Life in OUR America, The Livyjr Files Volume 7 Options

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"Pakistan polls 'impossible' on Jan. 8"

By SADAQAT JAN, Associated Press Writer

1 January 2008

ISLAMABAD, Pakistan - It appears "impossible" for Pakistan to hold an election on Jan. 8 because of unrest following the killing of Benazir Bhutto, election officials said Tuesday — an announcement that could spark protests by parties demanding that the polls be held on time.

The Election Commission said it would announce a date Wednesday after meeting with Pakistan's political parties.

Bhutto's party and other opposition groups have called for the elections to be held as scheduled in hopes that sympathy following her slaying could translate to electoral gains.

The U.S., Britain and other countries view the parliamentary election as key to restoring democracy to Pakistan as it battles the rise of al-Qaida and Taliban militants.

But they have indicated they would accept a slight delay if technical reasons dictated one.

Bhutto's killing last week thrust the country into crisis and triggered nationwide riots.

Accusations over how exactly she was killed and who was responsible have been coupled with calls for an independent international investigation into her assassination.

The violence killed 58 people, Interior Ministry spokesman Javed Iqbal Cheema said.

The rampaging mobs also caused tens of millions of dollars in damage to homes, government offices and transport facilities, but the violence has died down since Sunday amid a heavy police and army presence.

Bhutto's home province of Sindh was especially hard hit.

"Our offices in 10 districts of Sindh have been burned, the electoral rolls have been burned, the polling schemes, the nomination papers have been burned," commission spokesman Kanwar Dilshad told reporters.

"We are in a very tricky situation."

He said it now "looks impossible" to hold the polls on Jan. 8.

Former Prime Minister Nawaz Sharif, who heads a large opposition party and is a vocal critic of Musharraf, has threatened street protests if the vote is delayed.

"We will agitate," Sharif told The Associated Press on Monday.

"We will not accept this postponement."

Bhutto's party accused Musharraf of wanting to delay the polls to allow public anger over her death to diminish.

"There have been elections in conflict zones such as Iraq and Afghanistan, so I find it difficult to understand why this election cannot be held on time," Sherry Rahman, information secretary of Bhutto's Pakistan Peoples Party, told Dawn TV.

The United States said a minor delay in elections would be acceptable if all parties agreed.

"The key here is that there be a date certain for elections," said Tom Casey, deputy spokesman for the State Department, said Monday.

"We would certainly have concerns about some sort of indefinite postponement of the elections.

Bhutto was killed in a gun and suicide bomb attack that the government blamed on Islamic extremists.

But many, pointing to video footage and medical reports, have disputed the Pakistani government's assertion that Bhutto died not from bullet or shrapnel wounds but from injuries sustained while hitting her head on her vehicle's sunroof during Thursday's attack.

Her husband and other opposition leaders have called for an international, independent investigation into the attack and accused Musharraf of failing to adequately protect her.

Some close to Bhutto have alleged forces close to the U.S-backed former general may have been involved.

In a statement received Tuesday, the government — which has rejected charges of involvement in Bhutto's death — said it was "committed to a thorough and transparent investigation and will not shy away from receiving assistance from outside, if needed."

U.S. officials, meanwhile, said Washington had provided a steady stream of intelligence to Bhutto about threats against her by Islamic extremists after suicide attackers came close to killing her in a massive blast hours after she had returned from self-imposed exile in October.

"She knew people were trying to assassinate her," an intelligence official told The AP.

"We don't hold information back on possible attacks on foreign leaders and foreign countries."

The official added, however, that while the U.S. could share the information, "it's up to (the recipient) how they want to take action."

The officials, who spoke to the AP on condition of anonymity due to the sensitivity of the matter, said the United States had quietly joined calls for Pakistan to allow international experts to join the probe into Bhutto's slaying.

The officials said they expected an announcement soon that investigators from Britain's Scotland Yard would be asked to play a significant role.

Any U.S. involvement would be limited and low-key, they said.
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Associated Press Writer Matthew Rosenberg contributed to this report from Lahore.

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"28 dead in suicide bomb at Iraqi funeral"

By BRADLEY BROOKS, Associated Press Writer

1 January 2008

BAGHDAD, Iraq - A suicide attacker detonated an explosives-rigged vest at a Shiite funeral in Baghdad, killing 28 people gathered to mourn the death of an Iraqi army officer killed in a car bombing, police and ambulance officials said.

The afternoon explosion took place in Baghdad's eastern Zayouna neighborhood, a mixed Shiite and Sunni district, the officials said on condition of anonymity because they were not authorized to release details of the attack.

The funeral was for Nabil Hussein Jassim, a retired lieutenant colonel killed in a car bombing in downtown Baghdad's Tayaran Square.

That blast left at least 14 people dead.

In Jalula, a city about 80 miles north of Baghdad, the bodies of a Sunni policeman and four of his relatives were found hours after gunman abducted them from their home, authorities said.

The abductions occurred in Diyala province, where al-Qaida in Iraq retains a presence and violence has persisted despite falling elsewhere.

Hours later in the same province, a Shiite man and his 16-year-old son were killed in a drive-by shooting as they stood outside their home, police said.

Late Monday, Iraq's government released statistics on the number of civilians and members of security forces it said were killed in 2007.

According to the health, defense and interior ministries, 16,232 civilians, 432 soldiers and about 1,300 policeman died in 2007.

The year before, the ministries said that 12,371 civilians, 603 soldiers and 1,224 policeman were killed.

The government figures were roughly in line with a count by The Associated Press.

For 2007, the count found that 18,610 Iraqis were killed.

In 2006, the only other full year an AP count has been tallied, 13,813 died.

The AP count — which includes civilians, government officials, and police and security forces — is compiled from hospital, police and military officials, as well as accounts from reporters and photographers.

Insurgent deaths were not included.

Other counts differ and some have given higher civilian death tolls.

In addition to policemen and Iraqi soldiers, the more than 70,000 Sunni fighters who have joined an anti-al-Qaida in Iraq movement are being targeted by extremists.

On Monday, a suicide bomber attacked a checkpoint manned by such fighters, killing 12 people in one of a series of strikes against the movement singled out by Osama bin Laden as a "disgrace and shame."

Leaders of the rapidly expanding U.S.-backed movement, credited with helping reduce the overall number of attacks in Iraq by 60 percent since June, condemned bin Laden's latest message to his followers.

"We consider our fighting against al-Qaida to be a popular revolution against the devil," said Sheik Mohammed Saleh al-Dohan, head of one of the groups in southern Ramadi, a city in Anbar province where the movement was born.

Al-Dohan blamed al-Qaida, which espouses a radical version of Sunni Islam, for bringing destruction to Iraq:

"They made enemies between Sunnis, Shiites and Christians who lived in peace for centuries."

Bin Laden and his fighters "are the traitors who betrayed the Muslim nation and brought shame to Islam in all the world," he said.

In a weekend audio message, bin Laden warned Iraq's Sunni Arabs against joining the groups, known as "awakening councils," or participating in any unity government.

He said Sunni Arabs who join the groups "have betrayed the nation and brought disgrace and shame to their people."

"They will suffer in life and in the afterlife."

The government, meanwhile, sent the speaker of parliament a draft bill for an amnesty for some prison detainees, said spokesman Ali al-Dabbagh.

The bill excludes those held in U.S. custody and those imprisoned for a variety of crimes, such as terrorism, kidnapping, rape, adultery, homosexuality and smuggling antiquities.

It also excludes senior figures of Saddam Hussein's Baath Party.

If passed in its current form, the bill could see about 5,000 prisoners released, al-Dabbagh said.

The government has about 20,000 people in custody, while the U.S. military holds about 25,000.

Sunni lawmakers have criticized the draft for its limited scope.

They have argued that most prisoners are charged with terrorist crimes, rendering the bill ineffective.

Some also fear referring the bill to the gridlocked parliament will actually delay prisoner releases.

Many key draft laws — including measures to share oil revenue and to allow some Baath Party members to hold government jobs — have remained mired in parliament for months.
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Associated Press writer Hamid Ahmed contributed to this report.

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"Female suicide bomber kills 10 in Iraq"

By Peter Graff

2 January 2008

BAGHDAD (Reuters) - A female suicide bomber wearing an explosive vest struck a checkpoint of neighborhood patrol volunteers in Baquba, capital of Iraq's restive Diyala province, killing 10 people and wounding eight on Wednesday, police said.

It was the latest in a wave of suicide bomb attacks that has appeared to intensify in recent days and weeks, even as overall levels of violence in Iraq have fallen.

Two policemen and four patrol volunteers were among the dead, police said.

Among those killed was Abdul-Rafaa al-Nidawi, whom police described as the coordinator between U.S. forces and the volunteer patrols in the city.

The mainly Sunni Arab neighborhood patrols, paid by U.S. forces to oppose Sunni al Qaeda militants, have frequently been targeted by suicide bombers in recent months.

Al Qaeda leader Osama bin Laden, who is not believed to have direct control over the Iraqi militants that use his organization's name, threatened attacks against the patrol members in an audio tape released last week.

Strikes by female suicide bombers are comparatively rare but there have been several in recent weeks in Diyala, including one which killed 16 people on December 7 and another which wounded seven people at a police station in Baquba on New Year's Eve.

Overall violence in Iraq declined dramatically over the second half of 2007.

But U.S. military figures released over the weekend show suicide bombings increased after falling to a low in October.

The past week has seen major suicide bomb attacks most days.

A bomber in a suicide vest killed 30 mourners at a Baghdad funeral on New Year's Day, the deadliest strike in the capital for months.

On New Year's Eve a suicide car bomb killed 11 people including five children in a town north of Baghdad.

On Christmas day two separate strikes on neighborhood patrol volunteers killed at least 33 people.

U.S. forces say they have driven al Qaeda Sunni Arab militants out of most of the territory they once controlled, but the militants still retain the capability to stage so-called "spectacular" strikes aimed at killing large numbers of people.

Al Qaeda has frequently targeted the neighborhood patrols, which were initially set up by tribes that turned against the Sunni Islamist group and are now springing up throughout Sunni Arab areas with U.S. funding and support.

(Writing by Peter Graff; editing by Ross Colvin)

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"FBI bug mars Philly mayor's legacy"

By PATRICK WALTERS, Associated Press Writer

2 January 2008

PHILADELPHIA - John F. Street drew praise for his initiatives targeting blight and crime in his early days as Philadelphia's mayor, but his eight-year tenure may be best remembered for a bug the FBI planted in his office.

The bug turned up on the eve of his re-election in 2003, uncovering a sweeping corruption probe that targeted, among others, his treasurer and a top fundraiser.

The investigation netted nearly two dozen people, many closely linked to Street, whose second term ends Wednesday.

"He was very respectful of tradition by not being aggressive against corruption," said Randall Miller, a St. Joseph's University political analyst.

"He's so tarred with that that no matter how many times he goes in the water, it's still sticking."

But the 64-year-old former city councilman will also leave behind a record of concrete and mortar in the nation's sixth-largest city, much of it from work early in his first term.

Street earned many supporters with a $300 million anti-blight initiative.

The program started fast, replacing abandoned buildings with community centers and other projects.

In South Philadelphia, two new stadiums for the NFL's Eagles and MLB's Phillies stand as reminders of another early success.

Street announced deals to build them as replacements for aging Veterans Stadium, even though hopes for downtown facilities collapsed.

His first-term crime initiative, "Safe Streets," evicted hundreds of open-air drug markets from tough neighborhoods.

Progress later stalled amid concerns about police overtime.

Street, the city's second black mayor, helped ensure that George Washington's slaves will be commemorated in a memorial at the former presidential mansion near the Liberty Bell.

But Street also generated racial controversy.

In 2002, he galvanized opponents by telling an NAACP conference:

"Let me tell you: The brothers and sisters are running the city."

"... Don't you let nobody fool you; we are in charge of the City of Brotherly Love."

He later apologized.

On his way out the door, Street raised eyebrows by claiming more than $111,000 in raises he had forgone since 2004.

He said the city's finances were now healthy enough for him to accept the raises retroactively.

The number of homicides in the city dropped to 288 in 2002, their lowest number in more than a decade.

But many will remember Street for the spike in 2006, when the tally broke 400 for the first time in nine years.

The mayor called gun violence a national problem.

He pointed out that homicides were nowhere near where they were in 1990, when the total hit 500.

"The first couple of years I think he did a great job in attacking the crime and gun violence," said state Rep. Jewell Williams, D-Philadelphia.

"But after the Safe Streets everything seemed to collapse."

Street did not respond to interview requests from The Associated Press to discuss his terms in office, but his staff released a 12-page document listing his accomplishments.

In it, his aides pointed out that 2007 homicides dipped slightly and other serious crime has been declining for seven years.

"The Philadelphia we leave behind is a lot better than the Philadelphia we found," the document said.

Many of Street's accomplishments would be eclipsed over time by the bug.

The discovery, made during a security sweep, uncovered a four-year probe of the city's pay-to-play corruption.

The mayor was never charged.

Public unrest came to a crescendo in his second term.

Although the city charter prohibited Street from seeking a third term, political adversary Michael Nutter, a former city councilman, swept to victory in November on an anti-Street campaign.

He blamed his fellow Democrat for allowing corruption to persist at City Hall and not doing enough to end gun violence.

Street's supporters say his efforts are only now beginning to take root.

They argue that his legacy will not be determined until after programs aimed at decreasing truancy, finding jobs for at-risk adolescents and getting guns off the street have time to take effect.

"Some of the stuff that he's initiating now, we won't see the results of for two or three years," said Bilal Qayyum, a co-chair of Men United for a Better Philadelphia.

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"Stocks drop on weak manufacturing report"

By TIM PARADIS, Associated Press

Last updated: 6:12 p.m., Wednesday, January 2, 2008

NEW YORK -- Wall Street skidded lower Wednesday after a weaker-than-expected reading on the manufacturing sector and a spike in oil prices to $100 a barrel triggered concerns of a further slowdown in the overall economy.

The major indexes each lost more than 1 percent, with the Dow Jones industrials giving up more than 200 points.

It was the blue chip index's biggest point decline for the first day of trading in a new year.

The Institute for Supply Management's report that its manufacturing index fell to 47.7 percent for December from 50.8 percent in November raised concerns that the economy could be slowing at a quicker pace than some investors had estimated.

The reading below 50 signals economic contraction, whereas readings over 50 indicate expansion.

Analysts polled by Thomson/IFR had anticipated that manufacturing would expand modestly in December.

Light, sweet crude rose $3.64 to $99.62 per barrel on the New York Mercantile Exchange after earlier hitting $100 for the first time.

The rise follows violence in the oil-producing nation of Nigeria, concerns about weather-related production halts in Mexico and speculation that inventory figures will show drops in levels of U.S. supplies.

The economic reading and rising oil prices were unwelcome for investors wading into the first trading session of 2008 and indicated the concerns that weighed on stocks in the second half of 2007 will for now persist.

"It certainly is a soft number and the declines in production and new orders are eye-catching," said Alan Levenson, chief economist at T. Rowe Price Associates Inc.

"Overall, the ISM has generally been a decent guide for the economy."

"This is a sharp decline in one month."

Stocks failed to gain momentum after an initial bounce after minutes from the Federal Reserve's last meeting.

Central bankers, who voted to cut interest rates a quarter percentage point, called the economic outlook "unusually uncertain."

While that strengthened the case for lower rates, it also confirmed some of the market's worst fears about the economy.

The Dow fell 220.86, or 1.67 percent, to 13,043.96.

The blue chips briefly fell below 13,000 for the first time since November.

Broader stock indicators also fell sharply.

The Standard & Poor's 500 index slid 21.20, or 1.44 percent, to 1,447.16, and the Nasdaq composite index fell 42.65, or 1.61 percent, to 2,609.63.

Bond prices surged after the ISM report.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 4.03 percent late Monday.

It rose to 3.91 percent in after-hours trading.

The dollar was mixed against other major currencies, while gold prices reached a 28-year high.

Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to 3.32 billion shares, up from 2.38 billion on Monday.

The weak manufacturing reading came as Wall Street entered 2008 still uneasy over the economy, specifically the state of the housing market and tightness in the credit markets brought on by fears of faltering mortgage debt.

In addition, the health of the consumer is again in focus as investor are awaiting the government's December employment report, due Friday.

Investors weren't swayed by the release of the Fed's minutes from its Dec. 11 meeting.

Central bankers cut rates amid worries about housing, credit and financial markets -- and kept all their options open for their next move, according to the minutes.

"We didn't really learn anything new," said Ryan Larson, senior equity trader with Voyageur Asset Management.

"The Fed continues to be stuck between a rock and a hard place in terms of fighting inflation and managing U.S. growth."

The arrival of the new year was accompanied by a return of more of Wall Street's regular players.

The recent weeks surrounding the holidays have seen light trading volume, making it hard to draw any meaningful reading on the market's mood.

Moves higher or lower tend to be exaggerated amid light sessions.

In corporate news, National City Corp. fell 87 cents, or 5.3 percent, to $15.59 after halving its dividend and shutting down its wholesale mortgage business.

The move, which eliminates 900 jobs, comes amid continued weakness in the housing and credit markets.

Chip stocks fell after Bank of America issued a bearish assessment for the sector.

Intel Corp. fell $1.31, or 4.9 percent, to $25.35, while Advanced Micro Devices fell 36 cents, or 4.8 percent, to $7.14.

Amazon.com Inc. gained $3.61, or 3.9 percent, to $96.25 after Citi Investment Research raised its rating on the online retailer.

The Russell 2000 index of smaller companies fell 12.48, or 1.63 percent, to 753.55.

Overseas, Germany's DAX index fell 1.47 percent and France's CAC-40 lost 1.14 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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"Oil futures rise to $100 a barrel"

By JOHN WILEN, Associated Press

Last updated: 5:12 p.m., Wednesday, January 2, 2008

NEW YORK -- Crude oil prices briefly soared to $100 a barrel Wednesday for the first time, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will outstrip supplies.

Surging economies in China and India fed by oil and gasoline have sent prices soaring over the past year, while tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices even higher.

Violence in Nigeria helped give crude the final push to $100.

Bands of armed men invaded Port Harcourt, the center of Nigeria's oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel.

Word that several Mexican oil export ports were closed due to rough weather added to the gains, as did a report that OPEC may not be able to meet its share of global oil demand by 2024.

Light, sweet crude for February delivery rose $4.02 to $100 a barrel on the New York Mercantile Exchange, according to Brenda Guzman, a Nymex spokeswoman, before slipping back to settle at a record close of $99.62, up $3.64.

Oil prices are within the range of inflation-adjusted highs set in early 1980.

Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

The White House on Wednesday said it would not release oil from the nation's strategic reserves to drive prices lower.

"This president would not use the (Strategic Petroleum Reserve) to manipulate (prices) unless there was a true emergency," said White House press secretary Dana Perino.

As of early November, the Strategic Petroleum Reserve contained 694 million barrels of oil.

The government is working to fill it to its 727 million barrel capacity.

Among the solutions to high prices are expanding domestic oil and gas production and increasing the nation's refining capacity, Energy Department spokeswoman Megan Barnett said.

Crude prices, which have flirted with $100 for months, have risen in recent days on supply concerns exacerbated by Turkish attacks on Kurdish rebels in northern Iraq and falling domestic inventories.

However, post-holiday trading volumes were about 50 percent of normal Wednesday, meaning the price move was likely exaggerated by speculative buying.

"I would imagine the speculators are the biggest drivers today," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

It's hard to say whether prices would have risen as quickly on a normal trading day, Flynn said.

While oil has soared on mounting supply concerns in recent months, speculators have often been cited as a reason for the swiftness of oil's climb.

Moreover, many of the concerns about supply disruptions have yet to materialize, but that hasn't stopped buyers from driving prices higher.

"Although the (Nigerian) violence has not impacted oil flow out of the country, it has reignited supply concerns as militant attacks have reduced Nigeria's crude output by roughly 20 percent since 2006," said John Gerdes, an analyst at SunTrust Robinson Humphrey in a research note.

Nigeria is Africa's largest oil producer.

Separately, the Organization of Petroleum Exporting Countries said its member nations may not be able to meet demand as early as 2024, though OPEC also said that deadline could slide for decades if members increase production more quickly.

Word that several Mexican oil export ports were closed due to rough weather added to the gains.

On top of those concerns, investors are anticipating that crude inventories fell by 1.7 million barrels last week, which would be the seventh straight weekly drop.

"(A decline) is not anything unusual for this time of year, but when it happens for seven weeks in a row, it starts to add up," said Amanda Kurzendoerfer, an analyst at Summit Energy Services Inc. in Louisville, Ky.

At the pump, meanwhile, gas prices rose 0.6 cent Wednesday to a national average of $3.049 a gallon, according to AAA and the Oil Price Information Service.

Gas prices, which typically lag the futures market, have edged higher in recent days, following oil's approach to $100.

Gas prices peaked at $3.227 a gallon in May as refiners faced unprecedented maintenance issues and struggled to produce enough gasoline to meet demand.

A similar scenario is expected this spring, when gas prices could peak above $3.40 a gallon, according to the Energy Department's Energy Information Administration.

The EIA's inventory report, delayed until Thursday this week due to the New Year's holiday, is also expected to show gains in gasoline supplies and refinery activity, and a decline in supplies of distillates, which include heating oil and diesel.

In other Nymex trading Wednesday, February heating oil futures rose 9.1 cents to settle at a record $2.7404 a gallon after setting a trading record of $2.7465 while February gasoline futures climbed 7.81 cents to settle at a record $2.5689 a gallon after setting their own trading record of $2.5784.

February natural gas futures advanced 36.7 cents to settle at $7.85 per 1,000 cubic feet.

In London, February Brent crude rose $3.37 to settle at $97.84 a barrel on the ICE Futures exchange.

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Associated Press Writers Dan Caterinicchia in Washington, George Jahn in Vienna and Gillian Wong in Singapore contributed to this report.

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"U.S. manufacturing sector contracts"

By VINNEE TONG, Associated Press

Last updated: 12:13 p.m., Wednesday, January 2, 2008

NEW YORK -- The U.S. manufacturing economy unexpectedly contracted in December, ending a streak of 10 consecutive months of growth and sinking to its lowest point in almost five years, a private research group said Wednesday.

The decline suggests that the overall economy may be weakening faster than some economists predicted.

The figures are closely watched because a slowdown in factory production can translate to job cuts, which in turn reduces consumer spending -- a major component of the economy.

The Institute for Supply Management, a Tempe, Ariz.-based private research group, said its manufacturing index registered 47.7 last month, down 3.1 percentage points from the 50.8 recorded in November.

A reading above 50 indicates growth; below that level indicates contraction.

The December results were weaker than the 50.9 expected by analysts polled by Thomson/IFR Markets.

Last month was the first that manufacturing has failed to grow since January 2007, when the index was 49.3.

It has been four years and eight months since the index was lower than in December; it hit 46.4 in April 2003.

The results sent stocks falling in morning trading as investors worried that the slowdown in manufacturing would spread to the overall economy.

The Dow Jones industrials fell more than 160 points by midday.

Meanwhile, the Commerce Department reported Wednesday that construction spending edged up slightly in November as the continued housing slump was offset by record spending on government and business projects.

Spending was up 0.1 percent in November to a seasonally adjusted annual rate of $1.165 trillion.

Spending had fallen by 0.4 percent in October.

Many economists believe the U.S. economy grew at an anemic rate of about 1.5 percent in the final quarter of the year and that it could slow to 0.5 percent or less in this first three months this year.

A growing number expect a recession because of turmoil in the housing market and continuing tight credit conditions.

The chairman of ISM's manufacturing business survey committee, Norbert Ore, said he expected a couple months of either contraction or very slow growth before a rebound.

He said supply executives reported that slower demand was more of a problem than excess inventory.

The survey found weakness in new orders and production, which reversed in December after reporting growth in November.

"It's a little too soon to say whether this is a trend of continued contraction or whether it's a soft patch, then things pick up after that," Ore said.

Nomura chief economist David Resler said December results can sometimes be skewed by seasonal variation in orders, so January will be very closely watched to see whether the sector will keep falling.

"I think the troubling thing is not just that it was so low, and it is at a level that is typically breached only in recession, but that it's continuing in a downward trend," Resler said, noting that the index has been dropping since June.

Resler said the weakness in new orders could be a sign of further slowing going forward.

"Up until now, we've been able to console ourselves with the fact that the manufacturing sector has withstood the effects of the downdraft in housing," Resler said.

"Now we can't be so confident."

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"Fed fears worsening credit market"

By JEANNINE AVERSA, Associated Press

Last updated: 5:52 p.m., Wednesday, January 2, 2008

WASHINGTON -- Federal Reserve policymakers worried at their December meeting about the potential for a vicious cycle to develop in which credit problems could worsen.

That could hurt economic growth and force the Fed to act more aggressively in cutting rates, according to meeting minutes made public Wednesday.

"Some members noted the risk of an unfavorable feedback loop in which credit market conditions restrained economic growth further, leading to additional tightening of credit," the minutes said.

"Such an adverse development could require substantial further easing" of rates, the minutes revealed.

Problems in the housing, credit and financial markets drove the Fed to do an about-face on Dec. 11 and slice its key interest rate yet again in the hope it would bolster an economy that was losing speed.

Fed Chairman Ben Bernanke and all but one of his colleagues agreed to trim the Fed key rate by one-quarter percentage point to 4.25 percent, a two-year low.

The central bank ordered its key rate lowered three times last year; the December reduction was most recent one.

The decision to cut rates essentially marked a reversal for the central bank, which had hinted at its October meeting that the Fed's two rate cuts probably would be enough to help the economy survive the housing and credit stresses.

But the economy's problems intensified after that meeting, forcing the Fed to change its stance.

"Members judged that the softening in the outlook for economic growth warranted an easing of the stance of policy at this meeting," the minutes said.

"In view of the further tightening of credit and deterioration of financial market conditions, the stance of monetary policy now appeared to be somewhat restrictive," the minutes said.

On Wall Street, stocks tumbled as oil prices briefly hit $100 a barrel and a weak report on manufacturing rattled investors.

The Dow Jones industrials sank by 220.86 points to close at 13,043.96.

The 9-1 decision for a quarter-point reduction in December was opposed by Eric Rosengren, president of the Federal Reserve Bank of Boston, who preferred a bolder, half-percentage point cut.

Wall Street, disappointed by the quarter-point cut, took a nosedive Dec. 11.

The Dow Jones plunged more than 290 points.

In Rosengren's view, the worsening housing slump, high energy prices and more cautious spending by individuals and businesses raised the risk of continued economic weakness, the minutes said.

"In light of that possibility, a more decisive policy response was called for to minimize that risk," the minutes said.

Fed policymakers were concerned that rising energy prices could spread inflation through the economy.

That concern figured into the Fed's decision to cut rates by a modest one-quarter point cut in December, the minutes suggested.

"Inflation pressures and risks remained," according to the minutes.

To bolster the economy, many economists predict the Fed will slice rates yet again at its next meeting, on Jan. 29-30, the first regularly scheduled gathering of 2008.

"The Fed minutes are a testament that the economy is extremely volatile and policymakers have some very difficult decisions to make," said Richard Yamarone, economist at Argus Research.

The economy is believed to have slowed sharply in the October-to-December quarter, probably to a pace of just 1.5 percent or less, according to analysts' projections.

Economic growth in the first three months of 2008 also is expected to be weak.

Economists' big worry is that individuals will reduce spending and businesses will become reluctant to hire workers, throwing the economy into a tailspin.

The odds of a recession have grown, with some economists putting it at just under 50 percent.

At the December meeting, Fed policymakers suggested all the housing, credit and financial problems have increased economic uncertainty.

That has made it more difficult for the Fed to assess the country's economic outlook and give clear signals about its next move.

"The committee agreed on the need to remain exceptionally alert to economic and financial developments and their effects on the outlook, and members would be prepared to adjust the stance of monetary policy if prospects for economic growth or inflation were to worsen," the minutes said.

If economic conditions were to improve more rapidly than expected, "a reversal of some of the rate cuts might be appropriate," according to the record of the meeting.

Although Fed policymakers agreed in December that rates must be cut yet again, "they also recognized that the situation was quite fluid and the economic outlook unusually uncertain," the minutes said.

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On the Net:

Federal Reserve: http://www.federalreserve.gov/

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"$100 oil may pinch but not faze consumer"

By JOHN WILEN, Associated Press

Last updated: 6:02 p.m., Wednesday, January 2, 2008

NEW YORK -- With oil having briefly touched the once unfathomable price of $100 a barrel, consumers can expect the cost of filling their gas tanks, heating their homes -- in fact, the price of most everything -- to also keep rising.

Still, analysts don't expect record-high prices by themselves to send the economy into recession, simply because expensive as oil is, energy doesn't consume as big a chunk of Americans' budget as it did decades ago.

"So far, consumers have done an amazing job of ignoring high oil prices, not to mention falling home prices," said David Wyss, chief economist at Standard & Poor's.

A barrel of light, sweet crude reached triple digits for the first time Wednesday, soaring 44 percent since August and 57 percent since the end of 2006.

Meanwhile, gasoline prices at the pump reached a national average of $3.05 a gallon, according to AAA and the Oil Price Information Service.

That's below their May peak of $3.23 a gallon but likely to go higher as the spring and summer approach.

"It's just crazy, I don't know how much worse it can get," said Susan Witte, of Fairless Hills, Pa., while shopping at a suburban Philadelphia sporting goods store one recent morning.

But Chicagoan Fraz Baig was unfazed as oil approached its milestone, although rising prices are making it more expensive for him to gas up his just purchased 2008 Infiniti FX SUV.

"I'm doing well financially and I'm single, so I'm not really worried," said Baig, who works in Internet technology solution sales for IBM Corp.

Rising energy prices were cited as a contributing factor in disappointing sales for the just-ended holiday season, along with the continuing slump in housing and an overall uneasiness about the economy.

But economists say that generally, the jump in oil is less devastating than previous spikes because incomes have risen faster than energy costs.

"The percentage (of personal income spent on energy) was far higher in 1979-80 than it is now," said Kay Smith, a macroeconomist at the Energy Information Administration.

In 1981, 14 percent to 15 percent of the nation's gross domestic product was spent on energy, according to Lester Lave, professor of economics at Carnegie Mellon University's Tepper School of Business.

That's fallen to 7 percent today.

In part, that's because energy efficiency has increased.

"It's just not (as) important to the economy anymore," Lave said.

"Prices are not high enough so that they're going to get middle-income people to change their behavior."

Still, that could change if prices keep rising.

The question is at what point do prices start to truly hurt.

Lower-income families feel the effects of price increases most dramatically.

With heating oil costs expected to jump 33 percent this winter, according to the Energy Department, families who rely on heating oil will have less money to spend on other things.

Diesel prices are also at record levels, which will affect the cost of food and, indeed, any goods that are shipped.

Diesel hit a record price of nearly $3.50 a gallon at the end of November, according to AAA and the Oil Price Information Service.

Oil's march higher is expected to have more of an impact in the months ahead.

For example, the chief financial officer of United Airlines owner UAL Corp. recently said airlines would have to keep raising fares or reduce capacity to compensate for rising fuel charges.

Several carriers have announced new fuel surcharges in recent weeks.

Some analysts predict gas prices could rise as high as $3.50 to $4 a gallon next summer.

And the Energy Information Administration predicts gas prices will set a new record national average above $3.40 a gallon this spring.

Many consumers have found ways to cope with higher energy costs.

James Ersery, of Chicago, commutes by bus to his job as a letter carrier for the U.S. Postal Service, so he's not being hit hard by higher gasoline prices.

But at home, he turns down the thermostat when he's away.

Still, he shrugged off oil's rise.

"Prices have been extremely high for quite some time," he said.

Barbara Binik, a Realtor in Chicago, said that while higher prices haven't significantly altered her spending habits, a larger percentage of her disposable income is going toward gasoline, and "you feel it."

"It's out of whack."

She has cut back in small ways so far, such as by using a cheaper drive-through car wash instead of an automated one and eating out less.

"I'm more careful about my spending."

Some analysts predict oil will continue to rise in the futures market, and if that's the case, $100 crude might sow the seeds of its own destruction.

Many analysts believe higher prices will hurt demand, eventually.

"We think it important to keep in mind that all of the economic consequences of $100 crude are bearish, not bullish" for prices, Tim Evans, an analyst at Citigroup Inc. in New York, wrote in a recent research note.

Oil prices have risen in recent years as booming economies in China and India have grown exponentially and fed the perceptions that global crude supplies are not rising fast enough to meet demand.

Political problems and labor strife in oil-producing areas have also fed oil's upward momentum.

In Nigeria, political upheaval has cut oil supplies from Africa's biggest producer by 587,000 barrels a day since the end of 2005, according to Energy Information Administration estimates.

Renewed violence in Nigeria helped send crude to $100 Wednesday.

Any news about Iran's disputes with the West and conflict between Turkish armed forces and Kurdish rebels in northern Iraq has also sent crude soaring.

However, oil has also been pushed higher by speculators, who have come to see oil as an investment play as the dollar has weakened in recent months.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are also more attractive to foreign investors when the greenback is falling.

That has some analysts concerned that shift in speculators' strategy could just as easily send oil prices tumbling.

"We are still leaving open the possibility of a major price downdraft prior to month's end," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill., in a Wednesday research note.

------

Business Writer Dave Carpenter in Chicago contributed to this report

[Livyjr]

"National City cutting dividend, jobs"

By My M.R. KROPKO, Associated Press

Last updated: 7:04 p.m., Wednesday, January 2, 2008

CLEVELAND -- Regional bank National City Corp. said Wednesday it is slashing its dividend 49 percent and shutting down its wholesale mortgage division, eliminating 900 jobs, due to weakened housing and credit markets.

The dividend was reduced to 21 cents per share from 41 cents per share, payable Feb. 1 to shareholders of record as of Jan. 14.

The news sent National City shares tumbling 5.3 percent, or 87 cents, to $15.59 in trading Wednesday.

The shares had been as high as $38.94 in the past year.

Investors tend to choose bank stocks for stability and as a way to generate income from dividends.

National City also plans to raise more capital during the first quarter and has hired Goldman Sachs and Co. as its adviser.

The job cuts announced Wednesday bring to 3,400 the number of jobs eliminated in recent months as National City restricted mortgage originations to focus on prime rate borrowers with solid credit histories.

Despite leaving the wholesale lending business in which brokers originate loans for National City, National City will continue to make loans through its retail banking offices.

National City has been hit hard in recent months because of rising delinquencies and defaults among mortgages and a severely declining housing market.

It had increased its dividend at least once every year since 1993.

"It's a decision that was very difficult but one that the board firmly believes is right for the circumstances we face today," Peter Raskind, National City's chairman and chief executive, said in an interview Wednesday.

"We expect 2008 to continue to be a challenging year," Raskind said.

"In particular, the pressure on the housing markets won't abate quickly."

"There's an inventory of homes to be absorbed nationally, for the entire industry[/u]."

"And it will take some time for that to happen."

National City expects mortgage originations in 2008 of about $15 billion to $20 billion, less than half of the $45 billion it originated in 2006.

The total through the first nine months of 2007 was about $35 billion.

The dividend cut may be part of a growing trend in the banking industry.

In a note to investors Dec. 26, Goldman analysts wrote that many financial organizations will have to find ways, such as cutting a dividend, to secure capital.

On Dec. 10, Seattle-based Washington Mutual, which plans to get out of the subprime lending business, cut its dividend and eliminated 3,150 jobs due to the mortgage and credit market.

It reduced its dividend to 15 cents a share, from 53 cents.

Cleveland-based National City operates 1,400 bank branches in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and some other markets.

------

On the Net:

http://www.NationalCity.com.

[Livyjr]

"Dollar mixed in first trading day of '08"

Associated Press

Last updated: 4:22 p.m., Wednesday, January 2, 2008

NEW YORK -- The dollar was mixed against other currencies Wednesday, the first trading day of the new year, as an index of U.S. manufacturing contracted last month after 10 straight months of growth, contributing to a tumble of more than 200 points in the Dow.

The U.S.-based Institute for Supply Management, a private research group, said its manufacturing index registered 47.7 last month, down nearly 3 percentage points from the 50.8 recorded in November.

A reading above 50 indicates growth, while anything below that means contraction.

That was weaker than the 50.9 expected by analysts polled by Thomson/IFR Markets.

The dollar fell against the euro in afternoon trading.

The 15-nation euro, which expanded to include Malta and Cyprus on Jan. 1, bought $1.4726 late in New York, above the $1.4682 it bought on Dec. 31 in New York, and well off its all-time high of $1.4967 set on Nov. 23.

Most markets were closed Jan. 1, a holiday in the U.S. and across the euro zone.

The dollar gained on the British pound.

The pound fell to $1.9802 from $2.0029 on Monday, while the dollar slipped to 109.43 Japanese yen from 111.54 on Dec. 31.

The dollar has been buffeted by worries over the health of the U.S. economy and three interest rate cuts by the U.S. Federal Reserve, which is trying to reduce borrowing costs to revive the nation's battered housing market.

Investors think another rate cut may be on the way.

The minutes of the Fed's Dec. 11 meeting, released Wednesday, called the country's economic outlook "uncertain," saying that a "substantial further easing" of interest rates may be needed if U.S. economic problems worsen.

Lower interest rates can jump-start a country's economy, but may weigh on the currency as traders look to invest in higher-yielding assets.

"There's certainly a consensus that the U.S. economy will be in for a rough ride through the early part of 2008, but whether we'll see a recession remains to be seen," said James Hughes, of CMC Markets in London.

Similarly, the rise of the euro has led to consternation by some politicians, notably in France, where President Nicolas Sarkozy has said it makes it harder for European exporters like plane builder Airbus to be competitive.

In other New York trading, the dollar fell to 1.1178 Swiss francs from 1.1276 Swiss francs Monday, while the dollar rose to 99.07 Canadian cents from 98.54 Canadian cents on Dec. 31.

[Livyjr]

"Construction spending rebounds slightly"

By MARTIN CRUTSINGER, Associated Press

Last updated: 6:32 p.m., Wednesday, January 2, 2008

WASHINGTON -- Construction spending edged up slightly in November as a continued steep slump in housing was offset by record spending on government and business projects.

But a key gauge of manufacturing activity fell in December to the lowest point in almost five years.

The Commerce Department reported that spending on construction projects rose by 0.1 percent in November to a seasonally adjusted annual rate of $1.165 trillion, a better performance than what economists expected.

Spending had fallen by 0.4 percent in October.

The small improvement came despite the fact that housing fell for a record 21st straight month, with private residential construction dropping by 2.5 percent to an annual rate of $484.9 billion, down by 17.5 percent from a year ago.

However, a closely watched gauge of manufacturing activity showed the factory sector contracted in December, the first decline after 10 months of gains.

The Institute for Supply Management said its manufacturing index dropped to 47.7 in December, down from 50.8 in November.

It was the weakest showing since April 2003 during the period of the U.S. invasion of Iraq.

Any reading below 50 is considered a sign that manufacturing is contracting rather than expanding.

The much weaker-than-expected reading on the manufacturing sector and a spike in oil prices up to $100 a barrel triggered recession worries on Wall Street and sent stocks plunging.

The Dow Jones industrial average fell 220.86 points to close at 13,043.96 on the first trading day of the New Year.

"The contraction in manufacturing activity is yet another indication that the housing market problems are becoming more widespread," said Joel Naroff, chief economist at Naroff Economic Advisors.

Nigel Gault, an economist at Global Insight, another forecasting firm, said the manufacturing decline "clearly moves recession risks higher."

Minutes released Wednesday of the Dec. 11 meeting of the Federal Reserve showed policymakers were worried about the potential for a vicious cycle to develop in which credit problems could worsen.

Fed officials said the current economic outlook was "unusually uncertain."

Home builders have been battered by the worst slump in the housing market in more than two decades, a decline that occurred after five boom years which had pushed home sales and prices to record levels.

Analysts believe the slowdown in housing will last through much of 2008, forcing builders to keep slashing their construction plans in an effort to reduce a huge backlog of unsold homes.

The housing meltdown has been exacerbated by a sharp increase in mortgage foreclosures, which dumps more homes on an already glutted market, and tighter lending standards by banks, which is making it more difficult to qualify for a mortgage.

There is a danger that the housing slump could push the country into a full-blown recession but economists believe that worst-case scenario can be avoided if the Federal Reserve keeps cutting interest rates.

The Fed cut rates three times last year starting in September.

The blow to the construction industry from the housing meltdown is being cushioned somewhat by strength in government projects and non-residential activity.

Private non-residential spending rose by 1.7 percent, a 14th consecutive monthly gain, which pushed spending in this category to an all-time high of $375.8 billion at an annual rate.

Strong increases were seen in November for office building, hotels, power plants, factories and amusement parks.

Spending on government projects rose by 2.5 percent, the biggest one-month gain since December 2006, pushing activity in this area to a record level of $304.3 billion at an annual rate.

Spending by state and local governments was up 2.5 percent while spending by the federal government rose 2.2 percent.

[Livyjr]

"German economy expected to cool in 2008"

Associated Press

Last updated: 9:02 a.m., Wednesday, January 2, 2008

BERLIN -- Germany's economy minister and a leading economic institute said Wednesday they expect 2008 growth to cool amid rising food and oil prices and fallout from the U.S. subprime mortgage loan crisis.

Economy Minster Michael Glos was quoted by the mass-circulation Bild daily as saying the government was scaling back its forecast for 2008 to just under 2 percent.

He did not give an exact figure.

The Berlin-based DIW economic institute said it expected gross domestic product to expand by 2.1 percent in the coming year, following growth of at least 2.4 percent in 2007.

"Growth will slow down, due to increased global risk," Klaus Zimmermann, president of the DIW, said in comments released Wednesday.

At the same time, Zimmermann insisted the situation was far from gloomy, with some 300,000 new jobs expected by 2009 and average salaries going up in real terms for the first time in five years.

Both Glos and Zimmermann blamed the jump in prices for fuel and food for the anticipated growth slowdown in Germany's economy, which took off in 2007 after years of stagnation.

They also blamed the market instability triggered by the U.S. subprime lending crisis.

Zimmermann also criticized the government of Chancellor Angela Merkel for failing to take advantage of the upswing in the economy to push through more badly needed reforms, such as to the country's social benefits system.

"It is fatal that the government is not taking advantage of the current situation so that we do not end up with long-term difficulties," Zimmermann said.

------

On the Net:

http://www.diw.de

[Livyjr]

"U.S. launches criminal probe of CIA tapes"

By Randall Mikkelsen

2 January 2008

WASHINGTON (Reuters) - The U.S. Justice Department said on Wednesday it had launched a criminal investigation into the CIA's destruction of videotapes depicting the harsh interrogation of terrorism suspects.

"There is a basis for initiating a criminal investigation of this matter, and I have taken steps to begin that investigation," Attorney General Michael Mukasey said in a statement issued by the department.

The CIA last month disclosed that it had destroyed in 2005 hundreds of hours of tapes from the interrogations of two al Qaeda suspects, prompting an outcry from Democrats, human rights activists and some legal experts.

The interrogations, which took place in 2002, were believed to have included a form of simulated drowning known as waterboarding, condemned internationally as torture.

President George W. Bush has said the United States does not torture but has declined to be specific about interrogation methods.

The Justice Department and the CIA's inspector general last month launched an initial inquiry into the tapes.

Congress is also investigating the tapes' destruction.

The CIA said it would "cooperate fully with this investigation, as it has with others into this matter."

But the agency's inspector general, John Helgerson, said he would step aside from the full investigation.

Helgerson said the inspector general's office had reviewed the tapes "some years ago" as part of a review into agency interrogations and that he had helped prepare a report on the issue, so it would be inappropriate to be involved in the probe.

Mukasey said he had asked a federal prosecutor from Connecticut, John Durham, to lead the probe.

[Livyjr]

"Missing Evidence from Bhutto's Murder"

By ARYN BAKER AND SIMON ROBINSON/ISLAMABAD

Tue Jan 1, 11:10 PM ET

With rumors of government complicity in Benazir Bhutto's assassination rife throughout Pakistan, the country's stability may depend on the absolute transparency of the investigation into the murder.

But a constantly evolving and sometimes contradictory explanation of the events by Pakistani investigators has only clouded the issue.

Meanwhile, her husband and her supporters are asking for a United Nations-led inquiry into her death, something Pakistani President Pervez Musharraf is unlikely to accede to.

But even if Musharraf were to agree, there is very little for international forensics experts to investigate.

Within hours of the attack in the garrison town of Rawalpindi some 10 miles from the capital, authorities had already hosed down the streets.

Pools of blood, along with possible evidence such as bullet casings, DNA samples from the bomber and tracks had been washed away.

Retired Lieutenant General Hamid Gul, the former director general of Pakistani Intelligence, said he was shocked to see people cleaning up the debris so soon after the assassination.

"It's a crime scene, and they're washing away all the evidence!"

"We need to be asking why the hell was this thing done."

One of the few pieces of evidence from the crime scene that remains is amateur footage showing a clean-cut man in a black vest brandishing what appears to be a gun.

Behind him stands another man, a white scarf wrapped around his head.

It is thought that he might have been the suicide bomber.

The situation had already been muddied by contradictory versions of how Bhutto died.

Initial health official reports stated that Bhutto had been shot twice before a suicide bomber detonated himself seconds later.

But by Saturday, the government reversed track.

Bhutto had been shot at, said Interior Ministry spokesman Javed Iqbal Cheema, but the shooter missed.

The force of the explosion knocked Bhutto, who had been waving at the crowds from her vehicle's sunroof, backwards.

She hit her head on a protruding lever, and succumbed to the fractures to her skull.

Cheema presented X rays to support his claim, but witnesses and close friends who rushed Bhutto to the hospital say that there was no doubt she had been shot.

Doctors who had attended Bhutto immediately after the attack initially said that she died of gunshot wounds, but over the weekend they released new findings in line with the Interior Ministry's claim that the official cause of death was head wounds sustained when Bhutto fell.

The reversal has many people suspecting government interference.

Says Chaudhry Nisar Ali Khan, an opposition member of the National Assembly and a former petroleum minister:

"The government says it was the work of terrorists and they say someone has claimed responsibility."

"What I don't understand is why they keep changing the story of how Bhutto died?"

"Why do that?"

"These summersaults make everything look suspicious."

Khan says he is naturally skeptical of talk that the government could be behind the assassination but says that their inept handling of the investigation only adds to the rumors.

The idea that Bhutto died when her head hit a lever as she was pushed down into her open top car is "ridiculous."

He also says that the government is not serious in investigating incidents like last week's.

"How come, at least in the last three years, there have been scores and scores if not hundreds of bomb blasts and suicide attacks in Pakistan and the only incidents that resulted in people being arrested and sentenced is in the two attacks on Pervez Musharraf?"

An autopsy would have been the obvious solution to the ongoing debate, but Bhutto's husband Asif Ali Zadari declined one at the time of her death, explaining at a news conference on Sunday that, "It was an insult to my wife, an insult to the mother of the nation."

"I know their forensic reports are useless."

"I refuse to give them her last remains."

The government has since offered to exhume the body, which was buried Friday, in order to perform a post-mortem - but it may be a case of too little, too late.

Doing so now only risks inflaming tensions.

Islamic traditions hold that the body is sacred, and must not be disturbed in death.

As expected, Bhutto's family declined the offer.

As for who plotted the assassination, that too is clouded by what many see as either government incompetence or a knee-jerk choice of "usual suspects."

On Friday, the Interior Ministery claimed that investigators had intercepted a telephone call that proved that Baitullah Mehsud, a leader of the Pakistani Taliban thought to be affiliated with al-Qaeda, had instigated the attack.

Ministry spokesman Cheema released a transcript of a purported conversation between Mehsud and a follower, offering congratulations for a job well done.

But Bhutto supporters are skeptical of the reports' veracity.

"We do not know if it is a genuine transcript or one created by the intelligence agencies," says PPP party spokesman Farhatullah Babar.

Mehsud has become a convenient scapegoat in recent terrorist attacks, sometimes standing in when investigators turn up empty-handed.

Speaking through his spokesman to the BBC, Mehsud denied any involvement in the attack, as he did when he was accused in the October 18 suicide bombing at a Bhutto rally in Karachi that killed some 140.

Such denials, of course, are meaningless, but they do exacerbate rumors of government complicity, a situation that benefits an anti-government insurgency.

"There is a very strong possibility that the intelligence agencies were behind the attack," Mehsud's spokesman told the BBC.

The government pirouettes may have less to do with a possible cover-up of an Administration-led assassination than a poorly executed attempt at damage control.

If Bhutto was killed in a deliberate attack by a sniper, the government would have much more to answer for than if she was the victim of an arguably less-focused terrorist bombing.

Bhutto has been dogged by terrorist threats since she returned to Pakistan on October 18; attending a rally and waving to crowds from the sunroof of her car was clearly a risky undertaking.

And the government can argue that providing security under such conditions is impossible.

"Look at our country," says Abdul Sattar, a former foreign minister under Musharraf.

"Ask whether anyone could get security."

"I do not know while moving on a street with the supporters lining up along the side, front and rear, whether our security authorities have the capabilities to have a wall of security around the car."

Bhutto's supporters have demanded an international, independent investigation into the events leading to her death.

California Congresswoman Nancy Pelosi, the Speaker of the U.S. House of Representatives, said that Washington needed to answer some "troubling questions" about Pakistan's investigation so far.

At yesterday's press conference, Bhutto's husband Zadari demanded a United Nations investigation, saying "We want a [assassinated Lebanese Prime Minister Rafik] Hariri commission-style investigation... we are writing to the United Nations for an international probe into her martyrdom."

According to Dawn, a local newspaper Pakistani President Pervez Musharraf said that he would "consider" outside help during a phone call with British PM Gordon Brown yesterday, which many are interpreting as a "thanks, but no thanks" dismissal.

And then there is the cynical view.

In some ways, the lack of a definitive answer suits all sides.

The government can maintain its story that an al-Qaeda suicide bomb plot killed Bhutto, thus exonerating itself from negligence at best and complicity at worst.

Meanwhile the PPP can leverage the insinuation of government culpability to keep Bhutto's death relevant as Pakistan prepares for the elections she died campaigning for.

With reporting by Khuda Yar Khan/Islamabad

[Livyjr]

"Missing Evidence from Bhutto's Murder"

By ARYN BAKER AND SIMON ROBINSON/ISLAMABAD

Tue Jan 1, 11:10 PM ET

With rumors of government complicity in Benazir Bhutto's assassination rife throughout Pakistan, the country's stability may depend on the absolute transparency of the investigation into the murder.

But a constantly evolving and sometimes contradictory explanation of the events by Pakistani investigators has only clouded the issue.

Within hours of the attack in the garrison town of Rawalpindi some 10 miles from the capital, authorities had already hosed down the streets.

Pools of blood, along with possible evidence such as bullet casings, DNA samples from the bomber and tracks had been washed away.

Retired Lieutenant General Hamid Gul, the former director general of Pakistani Intelligence, said he was shocked to see people cleaning up the debris so soon after the assassination.

"It's a crime scene, and they're washing away all the evidence!"

"We need to be asking why the hell was this thing done."

Initial health official reports stated that Bhutto had been shot twice before a suicide bomber detonated himself seconds later.

But by Saturday, the government reversed track.

Bhutto had been shot at, said Interior Ministry spokesman Javed Iqbal Cheema, but the shooter missed.

The force of the explosion knocked Bhutto, who had been waving at the crowds from her vehicle's sunroof, backwards.

She hit her head on a protruding lever, and succumbed to the fractures to her skull.

Cheema presented X rays to support his claim, but witnesses and close friends who rushed Bhutto to the hospital say that there was no doubt she had been shot.

Says Chaudhry Nisar Ali Khan, an opposition member of the National Assembly and a former petroleum minister:

"The government says it was the work of terrorists and they say someone has claimed responsibility."

"What I don't understand is why they keep changing the story of how Bhutto died?"

"Why do that?"

"These summersaults make everything look suspicious."

The idea that Bhutto died when her head hit a lever as she was pushed down into her open top car is "ridiculous."

He also says that the government is not serious in investigating incidents like last week's.

"How come, at least in the last three years, there have been scores and scores if not hundreds of bomb blasts and suicide attacks in Pakistan and the only incidents that resulted in people being arrested and sentenced is in the two attacks on Pervez Musharraf?"

As for who plotted the assassination, that too is clouded by what many see as either government incompetence or a knee-jerk choice of "usual suspects."

On Friday, the Interior Ministery claimed that investigators had intercepted a telephone call that proved that Baitullah Mehsud, a leader of the Pakistani Taliban thought to be affiliated with al-Qaeda, had instigated the attack.

Ministry spokesman Cheema released a transcript of a purported conversation between Mehsud and a follower, offering congratulations for a job well done.

But Bhutto supporters are skeptical of the reports' veracity.

"We do not know if it is a genuine transcript or one created by the intelligence agencies," says PPP party spokesman Farhatullah Babar.

Mehsud has become a convenient scapegoat in recent terrorist attacks, sometimes standing in when investigators turn up empty-handed.

The government pirouettes may have less to do with a possible cover-up of an Administration-led assassination than a poorly executed attempt at damage control.

If Bhutto was killed in a deliberate attack by a sniper, the government would have much more to answer for than if she was the victim of an arguably less-focused terrorist bombing.

"Opposition urges Musharraf to step down"

By SADAQAT JAN, Associated Press Writer

3 January 2008

ISLAMABAD, Pakistan - Pakistan's U.S.-allied president must resign before next month's elections or the country could risk slipping into civil war, opposition leaders and a leading independent research institute said Thursday.

The calls came after the government pushed back polls to Feb. 18 from the planned Jan. 8 date due to unrest following the assassination of opposition leader Benazir Bhutto.

Bhutto's death in a suicide bomb and gun attack plunged already volatile Pakistan deeper into crisis and stoked fears of political meltdown as the nation struggled to contain an explosion of Islamic militant violence.

The government — which had initially ruled out the need for foreign involvement in the assassination probe — has been criticized over its security arrangements for Bhutto, who had claimed elements in the ruling party were trying to kill her.

The party vehemently denies such a plot.

Bhutto supporters have insisted that a U.N. probe would be the only way to reveal the truth behind her Dec. 27 slaying.

They dismissed President Pervez Musharraf's announcement late Wednesday that Britain's Scotland Yard will soon join the investigation.

"The mist of confusion will be cleared only if the regime accepts the party's demand for holding a U.N. inquiry into the assassination as was done in the case of Lebanese Premier Rafik Hariri's murder," said Farhatullah Babar, a spokesman for Bhutto's Pakistan Peoples Party.

"The regime has lost all credibility."

"Neither a domestic inquiry nor vague foreign involvement ... would lay to rest the lingering doubts and suspicions," Babar said.

A senior police investigator, who spoke on condition of anonymity because of the sensitivity of the investigation, said Thursday that police in Pakistan already had secured key evidence, including the suspected bomber's remains, two pistols and mobile phones.

Scotland Yard investigators, with their superior forensic techniques, could help determine whether either pistol was fired in the attack and also could examine video, he said.

The election delay also drew condemnation from Bhutto's party and the other main opposition group, led by former Prime Minister Nawaz Sharif.

They said, however, that they would run in the polls anyway — seemingly a boost to Musharraf's hopes to engineer a democratic transition.

The opposition urged Musharraf to resign.

"Free and fair polls are impossible under his leadership," said Javed Hashmi, a senior member of Sharif's party.

"Such a thing is unthinkable if he is there."

In a report on Bhutto's assassination, the Brussels-based International Crisis Group research institute called on the United States — which continues to support Musharraf — to recognize him as "a serious liability, seen as complicit in the death of the popular politician" Bhutto.

"It is time to recognize that democracy, not an artificially propped-up, defrocked, widely despised general has the best chance to provide stability," the group's Asia director, Robert Templer, said in a statement accompanying the report.

"Unless Musharraf steps down, tensions will worsen and the international community could face the nightmare of a nuclear-armed, Muslim country descending into civil war," Templer said.

Musharraf, who took power in a 1999 coup, said in a television address Wednesday that he supported election authorities' decision to delay the vote due to riots that followed Bhutto's death.

The violence killed nearly 60 people and caused tens of millions of dollars in damage.

Bhutto — who the United States had hoped would enter into a power-sharing agreement with Musharraf after the elections — spent about eight years in self-exile, mostly in London, before returning to Pakistan in October to campaign.

In his address, Musharraf announced that Scotland Yard detectives had been invited to join the probe into her slaying.

He blamed Islamic militants for the death of Bhutto, a two-time prime minister, and appealed for public unity to combat them.

"This is a time for reconciliation and not for confrontation," he said.

Scotland Yard said it was sending a small team of officers from the Metropolitan Police's Counterterrorism Command.

British Foreign Secretary David Miliband said the team would leave Britain by the end of the week.

The White House said that it supported Scotland Yard's involvement, and that a U.N. investigation was not necessary now.

"Scotland Yard being in the lead in this investigation is appropriate and necessary and I don't see — we don't see a need for an investigation beyond that at this time," said presidential spokeswoman Dana Perino.

[Livyjr]

"Stocks sink on jobs data; tech plummets"

By TIM PARADIS, Associated Press

Last updated: 6:22 p.m., Friday, January 4, 2008

NEW YORK -- Wall Street fell sharply Friday after the government's much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate.

The Nasdaq composite index, also pummeled by a downgrade of Intel Corp., skidded more than 3.5 percent, while the Dow Jones industrials fell more than 1.5 percent.

The Labor Department's report that employers raised payrolls by only 18,000 and that the nation's unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.

A better-than-expected reading on the nation's service economy briefly pulled stocks off their lows but wasn't enough to shake investors' concerns.

Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow.

Wall Street is concerned that areas of weakness could puncture growth if consumers can't depend on a solid job market.

Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market.

Retailers also made reductions.

The December report showed employers added the fewest jobs to their payrolls since August 2003.

Economists had predicted much stronger growth and an unemployment rate of 4.8 percent.

Instead, unemployment climbed to 5 percent in December from 4.7 percent in November.

While 5 percent unemployment is still considered good by historical standards, the increase from November clearly made some investors nervous.

"It's a scary number, no question about it."

"No matter how good you wanted to feel about the economy averting a recession, there is far less conviction than even two or three days ago," said Joe Balestrino, senior portfolio manager at Federated Investors.

The technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on Feb. 27 last year.

The Nasdaq declined 98.03, or 3.77 percent, to 2,504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.

For 2008, the Nasdaq is down 5.57; in all of 2007, the index rose 9.81 percent.

The Dow fell 256.54, or 1.96 percent, to 12,800.18, while the Standard & Poor's 500 index declined 35.53, or 2.46 percent, to 1,411.63.

It was the steepest point drop for the Dow and the S&P 500 since Dec. 11.

In 2008, the Dow is off 3.5 percent and the S&P is down 3.86 percent.

The Russell 2000 index of smaller companies fell 23.41, or 3.14 percent, to 721.60 and hit a fresh 52-week low.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.05 billion shares, compared with 3.30 billion traded Thursday.

Bond prices rose as investors sought the safety of government-backed debt after the employment reading.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.87 percent from 3.89 percent late Thursday.

A Federal Reserve announcement Friday that it is ramping up the amount of cash available to banks through a new auction process did little to calm the markets.

After two auctions of $20 billion each, the Fed has now scheduled auctions Jan. 14 and Jan. 28 at $30 billion each.

The dollar was mixed against other major currencies.

Gold prices, which have risen to nearly 30-year highs in recent days, declined.

Light, sweet crude fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange.

Oil touched $100 per barrel this week for the first time, stirring concerns about inflation.

The employment figures overshadowed a report from the Institute for Supply Management, a business group, which said its December index of non-manufacturing activity showed the nation's service sector grew in December.

However, the pace was slightly slower than in November and the index fell to 53.9 in December from 54.1 the prior month.

Analysts had expected a deeper decline.

It's been a difficult start to 2008 on Wall Street.

After selling off in the final session of last year on Monday, investors spent the first three sessions of the new year absorbing a weaker-than-expected reading on the manufacturing sector, oil that reached $100 a barrel and Friday's dismal employment numbers.

"It's hard to point to any piece of data in recent weeks that makes you feel comfortable," said Balestrino, noting that many bullish investors had hoped a strong jobs picture would lift Wall Street's mood.

"This the one piece that was holding up pretty well and now it's showing some weakness as well," he said.

"In our business it's not the absolute number, it's the direction of the number and especially the direction versus the expectations."

In corporate news, a JPMorgan analyst lowered his rating on Intel to "neutral" from "overweight," citing a drop in chip orders from computer manufacturers during the fourth quarter and high inventories.

Intel, one of the 30 stocks that comprise the Dow industrials, fell $2, or 8.1 percent, to $22.67.

Overseas, Japan's Nikkei stock average fell sharply, finishing down 4.03 percent to its lowest level since July 2006 after being closed since the previous Friday for holidays.

The pullback followed uncertainty on Wall Street about the U.S. economy and rising oil prices.

Britain's FTSE 100 fell 2.02 percent, Germany's DAX index fell 1.26 percent, and France's CAC-40 fell 1.79 percent.

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The Dow Jones industrial average ended the week down 565.69, or 4.23 percent, at 12,800.18.

The Standard & Poor's 500 index finished down 66.86, or 4.52 percent, at 1,411.63.

The Nasdaq composite index ended down 169.81, or 6.35 percent, at 2,504.65.

The Russell 2000 index finished the week down 50.16, or 6.50 percent, at 721.60.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 14,210.84, down 700.79 points, or 4.70 percent, for the week.

A year ago, the index was at 14,269.90.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

[Livyjr]

"Unemployment up, stoking recession fears"

By JEANNINE AVERSA, Associated Press

Last updated: 5:42 p.m., Friday, January 4, 2008

WASHINGTON -- Wary employers clamped down on hiring and pushed the unemployment rate to a two-year high of 5 percent in December, an ominous sign that the economy may slide into recession.

President Bush explored a rescue package, including a tax cut, with his economic advisers.

Gripped by uncertainty, government and private employers last month added the fewest new jobs to their payrolls in more than four years.

In fact, employment at private companies alone actually declined.

The Labor Department's report, released Friday, provided evidence of an economy greatly strained by a housing slump and a credit crunch.

The disappointing employment figures sent Wall Street into a nosedive, thrust the White House into damage control and ratcheted up the blame game as Republicans and Democrats battle for the presidency.

The employment numbers also sparked expectations that the Federal Reserve will have to lower interest rates again.

As expected, the Fed took action to make cash more available to banks.

Bush said he is on top of the situation.

"We can't take economic growth for granted," he said.

"There are signs that will cause us to be ever more diligent and make sure that good policies come out of Washington."

The president said he wants to work with Congress "to deal with the economic realities of the moment and to assure the American people that we will do everything we can to make sure we remain a prosperous country."

With the odds of a recession increasing, Bush is weighing the need for an economic stimulation package.

The president, who has been plagued by low public approval ratings for his handling of the economy, isn't expected to make any decisions until later this month.

Tax cuts are under consideration, White House spokesman Tony Fratto said.

"We've done tax cuts before and it's led to growth," Fratto said.

The State of the Union address is Jan. 28 and Bush is likely to unveil his package then.

The civilian unemployment rate jumped from 4.7 percent in November to 5 percent in December, the highest since November 2005, after the Gulf Coast hurricanes dealt the country a mighty blow.

Total payrolls -- both private employers and government -- grew by just 18,000 last month, the worst showing since August 2003, when the economy suffered job losses as it struggled to recover from the 2001 recession.

"This is a major warning shot that the economy is in trouble," said economist Joel Naroff, president of Naroff Economic Advisors.

On Wall Street, stocks plunged.

The Dow Jones industrials lost 256.54 points to close at 12,800.18.

As part of its recently launched effort to make credit more readily available, the Federal Reserve announced that it will provide banks an additional $60 billion worth of loans through two auctions on Jan. 14 and Jan. 28.

The Fed's first two auctions offered banks a total of $40 billion in loans.

The December employment picture was much weaker than economists were expecting.

Employers have grown cautious as they try to cope with fallout from housing and credit problems and rising uncertainty about how the economy will fare in the months ahead.

Galloping energy prices and bad weather in some parts of the country also probably figured into the weak job figures.

Manufacturers, construction companies and financial services all cut jobs in December -- casualties of the housing slump.

Retailers also sliced jobs.

The government added 31,000 jobs in December, while private employers actually cut payrolls by 13,000, underscoring the weakness.

"Businesses have turned super-conservative," said economist Ken Mayland, president of ClearView Economics.

"With slower economic growth has come the pink slips."

The unemployment rate for blacks jumped to 9 percent in December, a 15-month high.

The jobless rate for Hispanics climbed to 6.3 percent, the highest in more than two years.

For all of 2007, the economy added 1.33 million jobs and the unemployment rate averaged 4.6 percent, the same as in 2006.

Employment growth averaged 111,000 a month in 2007, down from 189,000 a month in 2006.

Fratto said the 5 percent jobless rate should be viewed in proper historical context, saying the figure was relatively low despite the problems.

Rep. Barney Frank, D-Mass., said the employment figures "should be a wake-up call that a public policy response is needed to help the economy recover more quickly."

Other Democrats, including presidential contender Sen. Hillary Clinton, pointed to the employment figures as evidence of what they called Bush's flawed economic stewardship.

"If there were ever a shot across the bow to this administration to get off its laissez-faire boat and start helping the economy, this is it," said Sen. Charles Schumer, D-N.Y.

The health of the nation's job market is critical in determining whether the economy will survive the stresses from housing and harder-to-get credit.

The positive forces of job and wage growth have helped to cushion individuals from all the negative forces in the economy.

The big worry is that people will clamp down on their spending and businesses will put a lid on investment and hiring, throwing the economy into a tailspin.

For all of 2007, wages increased 3.7 percent, down from a 4.3 percent gain in 2006.

High energy prices, though, probably made some workers feel like their paychecks aren't stretching as far as they would like.

To fend off the possibility of a recession, the Federal Reserve cut a key interest rate three times last year.

Policymakers are expected to lower rates again when they meet at the end of the month.

Some analysts are predicting a bold half-point reduction in light of the weak employment report.

The big question, said Stephen Stanley, chief economist at RBS Greenwich Capital:

"Has the economy hit a big pothole or careened into the ditch?"

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On the Net:

Employment report: http://www.bls.gov/

[Livyjr]

"Semiconductors down on Intel downgrade"

By SEAN O'DRISCOLL, Associated Press

Last updated: 5:02 p.m., Friday, January 4, 2008

NEW YORK -- Chip stocks plunged Friday, as a JP Morgan analyst downgraded market leader Intel Corp. on concerns over slowing orders and high inventory levels.

Analyst Christopher Danely downgraded Intel from "Overweight" to "Neutral."

He said he was increasingly concerned about a possible correction to inventory levels for personal computer components.

He also noted growth limitations in the microprocessor market.

Microprocessors are found in all personal computers and control the logic of almost all digital electronics, from clock alarms to video players.

Intel shares fell $2, or 8.1 percent, to close at $22.67.

They have traded in the last year between $18.75 and $27.99.

Intel shares are now down 14 percent on the week.

They fell more than 4 percent Wednesday after Banc of America analyst Sumit Dhanda downgraded them to "Neutral" from "Buy," citing concern over market growth in the first half of 2008.

Intel competitor AMD fell 52 cents or 7.6 percent to close at $6.25.

It traded as low as $6.10, its lowest point in nearly five years.

The Philadelphia Semiconductor Index tumbled 18.67 points, or 4.8 percent, to close at 372.85 after earlier hitting a year low of 370.04.

It had ranged in the last year between 389.28 and 549.39.

The downward move in the chip market was also fueled by FBR Research analyst Craig Berger, who said in a note to investors that the overall chip market is struggling with recession fears as it prepares to release fourth-quarter results.

Berger said business remains "at least decent" but management teams will not likely release aggressive estimates for their first quarters.

He said he believed companies will estimate a quarter-on-quarter revenue decline of 3 percent to 5 percent, worse than the typical 1 percent to 3 percent quarter-on-quarter decline.

Chip makers Broadcom Corp., LSI Corp. and Atmel Corp. all hit a year low after Berger said they were the most likely to lower their first-quarter revenue estimates.

He said other companies may also lower their estimates.

Broadcom shares fell $1.79, or 6.3 percent to close at $24.80 after earlier hitting a year low of $24.52.

They had traded in the last year between $25.70 and $43.07.

LSI Corp. shares fell 26 cents, or 5.4 percent, to close at $4.48.

They earlier fell to a year low of $4.38.

Atmel shares fell 4 cents to close at $4.19.

They earlier set a new year low of $4.12.

[Livyjr]

"Fed ups auction amounts to aid banks"

By MARTIN CRUTSINGER, Associated Press

Last updated: 6:12 p.m., Friday, January 4, 2008

WASHINGTON -- The Federal Reserve announced Friday that it is increasing the amount of money available to banks through the new auction process it created to ease the nation's severe credit squeeze.

The Fed again pledged to continue the auctions "for as long as necessary."

The Fed said that it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion, a 50 percent jump.

Those two auctions will be Jan. 14 and Jan. 28.

The Fed announcement indicated that the auction process it began last month has been successful in providing a source of loans for cash-strapped banks.

The first two auctions offered $20 billion each and attracted bids for about three times that amount.

Federal Reserve Chairman Ben Bernanke and his colleagues decided to try the auction approach because their efforts to inject funds into the banking system through direct loans to banks had not been as successful as hoped.

Banks were hesitant to borrow money directly from the Fed, using a process known as the Fed's discount window, for fear that it would carry a stigma that would raise doubts among investors about the soundness of institutions using the discount window.

The Fed said last month that it would announce on Friday the amounts to be offered in the January auctions.

In a brief statement Friday, the Fed said that it planned to continue to conduct the auctions every two weeks "for as long as necessary to address elevated pressures in short-term funding markets."

Analysts saw the Fed's increase in auction amounts as an indication of the success of the auctions, which the central bank had never tried before.

"They are feeling more comfortable with the process and that is why they are increasing the size of the auctions," said Mark Zandi, chief economist at Moody's Economy.com.

Treasury Secretary Henry Paulson is scheduled to give a speech in New York on Monday on how the capital markets are recovering since financial markets were roiled last month by a severe credit shortage brought on by soaring mortgage defaults.

The Fed announcement Friday came after release of a government report showing that the jobless rate shot to a two-year high of 5 percent in December, raising concerns about a possible recession.

The worry is that a severe slump in housing, soaring energy prices and the credit crisis that hit in August will combine to push the country into a full-blown downturn.

Analysts said the December jobless report increased the likelihood that the Fed will continue cutting interest rates as a way of boosting economic growth.

The Fed has cut a key rate three times starting in September.

The previous two auctions resulted in interest rates of 4.67 percent and 4.65 percent.

That was lower than the 4.75 percent Fed discount rate, the interest that the Fed charges for making direct loans to banks.

However, it was higher than the 4.25 percent Fed target for the federal funds rate, the interest banks charge each other for overnight loans.

The Fed has cut the funds rate three times recently -- a half-point move in September followed by quarter-point cuts in October and December.