation of their currency. Your economic system, the Americans strongly implied, should look a lot more like ours.
But in recent weeks, the fingers have been wagging in the other direction. Senior Chinese officials are publicly and loudly rebuking the Americans on their handling of the economy and defending their own more assertive style of regulation.
Chinese officials seem to be galled by the apparent hypocrisy of Americans telling them what to do while the American economy is at best stagnant. China, on the other hand, has maintained its feverish growth.
Some officials are promoting a Chinese style of economic management that they suggest serves developing countries better than the American model, in much the same way they argue that they are in no hurry to copy American-style multiparty democracy.
In the last six weeks alone, a senior banking regulator blamed Washington’s “warped conception” of market regulation for the subprime mortgage crisis that is rattling the world economy; the Chinese envoy to the World Trade Organization called on the United States to halt the dollar’s unchecked depreciation before the slide further worsens soaring oil and food prices; and Chinese agencies denounced a federal committee charged with vetting foreign investments in the United States, saying the Americans were showing “hostility” and a “discriminatory attitude,” not least toward the Chinese.
All this reflects a brash new sense of self-confidence on the part of the Chinese. China seems to feel unusually bold before the Summer Olympics, seen here as a curtain raiser for the nation’s ascent to pre-eminence in the world. The devastating earthquake last month helped by turning world sympathy toward China and dampening criticism of its handling of Tibet.
The Chinese attitude is no doubt bolstered by the lame-duck status of the Bush administration and by the fact that the United States is widely seen as having squandered its political and military leadership during the war in Iraq, which China opposed. Likewise, Chinese officials and state news media have suggested that the relatively quick mobilization of the Chinese Army during the recent earthquake in Sichuan Province contrasts favorably with the Bush administration’s reaction to Hurricane Katrina.
The aggressive stand comes at an inopportune moment for the White House. Treasury Secretary Henry M. Paulson Jr. and other cabinet members are to meet with Chinese officials in Annapolis, Md., on Tuesday in the latest round of semiannual economic talks. The Americans have a laundry list of complaints, among them that the Chinese use regulations to favor domestic companies over foreign rivals and that Beijing does too little to police the theft of copyrights and patents held by Western companies.
The United States is also pressing China to address concerns about the safety of food and drugs it exports.
But China has its own list of grievances, topped by management of the dollar and restrictions on foreign investment in the United States. And the Americans could find themselves with little negotiating leverage.
“U.S. credibility and the credibility of U.S. financial markets is zero everywhere in the world,” said Joseph E. Stiglitz, a professor of economics at Columbia University who has sharply criticized the Bush administration and praised China’s economic management in the past. “Anybody looking at this from the outside says, ‘There’s been a lot of hot air coming out of the U.S., so why should we listen to these guys when they didn’t know how to manage risk?’ ”
Here in China, economic observers are noting that the Chinese posture toward the Americans has decidedly shifted.
“This time, the Chinese side is trying to change its attitude to be more active, to be more aggressive, to balance the two sides,” said Song Hongbing, author of “The Currency War,” a best-selling if conspiratorial book on the American economy. “They just started to change their attitude for the future.”
Chinese officials are expressing their disdain in forums around the world. Last month, Liu Mingkang, the chairman of the China Banking Regulatory Commission, delivered a lecture at the British Museum in London in which he blamed the American government for the subprime mortgage crisis that came close to freezing Western debt markets and required extensive intervention by the Federal Reserve. The turmoil, he said, was “counteracting the course of global civilization.”
“Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?” he said.
One of Mr. Liu’s colleagues, Liao Min, told the newspaper The Financial Times in late May that the “Western consensus on the relation between the market and the government should be reviewed.”
“In practice, they tend to overestimate the power of the market and overlook the regulatory role of the government, and this warped conception is at the root of the subprime crisis,” said Mr. Liao, director general of the commission.
China is grappling with its share of economic problems, including high inflation. But it has reasons to feel optimistic.
Some economists say it has improved its state-owned banking system by writing off bad debt and overhauling management even as it rejected American pressure to privatize banks and allow unfettered competition in the financial sector. Its financial system is more tightly regulated and less dynamic than the American one, but also more stable, Chinese economists argue.
On currency management, China has been under heavy pressure to raise the value of the renminbi, which foreign critics say is maintained at an artificially low level to make Chinese exports less expensive. So far, China has managed to walk a tightrope. It has allowed the renminbi to increase in value against the dollar in tiny increments, for a total of 20 percent since 2005, a less dramatic change than the Bush administration and Congress demanded.
The gradual approach has allowed the export sector to adjust while preventing a currency shock that might derail growth.
Meanwhile, the Americans allowed the dollar to plunge in value. That angered the Chinese, which keeps most of its $1.76 trillion in foreign reserves in dollars. Chinese officials have accused the Americans of mismanaging the dollar at a time when Washington is still pressing China to appreciate the renminbi to narrow the trade deficit.
This month, the Chinese envoy to the World Trade Organization said in Geneva that the United States had failed to safeguard the value of its currency, worsening the pain for people around the world who pay high oil and food prices in dollars.
The envoy, Sun Zhenyu, also said the United States was engaging in protectionism by imposing unfair duties on Chinese goods and subsidizing American products.
Also this month, several Chinese institutions submitted sharp critiques to the Treasury Department of proposed new regulations relating to foreign investment in the United States. Some of the remarks were scathing.
“The regulations still include some sections and procedures which reflect the enshrouded protectionism, an obvious contradiction to the spirit of free competition the U.S. has championed since long time ago,” wrote the China Securities Regulatory Commission.
The commission said the proposed regulations reflected a “self-evident hostility” and “discriminatory attitude” to certain types of foreign investments and “will ultimately hurt enthusiasm of foreign investment in the U.S.”
China was particularly stung in 2005 by opposition in Congress to a bid by its third largest national oil company to buy the Unocal Corporation, an American oil company, for $18.5 billion.
Mr. Paulson, the Treasury secretary, said Monday that he agreed that there had been a “general trend” of China’s becoming increasingly vocal in its criticism of American policies, but that this was not a cause for concern.
“We’ve had a relationship where both sides have been pretty frank privately and pretty frank publicly,” Mr. Paulson said in a telephone interview in Washington. He said China’s criticism of American policies grew out of its rise as an economic power, with greater voice in global discussions on trade, currency and the flow of capital.
Nicholas R. Lardy, a China expert at the Peterson Institute for International Economics in Washington, said in an interview that “the Chinese are reacting adversely, and I think with some justification.”
He added, though, that he interpreted China’s recent aggression more as a reaction to specific events or policies involving the American economy than as a result of a new surge in national confidence.
If that is the case, China might be able to avoid the pitfall of hubris. Japan attacked the American government’s economic management in the 1980s, only to find itself tumbling into recession and stagnation ever since. Some economic experts here warn that China’s economy could soon feel the full brunt of the downturn in the world economy, and that the American economy, in the long run, could stay on top.
“The U.S. has always considered its economy powerful and is reluctant to listen to other countries,” said Lin Jiang, the head of the economics department at the China Youth College for Political Sciences in Beijing. “Of course China now is more confident than before and Chinese people are more proud of China’s economy, but we can’t be blind. It’s still hard to challenge the U.S.”
Huang Yuanxi contributed research from Beijing. Keith Bradsher contributed reporting from Hong Kong, and Steven R. Weisman from Washington.
Copyright 2008 The New York Times Company
http://www.nytimes.com/2008/06/17/world/asia/17china.html?exprod=myyahoo&pagewanted=print
Published: June 17, 2008
BEIJING — Not long ago, Chinese officials sat across conference tables from American officials and got an earful.
The Americans scolded the Chinese on mismanaging their economy, from state subsidies to foreign investment regulations to the valuation of their currency. Your economic system, the Americans strongly implied, should look a lot more like ours.
But in recent weeks, the fingers have been wagging in the other direction. Senior Chinese officials are publicly and loudly rebuking the Americans on their handling of the economy and defending their own more assertive style of regulation.
Chinese officials seem to be galled by the apparent hypocrisy of Americans telling them what to do while the American economy is at best stagnant. China, on the other hand, has maintained its feverish growth.
Some officials are promoting a Chinese style of economic management that they suggest serves developing countries better than the American model, in much the same way they argue that they are in no hurry to copy American-style multiparty democracy.
In the last six weeks alone, a senior banking regulator blamed Washington’s “warped conception” of market regulation for the subprime mortgage crisis that is rattling the world economy; the Chinese envoy to the World Trade Organization called on the United States to halt the dollar’s unchecked depreciation before the slide further worsens soaring oil and food prices; and Chinese agencies denounced a federal committee charged with vetting foreign investments in the United States, saying the Americans were showing “hostility” and a “discriminatory attitude,” not least toward the Chinese.
All this reflects a brash new sense of self-confidence on the part of the Chinese. China seems to feel unusually bold before the Summer Olympics, seen here as a curtain raiser for the nation’s ascent to pre-eminence in the world. The devastating earthquake last month helped by turning world sympathy toward China and dampening criticism of its handling of Tibet.
The Chinese attitude is no doubt bolstered by the lame-duck status of the Bush administration and by the fact that the United States is widely seen as having squandered its political and military leadership during the war in Iraq, which China opposed. Likewise, Chinese officials and state news media have suggested that the relatively quick mobilization of the Chinese Army during the recent earthquake in Sichuan Province contrasts favorably with the Bush administration’s reaction to Hurricane Katrina.
The aggressive stand comes at an inopportune moment for the White House. Treasury Secretary Henry M. Paulson Jr. and other cabinet members are to meet with Chinese officials in Annapolis, Md., on Tuesday in the latest round of semiannual economic talks. The Americans have a laundry list of complaints, among them that the Chinese use regulations to favor domestic companies over foreign rivals and that Beijing does too little to police the theft of copyrights and patents held by Western companies.
The United States is also pressing China to address concerns about the safety of food and drugs it exports.
But China has its own list of grievances, topped by management of the dollar and restrictions on foreign investment in the United States. And the Americans could find themselves with little negotiating leverage.
“U.S. credibility and the credibility of U.S. financial markets is zero everywhere in the world,” said Joseph E. Stiglitz, a professor of economics at Columbia University who has sharply criticized the Bush administration and praised China’s economic management in the past. “Anybody looking at this from the outside says, ‘There’s been a lot of hot air coming out of the U.S., so why should we listen to these guys when they didn’t know how to manage risk?’ ”
Here in China, economic observers are noting that the Chinese posture toward the Americans has decidedly shifted.
“This time, the Chinese side is trying to change its attitude to be more active, to be more aggressive, to balance the two sides,” said Song Hongbing, author of “The Currency War,” a best-selling if conspiratorial book on the American economy. “They just started to change their attitude for the future.”
Chinese officials are expressing their disdain in forums around the world. Last month, Liu Mingkang, the chairman of the China Banking Regulatory Commission, delivered a lecture at the British Museum in London in which he blamed the American government for the subprime mortgage crisis that came close to freezing Western debt markets and required extensive intervention by the Federal Reserve. The turmoil, he said, was “counteracting the course of global civilization.”
“Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?” he said.
One of Mr. Liu’s colleagues, Liao Min, told the newspaper The Financial Times in late May that the “Western consensus on the relation between the market and the government should be reviewed.”
“In practice, they tend to overestimate the power of the market and overlook the regulatory role of the government, and this warped conception is at the root of the subprime crisis,” said Mr. Liao, director general of the commission.
China is grappling with its share of economic problems, including high inflation. But it has reasons to feel optimistic.
Some economists say it has improved its state-owned banking system by writing off bad debt and overhauling management even as it rejected American pressure to privatize banks and allow unfettered competition in the financial sector. Its financial system is more tightly regulated and less dynamic than the American one, but also more stable, Chinese economists argue.
On currency management, China has been under heavy pressure to raise the value of the renminbi, which foreign critics say is maintained at an artificially low level to make Chinese exports less expensive. So far, China has managed to walk a tightrope. It has allowed the renminbi to increase in value against the dollar in tiny increments, for a total of 20 percent since 2005, a less dramatic change than the Bush administration and Congress demanded.
The gradual approach has allowed the export sector to adjust while preventing a currency shock that might derail growth.
Meanwhile, the Americans allowed the dollar to plunge in value. That angered the Chinese, which keeps most of its $1.76 trillion in foreign reserves in dollars. Chinese officials have accused the Americans of mismanaging the dollar at a time when Washington is still pressing China to appreciate the renminbi to narrow the trade deficit.
This month, the Chinese envoy to the World Trade Organization said in Geneva that the United States had failed to safeguard the value of its currency, worsening the pain for people around the world who pay high oil and food prices in dollars.
The envoy, Sun Zhenyu, also said the United States was engaging in protectionism by imposing unfair duties on Chinese goods and subsidizing American products.
Also this month, several Chinese institutions submitted sharp critiques to the Treasury Department of proposed new regulations relating to foreign investment in the United States. Some of the remarks were scathing.
“The regulations still include some sections and procedures which reflect the enshrouded protectionism, an obvious contradiction to the spirit of free competition the U.S. has championed since long time ago,” wrote the China Securities Regulatory Commission.
The commission said the proposed regulations reflected a “self-evident hostility” and “discriminatory attitude” to certain types of foreign investments and “will ultimately hurt enthusiasm of foreign investment in the U.S.”
China was particularly stung in 2005 by opposition in Congress to a bid by its third largest national oil company to buy the Unocal Corporation, an American oil company, for $18.5 billion.
Mr. Paulson, the Treasury secretary, said Monday that he agreed that there had been a “general trend” of China’s becoming increasingly vocal in its criticism of American policies, but that this was not a cause for concern.
“We’ve had a relationship where both sides have been pretty frank privately and pretty frank publicly,” Mr. Paulson said in a telephone interview in Washington. He said China’s criticism of American policies grew out of its rise as an economic power, with greater voice in global discussions on trade, currency and the flow of capital.
Nicholas R. Lardy, a China expert at the Peterson Institute for International Economics in Washington, said in an interview that “the Chinese are reacting adversely, and I think with some justification.”
He added, though, that he interpreted China’s recent aggression more as a reaction to specific events or policies involving the American economy than as a result of a new surge in national confidence.
If that is the case, China might be able to avoid the pitfall of hubris. Japan attacked the American government’s economic management in the 1980s, only to find itself tumbling into recession and stagnation ever since. Some economic experts here warn that China’s economy could soon feel the full brunt of the downturn in the world economy, and that the American economy, in the long run, could stay on top.
“The U.S. has always considered its economy powerful and is reluctant to listen to other countries,” said Lin Jiang, the head of the economics department at the China Youth College for Political Sciences in Beijing. “Of course China now is more confident than before and Chinese people are more proud of China’s economy, but we can’t be blind. It’s still hard to challenge the U.S.”
Huang Yuanxi contributed research from Beijing. Keith Bradsher contributed reporting from Hong Kong, and Steven R. Weisman from Washington.
Copyright 2008 The New York Times Company
http://www.nytimes.com/2008/06/17/world/asia/17china.html?exprod=myyahoo&pagewanted=print
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