Life in OUR America, The Livyjr Files Volume 7 Options

[Livyjr]

"U.S. and Iraq scale back security deal plans: W.Post"

By Dean Yates

13 JULY 2008

BAGHDAD (Reuters) - U.S. and Iraqi negotiators have ended efforts to reach a formal security pact before President George W. Bush leaves office in favour of an interim deal, the Washington Post said on Sunday, citing senior U.S. officials.

The two sides had been negotiating a Status of Forces Agreement that would provide a legal basis for U.S. troops to remain when a U.N. mandate expires at the end of the year.

But in the past week Iraqi leaders have spoken of only agreeing what they call a memorandum of understanding.

Shi'ite Prime Minister Nuri al-Maliki has also raised for the first time the idea of setting a timetable for U.S. troops to leave Iraq.

The Washington Post quoted one U.S. official close to the negotiations as saying "we are talking about dates," even though Bush has previously rebuffed calls for a timetable.

Iraq is a major issue in November's presidential election battle between Republican John McCain and Democrat Barack Obama.

McCain supports the Bush administration's current strategy, while Obama has called for a timetable for withdrawal.

Iraqi Vice President Tareq al-Hashemi, a Sunni Arab, added his support for a withdrawal timetable.

"Iraqis must know when the American and other forces will leave Iraqi land."

"It is our right to know, and know the truth of where the situation stands, if there is an intention for American forces to leave or not," Hashemi told Iraqiya state television in an interview broadcast late on Saturday.

The Post said the "bridge" security document would be limited in both time and scope and would allow basic U.S. military operations to continue once the U.N. mandate ended.

Iraq has rejected a number of Washington's demands, insisting they infringe on the country's sovereignty.

The document now under discussion with Iraq was likely to cover only 2009, the Post said.

Negotiators expected it to include a "time horizon," with specific goals for a U.S. troop withdrawal from Baghdad and other cities and installations, it added.

The fixed dates are likely to include caveats referring to the ability of Iraqi forces to take over security.

PRESSURE

There is strong domestic pressure in Iraq to set dates for a withdrawal of U.S. forces, especially with violence at a four-year low and with Iraqi security forces getting larger.

Maliki's political opponents would also likely try to exploit the issue of an undefined U.S. troop presence in provincial elections later this year.

The most contentious unresolved issue was the legal immunity of U.S. troops in Iraq, the Post reported.

U.S. officials have said this is non-negotiable.

But Iraq's deputy parliament speaker has said lawmakers would probably veto any deal that gave U.S. soldiers immunity from Iraqi law.

The Bush administration has always opposed setting any withdrawal timetable, saying to do so would allow militant groups to lie low and wait until U.S. troops in Iraq have left.

U.S. troop levels are already being cut, with the last of five additional combat brigades Bush deployed last year expected to pull out this month.

That will leave 15 combat brigades in Iraq, or around 140,000 soldiers.

Washington was considering withdrawing additional troops beginning in September, The New York Times reported on Sunday, citing administration and military officials.

The withdrawal stemmed partly from the need for more U.S. troops in Afghanistan to fight the rising insurgency by the Taliban and other fighters.

No final decisions had been made, but up to three combat brigades in Iraq could be withdrawn, or slated for withdrawal, by the end of the administration in January, the Times said.

(Additional reporting by Christopher Michaud in New York; Editing by Dominic Evans)

[Livyjr]

"U.S. visit feeds Pakistani worry over U.S. attack"

By Robert Birsel

Sun Jul 13, 3:31 AM ET

ISLAMABAD (Reuters) - The Chairman of the U.S. Joint Chiefs of Staff, Admiral Mike Mullen, visited Pakistan on the weekend, fueling speculation that the United States was about to take action against militants in northwest Pakistan.

Pakistan has been a close U.S. ally in the global campaign against terrorism but the United States has become increasingly frustrated at what it sees as insufficient effort by Islamabad to fight militants on the Afghan border.

A U.S. embassy spokeswoman confirmed that Mullen had made a one-day trip to Pakistan on Saturday, but said she had no details about his meetings.

Pakistani military and government spokesmen were not available for comment.

Pakistani newspapers said Mullen, in talks with Pakistani military commanders and leaders of a new government, had expressed deep frustration with growing cross-border militant attacks and had called for decisive action to stop it.

"Sources quoted Mullen as complaining that militants were moving across the border with greater liberty now than during the previous government," the Dawn newspaper said.

Pakistan's semi-autonomous ethnic Pashtun tribal belt on the border has became a sanctuary for al Qaeda and Taliban militants fighting Western soldiers in Afghanistan and against security forces in Pakistan where 15 soldiers were killed on Saturday.

The U.S. Pentagon said last month insurgent havens in Pakistan were the biggest threat to Afghan security.

Pakistan has ruled out allowing foreign troops onto its soil although U.S. pilotless drones have been increasing their flights, and attacks, over the Pakistani side of the border.

Pakistani Foreign Minister Shah Mahmood Qureshi sought in talks in Washington on Friday to assure the United States his country was doing all it could to fight militants on the border.

"QUITE AGGRESSIVE"

What Pakistanis see as a more aggressive U.S. action on the border has fueled speculation of a U.S. thrust.

Last month, 11 Pakistani border soldiers were killed in a U.S. air strike as U.S. forces battled Taliban militants.

On Saturday, Pakistan lodged a protest with the United States over fire from Afghanistan on Thursday that wounded six Pakistani soldiers.

Afghanistan's NATO force blamed militants for the fire saying they were trying to "spark a border incident."

Feeding the worry, some U.S. politicians, including presidential candidate Barack Obama, have said the United States could attack al Qaeda inside Pakistan without Pakistani approval.

A new government took power after President Pervez Musharraf's allies were defeated in February elections, vowing to negotiate an end to violence, but U.S. commanders in Afghanistan say such peace efforts have led to more militant attacks there.

Many Pakistanis oppose the U.S. campaign against militancy and blame Musharraf's cooperation with the United States for inciting violence.

Any U.S. action in Pakistan would only exacerbate the problem, they say.

The News newspaper said Mullen was accompanied by officials of the U.S. Central Intelligence Agency:

"Apparently the Americans were quite aggressive in their claims," it said.

NATO commanders in Afghanistan have said their mandate goes only as far as the border and their troops would go no further but such statements have done little to dampen speculation of a U.S. attack into Pakistan.

"Newspapers keep reporting this but there is an understanding between the government of Pakistan and the NATO and U.S. forces which I don't think the U.S. would violate," said a senior Pakistani official, who declined to be identified.

But an analyst said limited U.S. strikes were possible.

"I would not say that they would come with full ground forces because they understand that would be a great folly," said security analyst and retired general Talat Masood.

"But it is possible that if they find that there is a cluster of militants which has to be dealt with, they might land some commandos," he said.

(Additional reporting by Augustine Anthony; Editing by David Fox)

[Livyjr]

"Newfound Iraqi confidence pleases, worries US"

By ROBERT BURNS, AP Military Writer

13 JULY 2008

BAGHDAD - Wajih Hameed is an Iraqi general with an attitude.

With a satisfied look, he listened as a subordinate officer explained to the deputy commander of U.S. forces in Baghdad how he plans to reposition his troops in the coming weeks.

"Before, they would have asked us to propose a plan" in such a circumstance and then would have accepted it with little argument, said Brig. Gen. Will Grimsley, who led a group of American officers to Hameed's office on Thursday.

"Now they are telling us how they will do it," he said in an interview afterward.

Hameed's swagger sometimes grates on American officers.

But Maj. Gen. Jeffery Hammond sees it as a hopeful sign the Iraqi army — generals and soldiers alike — has reached a new level of self-confidence, pointing the way toward truly independent Iraqi forces and, eventually, an exit for U.S. combat troops.

The flip side is that the Americans feel their control slipping away.

This feeds a worry that Iraqi security forces either will set themselves up for a catastrophic failure or might even decide — at some point when the Americans largely have departed — that the country would be better off under military rule.

For now, the new assertiveness by generals such as Hameed, who commands all Iraqi soldiers in the western part of the capital, is welcomed.

"They have a self-confidence now that they didn't have when (I) first arrived" last fall, Hammond, the top commander of U.S. forces in Baghdad, said in an interview.

The Iraqi army, he said, was largely limited as recently as last winter to manning checkpoints and "they were struggling with that."

What changed?

Hammond and nearly a dozen other American military officers said in a series of Associated Press interviews this past week that the key was the Iraqis' sudden and largely unexpected leap into hard battle in Basra in March, followed by offensives in the northern city of Mosul and the Sadr City section of Baghdad ending in May.

The Iraqi army faltered initially in the Basra offensive, but the outcome seemed transformative for the Iraqis.

"They are confident in their ability to stand up and take on increasing missions," said Grimsley, Hammond's deputy.

That will be put to the test soon as the Iraqis prepare to take on a resilient insurgency in other parts of the country, perhaps including Diyala, northeast of Baghdad.

If the Iraqis stay on track, their taking more responsibility could allow Gen. David Petraeus, the top American commander in Iraq, to recommend to President Bush in September that he resume a troop withdrawal that is being put on hold this month so Petraeus has time to assess the overall situation.

There are now 15 U.S. combat brigades in Iraq, with the departure this month of the 2nd Brigade, 3rd Infantry Division.

Petraeus told Congress in May that he might be ready to send more home in the fall.

The Americans do not believe the Iraqi security forces are ready to operate without U.S. assistance.

While they are pleased at the new assertiveness, some American commanders also struggle with an unsettled feeling about the risk of the Iraqis taking on more than they are ready to handle.

Hammond says that while he is encouraged, he also feels some anxiety.

"I've got some frustrating days when they do do things independently," he said Friday.

"My staff reminds me, `That's what we wanted.'"

"'Now you're not comfortable with it.'"

"Well, that's maybe the rigid Army officer in me."

"But it is moving in the right direction."

"Is it there yet?"

"No, it's not there yet."

Similar concerns are shared among the American officers working to develop Iraq's police.

Army Col. Mark Spindler, commander of the 18th Military Police Brigade, said in an interview Saturday that some of his colleagues worry that when the Iraqis act on their own, the U.S.-Iraqi partnership is breaking down.

"No, it's not breaking down."

"It's changing."

"That's progress," Spindler said.

The Iraqis, too, recognize that the dynamic between their leaders and the U.S. commanders is changing.

"They (the Americans) want us to rely on ourselves," Maj. Gen. Ali Hadi Hussein al-Yaseri, commander of all patrol police in Baghdad province, said in an interview Saturday in his headquarters.

"We are now doing that."

Which raises this question: When will the Americans know that the Iraqis are ready to handle security entirely on their own?

"The Iraqis are going to have to decide."

"When do they believe they are where they need to be, on their terms?" Hammond said.

He said one test of their readiness will be when Shiite militias, whose leaders he says largely fled to Iran and other countries after being pushed out of Sadr City, return to fight again.

He predicts that fight is coming.

"I wouldn't give up Sadr City like that, and I don't think they will."

"I'm sure they won't," he said.

"They'll come back."

Hammond did not address the possibility of the Iraqi army breaking out of the control of its civilian overseers, but some private U.S. military analysts have said in recent weeks that they see a risk of a coup.

"It's something that's being talked about" among some U.S. government officials, said Stephen Biddle, an Iraq watcher at the Council on Foreign Relations in Washington.

He traveled in Iraq in early June and returned with a largely positive view of security developments, tempered by concern about remaining sectarian tensions.

Iraq has vastly increased the size of its forces over the past year, now totaling 566,000 in the army and police.

In May 2007 that number was 337,000.

For now, in Biddle's view, the presence of a large American military contingent mitigates against the possibility of a military coup.

"If we were to leave you could easily imagine a situation in which the military as the most effective institution in society decides to take over," Biddle said.

"The parliament is the least respected institution in the society."

[Livyjr]

FROM WHAT I CAN FIGURE OUT ...

U.S. COMMANDER-IN-CHIEF GEORGE W. BUSH IS FIGHTING FOR THE RIGHT OF WOMEN TO BE PROSTITUTES IN AFGHANISTNAM ...

AND THE TALIBAN IS FIGHTING AGAINST IT ....

BECAUSE THEY DON'T LIKE DEMOCRACY AND FREEDOM ...

And so ...

"Officials: 9 US troops killed in Afghanistan"

By JASON STRAZIUSO, Associated Press Writer

13 JULY 2008

KABUL, Afghanistan - A multi-pronged militant assault on a small, remote U.S. base killed nine American soldiers and wounded 15 Sunday in the deadliest attack on U.S. forces in Afghanistan in three years, officials said.

The attack on the U.S. outpost came the same day a suicide bomber targeting a police patrol killed 24 people, while U.S. coalition and Afghan soldiers killed 40 militants elsewhere in the south.

The militant assault on the American troops began around 4:30 a.m. in a dangerous region close to the Pakistan border and lasted throughout the day.

Militants fired machine guns, rocket-propelled grenades and mortars from homes and a mosque in the village of Wanat in the mountainous northeastern province of Kunar, NATO's International Security Assistance Force said in a statement.

Nine U.S. troops were killed in the attack, a Western official said on condition of anonymity because he was not authorized to release the troops' nationalities.

NATO confirmed nine of its soldiers had been killed and 15 wounded.

Four Afghan soldiers also were wounded, NATO said.

"Although no final assessment has been made, it is believed insurgents suffered heavy casualties during several hours of fighting," NATO said in a statement.

Lt. Col. Rumi Nielson-Green, the top U.S. military spokeswoman in Afghanistan, said she could not comment because the fight was ongoing.

The attack appeared to be the deadliest for U.S. troops in Afghanistan since June 2005, when 16 American troops were killed — also in Kunar province — when their helicopter was shot down by a rocket-propelled grenade.

Those troops were on their way to rescue a four-man team of Navy SEALs caught in a militant ambush.

Three SEALs were killed, the fourth was rescued days later by a farmer.

Sunday's attack came during a period of rising violence in Afghanistan.

Monthly death tolls of U.S. and NATO troops in Afghanistan surpassed U.S. military deaths in Iraq in May and June.

Last Monday, a suicide bomber attacked the Indian Embassy in Kabul, killing 58 people in the deadliest attack in the Afghan capital since 2001.

In two other incidents this month, an Afghan government commission found that U.S. aircraft killed 47 civilians during a bombing run in Nangarhar province, while a separate incident in Nuristan province is alleged by an Afghan officials to have killed 22 civilians.

The high casualty tolls have prompted the International Committee of the Red Cross this week to ask all sides to show restraint and avoid civilian casualties.

But violence continued around the country on Sunday.

A suicide bomber on a motorcycle blew himself up next to a police patrol Sunday in the southern province of Uruzgan, killing 24 people.

The bomb attack on a police patrol at a busy intersection of the Deh Rawood district killed five police officers and 19 civilians, wounding more than 30 others, said Juma Gul Himat, Uruzgan's police chief.

Most of those killed and wounded were shopkeepers and young boys selling goods in the street, he said.

Elsewhere, Taliban militants executed two women in central Afghanistan late Saturday after accusing them of working as prostitutes on a U.S. base.

The women, dressed in blue burqas, were shot and killed just outside Ghazni city in central Afghanistan, said Sayed Ismal, a spokesman for Ghazni's governor.

He called the two "innocent local people."

Taliban fighters told Associated Press Television News the two women were executed for allegedly running a prostitution ring catering to U.S. soldiers and other foreign contractors at a U.S. base in Ghazni city.

1st Lt. Nathan Perry, a U.S. military spokesman, said he had not heard allegations "anything close to that nature."

Meanwhile, at least 40 militants were killed following an attack on Afghan and U.S.-led coalition forces in Helmand province, the coalition said in a statement.

The militants attacked the combined forces near Sangin on Saturday from "multiple concealed and fortified positions," the coalition said.

Thirty "enemy boats" and several small bridges have been destroyed on the Helmand River during two days of fighting, it said.

A soldier with NATO's International Security Assistance Force died in a roadside blast in Helmand province Sunday, a statement said.

The soldier's nationality was not released and it wasn't clear if the death was connected to the two-day battle.

More than 2,300 people — mostly militants — have died in insurgency related violence this year, according to an Associated Press tally of official figures.

In the country's north, a soldier serving with ISAF died of wounds caused by an explosion Saturday, the military alliance said in a statement.

The statement did not give any further details of the explosion.

The soldier's nationality was not been disclosed.

There are nearly 53,000 troops from 40 nations serving the ISAF in Afghanistan.
___

Associated Press writers Noor Khan in Kandahar and Rahim Faiez and Fisnik Abrashi in Kabul contributed to this report.

[Livyjr]

"A changing American Dream - The suburbs at 50 remain a strong lure,but pursuit of the good life carries a price"

By JIMMY VIELKIND , BRIAN NEARING and CHRIS CHURCHILL, Staff writers, Albany, New York Times Union

First published: Sunday, July 13, 2008

CLIFTON PARK -- Bob Kelley bought his six-bedroom house on Hemlock Drive in 1963 -- and for the past five decades, the American Dream played out on his half-acre.

Two-car garage, expansive lawn, great schools for his children.

It's been, in his opinion, a glorious experience.

But the 81-year-old retiree says he's not sure he'd do it again if he was starting out now.

"The premise here was that the well will never run dry," Kelley said, referring to gasoline.

"I paid as little as 19 cents a gallon in 1966."

Cheap gas and the automobile dramatically changed the Capital Region.

In the last 50 years, much of the area's population spread from dense cities along the Hudson and Mohawk rivers to lower-density suburbs such as Clifton Park, Guilderland and Niskayuna.

But as the region's population slowly grew, it flowed from Albany, Troy and Schenectady to the towns that surround and link the cities.

Now, with the price of gas above $4 a gallon, some wonder if the Capital Region, and the rest of the country, is at a crossroads.

Can the growth of suburbia continue?

Can the region maintain its high quality of life if existing trends continue?

Will fuel become so pricey people can no longer afford commutes from the outlying suburbs?

Are decreases in property values -- particularly in affluent Saratoga County -- just another sign of the nation's faltering real estate market, or a more ominous sign that fuel prices are frightening people away from the outlying suburbs?

Is the Capital District Transportation Authority equipped to handle a dramatic increase in ridership if suburbanites turn to the sprawling bus system to get to the region's business hubs?

And, significantly, was the suburban explosion of the last half-century worth what some see as the consequences?

"If we don't change the patterns," said Dominick Ranieri, a Guilderland architect and critic of suburban development, "we're in for a long and slow and arduous collapse."

Some derisively call the growth of the suburbs "sprawl."

Others see it as a lifestyle improvement that gave thousands of families green grass and spacious homes.

The effects of the spread are far-reaching.

Thousands of abandoned homes and dozens of empty churches dot urban landscapes.

Political power is growing in the suburbs, and it's becoming increasingly Democratic.

The family farm is disappearing.

Fuel and energy consumption have increased.

The roads are more crowded than ever.

This is the first in a series of articles in which the Times Union will look closely at the evolution of how we live in the Capital Region.

We will examine how and why the region changed over the last 50 years.

We'll analyze the costs and benefits of those changes.

We'll envision how the region might look in 50 years, and how the development choices we make today will determine our collective future.

The Capital Region has always been decentralized.

It has never had just one primary city.

Even before suburbanization, thousands of workers headed to state jobs in downtown Albany, for example, while thousands of others in Schenectady worked at General Electric's massive manufacturing complex.

It seems predictable, then, that growth would fill in the land between the cities.

But suburbanization, of course, is far from just a Capital Region phenomenon.

After World World II, suburban growth boomed outside nearly every American city.

There was a severe housing crunch then, as returning veterans and their families crowded apartment buildings and their parents' houses.

So the federal government made it easier to get home mortgages -- so long as those mortgages were outside the "redlined" inner city.

Suburban life became the stuff of dreams, a 1950s ideal.

Who wouldn't want to live like the Cleavers?

And where did Ricky and Lucy go when little Ricky was born?

They didn't stay in Manhattan.

But the suburban ideal would not have been possible without a massive expansion of the nation's transportation network, without the construction of thousands of miles of highway to carry commuters from the center city to the leafy outskirts.

In the Capital Region, it was the Northway that guided suburban expansion.

When the first 5.5-mile stretch of the highway opened in 1959, the city of Albany held a party.

Erastus Corning 2nd, then considered Albany's mayor for life, told a crowd of 200 that the highway would help Albany maintain its importance as a crossroads.

Perhaps it did.

But there's also little doubt that suburbanization diminished the regional importance of Albany and other cities in the area.

A Times Union analysis of U.S. Census Bureau data shows that, in 1940, two out of three people in the Capital Region lived in Albany, Troy, Schenectady and other cities along the Hudson and Mohawk rivers.

By 2006, that had dropped to just one of three.

The cities of Albany, Schenectady and Troy each reached their peak populations in 1950, and have since lost more than 95,000 residents combined.

Though the region's population slowly grew during the period, the Saratoga County towns of Clifton Park, Halfmoon and Malta added 62,000 people from 1950 to 2006.

In Albany County, Colonie alone gained 50,000 in the same period.

Suburban roads filled with traffic as subdivisions, fast-food restaurants and malls devoured farmland.

Developers churned out neighborhoods of single-family homes on half-acre lots.

That's what Bob Kelley moved to in the Clifton Knolls housing development.

He loved it, believing he'd found an oasis from urban crowds and noise.

"The neighbors were wonderful, and it was terrific," Kelley said.

"You could go out in the street and have a ballgame."

But has the rising cost of energy made suburban life become untenable?

Will the graying of the population, particularly the baby boom generation, increase demand for walkable neighborhoods close to stores and lessen demand for housing on the fringes?

Real estate professionals like Carolyn DeSantis in Clifton Park and Tracy Metzger, owner of an Albany company, say there's demand for inner-city living here that developers are just starting to tap through projects like The Capital Grand, a proposed condo building just north of downtown Albany, or The Conservatory, a retail building renovated for apartments in downtown Troy.

"Gasoline prices are driving younger people closer to work," DeSantis said.

Yet urban developments still represent just a sliver of the housing market.

Saratoga County towns such as Halfmoon and Wilton remain the fastest-growing parts of the Capital Region.

Development patterns may not change quickly, if at all, despite rising energy prices.

The appeal of the suburbs remains powerful, offering the American Dream trifecta: a single-family home with good schools and low crime.

And property taxes are generally lower in suburbs.

There's another factor: Many jobs and much of the region's shopping followed people to the suburbs.

Now, if a Clifton Park resident works in one of the many office parks in Colonie or Latham, moving to downtown Albany will do little to curb her commute -- and she'll find herself traveling to Colonie or North Greenbush for basic shopping needs.

Some highly touted planned projects seem designed to accelerate, rather than curb, suburban growth.

The oft-cited example: the plan for an Advanced Micro Devices plant in Malta, backed by $1.2 billion in state grants and tax breaks.

"Right now, Malta is ground zero for sprawl in the region," said David Lewis, a University at Albany professor of geography and planning.

Even in Malta town government, there are critics: Paul Sausville, the town supervisor, thinks housing growth in the suburbs is hurting the region, though he supports the AMD project.

"We're draining the life out of our cities," he said.

"If you do the math, commuting from Saratoga County to Albany is costing people $500 a month."

"That affects quality of life."

Still, Bob Marini Jr. of Robert Marini Builders, a company that helped build the region's suburbs, thinks demand for suburban living is as popular as ever -- and will remain so.

People might choose smaller cars, he said, but they're unlikely to choose smaller urban home lots.

But when does it stop?

How far can we push the suburban frontier?

How many people can choose a decentralized lifestyle based on open space and free movement before both cease to exist?

Those are questions even some of suburbia's earliest proponents are asking.

"They keep building and building and building," said Kelley, in Clifton Park.

"I was just thinking of how nice it was here, of how easy it was to get around."

"Now it's all congested."

[Livyjr]

"Sen. Schumer defends comments on IndyMac collapse - Schumer: IndyMac's failure result of lax regulation, not his recent letter about bank's woes"

By STEPHEN BERNARD, Associated Press

Last updated: 4:32 p.m., Sunday, July 13, 2008

NEW YORK -- Sen. Charles Schumer on Sunday defended himself against claims by regulators that he was partially to blame for a run on IndyMac Bancorp Inc. that led to the bank's takeover by the government Friday.

At a news conference Sunday, the New York Democrat deflected blame cast upon him by regulators for causing a run on the bank that saw depositors withdraw more than $1.3 billion during the 11 days after Schumer released a letter about the possible risks of IndyMac failing.

"The regulator here was asleep at the switch," Schumer said.

"The administration is doing what they always do, blaming the fire on the person who called 9-1-1."

Schumer noted his letter in late June provided "no new revelations" about IndyMac, and instead pointed out the bank's problems had been building for years.

On Friday, the Office of Thrift Supervision transferred control of IndyMac to the Federal Deposit Insurance Corp. because it did not think the lender could meet its depositors' demands.

IndyMac is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said after taking control of the bank.

As of March 31, IndyMac had $19.06 billion in total deposits.

Regulators pinned part of IndyMac's recent problems on Schumer's June 26 letter causing alarm with depositors, leading to the run on the bank that that essentially sapped it of the liquidity needed to continue functioning properly.

During the housing boom earlier in the decade, IndyMac was one of the largest lenders of alt-A loans -- mortgages given to customers with minor credit trouble or that did not have the proper documentation to receive a traditional, prime loan.

Schumer was quick to point out Sunday that IndyMac is an outlier among banks because it was heavily involved in originating riskier mortgages than traditional community and regional banks.

Defaults among alt-A mortgages, like many other nontraditional loans, rapidly increased over the past year, forcing banks like IndyMac to set aside more money to cover defaults.

It also made it difficult for IndyMac to sell pools of mortgages -- known as mortgage-backed securities -- because investors shied away from bonds backed by the troubled loans.

That left IndyMac searching for new ways to generate capital to continue operations, as it relied heavily on the mortgage securities market to raise funds.

The bank is scheduled to reopen Monday as IndyMac Federal Bank, FSB, under the oversight of the FDIC.

The FDIC estimates its takeover of IndyMac will cost between $4 billion and $8 billion.

The FDIC set up a help page and hotline for IndyMac customers with questions regarding their deposits.

----------

AP Radio Correspondent Julie Walker in New York contributed to this report.

[Livyjr]

"SEC opens probe to prevent spread of false information that manipulates stocks"

By JEANNINE AVERSA, Associated Press

Last updated: 3:32 p.m., Sunday, July 13, 2008

WASHINGTON -- The Securities and Exchange Commission said Sunday it is immediately opening a probe to prevent the spread of false information used to manipulate securities prices.

SEC Chairman Christopher Cox said the investigation is aimed at "ensuring that investors continue to get reliable, accurate information about public companies in the marketplace."

The probe comes amid a new bout of turmoil that has gripped investors.

Questions have been swirling about the financial health of mortgage giants Fannie Mae and Freddie Mac as well as Lehman Brothers Holdings Inc.

Earlier this year, a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and into a takeover by JPMorgan Chase.

Bear officials blamed market rumors for the run.

The investigation will be conducted by the SEC's Office of Compliance Inspections and Examinations as well as the Financial Industry Regulatory Authority and New York Stock Exchange Regulation Inc.

Cox said the probe will provide an opportunity to make sure brokers and investment advisers have "appropriate training for their employees and sturdy controls in place to prevent intentionally false information from harming investors."

By law, brokers and investment advisers must have procedures in place to prevent market manipulation and other violations.

Investigators will focus on such procedures, or controls, and whether "they are reasonably designed to prevent the intentional creation or spreading of false information intended to affect securities prices or other potentially manipulative conduct," the agency said.

The probe is separate from SEC's investigations, already under way, into alleged intentional manipulation of securities prices through "rumor-mongering and abusive short selling," the agency said in a statement.

[Livyjr]

"Iraq eyes new offensive; U.S. talks scaled back"

By Dean Yates and Mohammed Abbas

Sun Jul 13, 12:26 PM ET

BAGHDAD (Reuters) - Iraqi security forces are poised to launch a major crackdown in volatile Diyala province, the Interior Ministry said on Sunday, the latest in a series of operations aimed at stabilizing the country.

Sunni Islamist al Qaeda has sought to stoke tensions in the religiously and ethnically mixed northeastern province, which has seen a string of suicide bombings in recent months.

The crackdown will be the latest Iraqi-led offensive aimed at stamping government authority on areas once in the hands of Sunni Arab insurgents or Shi'ite militias.

U.S. and Iraqi officials say a campaign against al Qaeda in the northern city of Mosul and surrounding Nineveh province has helped reduce violence there.

Other operations have targeted Shi'ite militias in the southern provinces of Basra and Maysan.

"Soon, the security forces will be in Diyala to play the role they played in Basra and Maysan and Mosul, and Diyala could be the last stage," Iraqi Interior Ministry spokesman Major-General Abdul-Kareem Khalaf told a news conference.

He did not give a date for the start of the Diyala crackdown and it was unclear if he meant the offensive would be the last major operation aimed at securing the country.

Overall attacks across Iraq were down 85 percent in June from a year ago, the Iraqi military said last week.

U.S. forces have been conducting security operations in Diyala since the beginning of the year and will take part in the new Iraqi push, a spokesman said.

The success of Iraq's recent operations has given the government confidence, which has been most apparent in calls by Iraqi leaders for a timetable for the withdrawal of U.S. troops as part of a security deal being negotiated with Washington.

IRAQI FORCES NEAR "SELF RELIANCE"

Iraqi security forces were taking the lead in more than 75 percent of security operations, national security adviser Mowaffaq al-Rubaie told CNN television.

"We can see in a very short period of time, the Iraqi security forces will reach ... self reliance ..."

"We can relax the requirements for foreign troops in this country," he said.

Iraqi and U.S. officials have been working on an agreement to provide a legal basis for American troops to remain when a U.N. mandate expires at the end of the year.

But negotiators had ended efforts to reach a formal Status of Forces Agreement before President George W. Bush leaves office in favor of an interim deal, the Washington Post said on Sunday, citing senior U.S. officials.

In the past week Iraqi leaders have spoken of only agreeing what they call a memorandum of understanding.

The Washington Post quoted one U.S. official close to the negotiations as saying "we are talking about dates," even though Bush has previously rebuffed calls for a timetable.

Iraq is a major issue in November's presidential election battle between Republican John McCain and Democrat Barack Obama.

McCain supports the Bush administration's current strategy, while Obama has called for a timetable for withdrawal.

Iraqi Vice President Tareq al-Hashemi, a Sunni Arab, added his support for a withdrawal timetable.

"Iraqis must know when the American and other forces will leave Iraqi land."

"It is our right to know, and know the truth of where the situation stands, if there is an intention for American forces to leave or not," Hashemi told Iraqiya state television in an interview broadcast on the weekend.

The Post said the "bridge" security document would likely cover only 2009, and be limited in scope, allowing basic U.S. military operations to continue once the U.N. mandate ended.

Iraq has rejected a number of Washington's demands, insisting they infringe on the country's sovereignty.

There is strong domestic pressure in Iraq to set dates for a withdrawal of U.S. forces, especially with violence at a four-year low and with Iraqi security forces getting larger.

Prime Minister Nuri al-Maliki's political opponents would also likely try to exploit the issue of an undefined U.S. troop presence in provincial elections later this year.

(Additional reporting by Tim Cocks and Waleed Ibrahim; Editing by Charles Dick)

[Livyjr]

"US spells out Fannie-Freddie backstop plan - Fed offers to lend to mortgage companies, Treasury plans possible equity investment"

By JEANNINE AVERSA, Associated Press

Last updated: 6:42 p.m., Sunday, July 13, 2008

WASHINGTON -- The Federal Reserve and the U.S. Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival.

The Federal Reserve said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary."

If the companies did borrow directly from the Fed, they would pay 2.25 percent -- the same rate given to commercial banks and Big Wall Street firms.

Secretary Henry Paulson said the Treasury is seeking authority to expand its current line of credit to the two companies should they need to tap it and to make an equity investment in the companies -- if needed.

Such moves will require congressional approval.

"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday.

"Their support for the housing market is particularly important as we work through the current housing correction."

The Treasury's plan also seek a "consultative role" for the Federal Reserve in any new regulatory framework eventually decided by Congress for Fannie and Freddie.

The Fed's role would be to weigh in on setting capital requirements for the companies.

Fannie Mae and Freddie Mac either hold or back $5.3 trillion of mortgage debt.

That's about half the outstanding mortgages in the United States.

The department, the Fed and other regulators worked in close consultation throughout the weekend after investor fears about the companies' finances sent their shares plummeting in trading last week.

Paulson is working closely with congressional leaders to advance his plan as soon as possible as one complete package.

The announcement marked the latest move by the government to bolster confidence in the mortgage companies.

A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities.

Fannie and Freddie were created by the government to provide more Americans the chance to own a home by adding to the available cash banks can loans customers.

A senior Treasury official said any increase in the line of credit -- now at $2.25 billion for each company-- would be at the Treasury secretary's discretion.

The same would apply to any equity investment made by the government.

The official, who spoke on condition of animosity, also sought to send a calming message about Fannie's and Freddie's financial shape, saying:

"There's been no deterioration of the situation since Friday."

If one or both of the companies were to fail, it would wreak havoc on the already fragile financial system and the crippled housing market.

The problems would spill over in the national economy, too.

Paulson on Friday said the government's focus was to support the pair "in their current form" without a takeover.

Hoping to bolster confidence, Senate Banking Committee Chairman Chris Dodd, D-Conn., told CNN on Sunday that Fannie and Freddie are financially sound.

"What's important here are facts," Dodd said.

"And the facts are that Fannie and Freddie are in sound situation."

"They have more than adequate capital -- in fact, more than the law requires."

"They have access to capital markets."

"They're in good shape."

"The chairman of the Federal Reserve has said as much."

"The secretary of the Treasury as said as much."

Last week Fed Chairman Ben Bernanke and Paulson, appearing before the House Financial Services Committee, made a point of saying that the regulator of Fannie and Freddie, the Office of Federal Housing Enterprise Oversight, has found both companies adequately capitalized.

[Livyjr]

"Government not expected to help more companies - Government pledges support for Fannie, Freddie; but banks, brokerages might be left to founder"

By JOE BEL BRUNO and STEPHEN BERNARD, Associated Press

Last updated: 7:22 p.m., Sunday, July 13, 2008

NEW YORK -- The U.S. government is signaling it won't throw a lifeline to struggling financial companies -- except for mortgage linchpins Fannie Mae and Freddie Mac -- marking a shift to a new and potentially more volatile phase of the credit crisis.

Such an approach could mean beaten-down investment banks like Lehman Brothers Holdings Inc. and regional banks must now fend for themselves as they try to recover from billions of dollars in mortgage-related losses -- unlike Bear Stearns Cos., whose buyout the government helped orchestrate in March.

That is bound to unnerve an already turbulent Wall Street and make investors even more anxious as they await financial companies' earnings reports that are expected to be down a stunning 69 percent from a year ago when all the numbers are in.

And, for consumers already squeezed by tightening credit standards, it could mean getting a mortgage will become even harder.

The short-term uncertainty about Freddie Mac and Fannie Mae -- which together hold or guarantee half the nation's mortgage debt -- was to an extent relieved on Sunday.

Federal officials again threw their support behind the government-sponsored enterprises; the Treasury pledged to expand its current line of credit to the two companies and the Federal Reserve said it will provide additional loans if needed.

Treasury Secretary Henry Paulson also said the government could, if needed, buy equity capital in the companies, whose stocks lost half their value last week.

The Treasury's moves would require congressional approval.

But, some of Wall Street's biggest investors believe there was another message in the government's announcement -- the rest of the financial sector seems unlikely to get a helping hand.

Global banks and brokerages have already written down nearly $300 billion in soured mortgage investments -- a number projected to ultimately reach $1 trillion.

"The credit crisis has obviously entered into a new phase -- the government has one bailout left in them, and this is it," said Jeffrey Gundlach, chief investment officer of TCW Group in Los Angeles, which invests $160 billion.

"One consequence of Freddie and Fannie is that other firms are allowed to go under," he said.

"If you couldn't get your act together after four months of unprecedented financing terms, maybe you don't deserve to be thrown yet another lifeline."

Worries about financial companies failing intensified after a run on IndyMac Bancorp Inc. led to the bank's takeover by the government on Friday.

It wasn't the Treasury or Fed helping to keep IndyMac in business, but a transfer of control to the Federal Deposit Insurance Corp. -- which backs deposits on all the nation's banks.

Analysts said these kind of failures will curtail competition among financial institutions, which might in turn make it even harder for some borrowers to get mortgages, personal or auto loans or credit cards.

On Wall Street, Monday could be a critical day, with investors quite nervous amid the uncertainty in the financial sector.

Friday, as investors tried to assess the health of the mortgage financiers, the Dow Jones industrial average dropped below 11,000 for the first time in nearly two years, and the overall market was left with its fourth straight weekly loss.

The government's support of Fannie and Freddie in part was meant to assuage investors around the world.

Wall Street will get a better sense of how concerned investors are with Fannie Mae and Freddie Mac's future immediately Monday morning.

Freddie Mac is scheduled to hold its weekly debt auction beginning at 8 a.m. EDT.

The auction closes at 9:45 a.m., shortly after U.S. markets open.

Successful completion of the debt auctions allows both lenders to remain liquid -- replacing old debt with new.

Liquidity has been one of the key questions facing financial companies during the credit crisis.

Freddie Mac is auctioning off a combined $3 billion in three- and six-month securities.

Wall Street will be looking very closely at the number of bidders and the rate at which the securities are auctioned, said Bert Ely, a banking consultant who has been critical of the companies in the past.

"I'll be surprised if the results aren't strong," he said, noting the government was likely heavily encouraging investors throughout the weekend.

The banking industry was already dealt a severe blow in March when Bear Stearns nearly collapsed amid the evaporation of its liquidity.

JPMorgan Chase & Co. stepped in to purchase Bear Stearns in a deal orchestrated by the Federal Reserve.

Bear Stearns was unhinged by mounting losses tied to investments in bonds backed by mortgages.

As the mortgages increasingly defaulted, the value of bonds backed by the troubled loans tumbled.

After Bear collapsed, investment banks were given the opportunity to borrow directly from the Fed, an option that was previously only granted to retail banks.

Financial companies' reports of write-downs of troubled debt are likely to increase this week as some of the country's largest institutions, including JPMorgan Chase, Merrill Lynch & Co. and Citigroup Inc., report second-quarter results.

That trio has already taken a combined $73 billion in write-downs since the credit crisis began last summer.

Lehman Brothers, whose shares have lost 78 percent since this year's peak in February, is considered to be on the shakiest ground because it is the smallest Wall Street bank and has significant mortgage holdings.

Last month, the investment bank announced it lost nearly $3 billion during the second quarter and was forced to offset that by raising $6 billion of fresh capital.

Meanwhile, analysts believe regional banks in areas hardest hit by the real estate downturn are also at risk for failure.

Some of the most bandied about names include Washington Mutual Inc., National City Corp., and Fifth Third Bancorp.

"Fannie and Freddie are too big to fail only because of the repercussions, not to just the mortgage and housing markets but the entire financial market," said Joe Balestrino, fixed-income market strategist at Federated Investors.

"The U.S. is in disarray ... these regionals could be gone, they are in a tough spot with housing and employment going south."

[Livyjr]

"Hurricane Season Getting Longer"

Andrea Thompson, Senior Writer, LiveScience.com

Mon Jul 14, 12:21 AM ET

Hurricane seasons have been getting longer over the past century and the big storms are coming earlier, LiveScience has learned.

The trend has been particularly noticeable since 1995, some climate scientists say.

Further, the area of warm water able to support hurricanes is growing larger over time.

The Atlantic Ocean is becoming more hurricane friendly, scientists say, and the shift is likely due to global warming.

"There has been an increase in the seasonal length over the last century," Jay Gulledge, a senior scientist with the Pew Center on Global Climate Change, told LiveScience.

"It's pretty striking."

A study Gulledge co-authored with other climate scientists found a five-day increase in season length per decade since 1915.

Hurricane season officially starts June 1, but the first named storm of the 2008 season, Tropical Storm Albert, formed on May 31.

The first hurricane of the season, Hurricane Bertha, formed on July 1, reaching hurricane strength on July 7, relatively early in the season for a major storm.

In the last decade, more strong storms have been forming earlier in the season, said hurricane researcher Greg Holland of the National Center for Atmospheric Research in Boulder, Colo.

While this trend hasn't been formally linked to global warming because climate models can't reproduce individual storms, Holland thinks it's likely that the warming caused by manmade greenhouse gases is a major factor in the seasonal shift based on observations of changes in recent decades and the predictions models are making for the changing conditions in the Atlantic basin.

The length of the hurricane season is "one of the potentially big signals" that could change in response to global warming, Holland said.

Defining the season

The definition of the hurricane season depends on who you ask: For hurricane forecasters and coastal residents living in an area prone to hurricane landfalls, the standard dates are June 1 to Nov. 30.

The National Hurricane Center uses these dates because historically most storms occur within that span of six months and because having a definitive time frame helps to heighten the public's awareness of the dangers of hurricanes.

But for researchers looking at how hurricane activity has changed over time, those dates don't really matter - meteorologists look at the dates of the first and last named storms in a given year, which allow them to evaluate the actual length of each hurricane season.

Since 1995, hurricane seasons have been increasing in length based on the latter definition, Holland said, with stronger storms that typically wouldn't be seen until mid-August showing up in July (Bertha, which became a Category 3 storm in the Atlantic last week, is one example).

Expanding warm pool

Like a hurricane's intensity, the length of the hurricane season is affected by the temperature of the ocean that fuels the storms.

The warmer the water, the more energy a storm has to draw from.

Hurricanes and tropical storms have been forming earlier in the season recently because "we now get warmer sea surface temperatures earlier in the year," Holland explained.

"The whole season has extended out."

Peter Webster of Georgia Tech put a finer point on it.

"There is some work that says that the length of the North Atlantic hurricane season has become longer as SSTs [sea surface temperatures] warm up more quickly early in the season," he said.

Tropical storms and hurricanes need water of at least 80 degrees Fahrenheit (26.5 degrees Celsius) to form.

The area where water temperatures meet or exceed that mark is called the warm pool.

In recent years, the warm pool has expanded, creating a larger area over which hurricanes can develop and strengthen, Holland told LiveScience.

It is now reaching all the way to the coast of Africa, allowing storms to form farther east, and so giving them more time to strengthen as they traverse the Atlantic.

Bertha, for example, formed farther east than any other July storm on record.

These storms that form so far over in the eastern Atlantic are called "Cape Verde-type" storms, after the chain of islands off the western coast of Africa.

Cape Verde-type storms account for a major proportion of all major hurricanes (Category 3 and higher), Holland said.

These storms tend to take a straight westward path across the Atlantic, avoiding land and cooler waters, which can kill a storm.

Hurricane Andrew, which devastated southern Florida in 1992, and 2007's Hurricane Dean, which wreaked havoc in the state of Yucatán in Mexico, were both Cape Verde-type storms, along with Bertha.

Holland thinks that the growth of the warm pool will be a factor in the length of future hurricane seasons by promoting these and other early-forming storms.

Outliers

Other early storms, outliers to the standard June 1 to Nov. 30 season, such as this season's Tropical Storm Arthur or last year's Subtropical Storm Andrea (which formed on May 9), aren't all that unusual.

Such early birds were seen even before global warming became an issue - the earliest-forming storm in recorded weather history was observed on March 7, 1908.

"There's always been the odd one out," Holland said, adding that we'll likely see more of these in a warming world.

"We have to expect that they'll be more outliers," he said, though he doubts that the official dates of hurricane season will change, since most will still lie within that window.

But these aren't the early-forming storms that Holland is worried about, because they tend to be weaker.

It's the major storms, like the Cape Verde-type, that are forming in July and later that are the ones to watch out for, he said.

These shift to more major storms is also cause for concern because the Atlantic historically had fairly timid hurricane seasons compared to other storm-producing basins such as the Indian Ocean.

Because the Atlantic basin wasn't optimized for hurricane formation already, "it didn't take much of a change to see a difference," Holland said.

One other way the Atlantic basin is becoming more hurricane-friendly, besides warmer oceans, is more favorable atmospheric conditions.

Warming ocean temperatures also change atmospheric circulation patterns.

Holland said some changes are already happening over the Atlantic and climate models predict that these changes will also tend to promote the development of storms off the coast of Africa.

"All of the stars are lining up," he said.

[Livyjr]

"General says Iraqi security forces still need help - Army general to tell Congress Iraqi security forces need US help for foreseeable future"

By ANNE FLAHERTY, Associated Press

Last updated: 7:52 p.m., Tuesday, July 8, 2008

WASHINGTON -- U.S. aid for Iraq's army and police units will be needed for the foreseeable future, although the security forces are becoming increasingly independent, a senior general will tell Congress on Wednesday.

In written remarks prepared for a House Armed Services Committee hearing, Army Lt. Gen. James Dubik said that the size of Iraq's forces have grown by more than a quarter in the past year, from 444,000 to 566,000.

They also are improving their ability to execute operations on their own.

But they still lack experienced military leaders and have yet to become proficient at training new recruits, added Dubik, who until last week led the Multi-National Security Transition Command in Iraq.

Dubik's testimony comes as the Iraq war remains a key issue in the upcoming presidential elections and progress of Iraq's security forces is widely seen as necessary to help smooth a U.S. exit to the unpopular five-year war.

"Our assistance may change in organization and size over the coming months or years, but some form of partnership and assistance, consistent with strategic objectives is still necessary," Dubik wrote.

"The Iraqis know this; we should remember it too."

When he testified before Congress in January, Dubik said Baghdad was on track to reach some 580,000 members by the end of the year but that they were still a long way from becoming self-sufficient.

Iraqi officials estimated to him that the country probably won't be able to assume responsibility for internal security until sometime between 2009 and 2012 or defend its borders before 2018, Dubik said.

In this week's testimony, Dubik recommends streamlining complex laws and regulations that he says have delayed U.S. military equipment purchased by Iraq.

Iraq has ordered $2.7 billion in equipment, but received just $1.4 billion.

Army Lt. Gen. Frank Helmick assumed control of the U.S. training command last week.

Dubik is retiring after 37 years of service.

------

On the Net:

The House Armed Services Committee: http://www.house.gov/hasc/

[Livyjr]

"President Clinton warns of growing polarization"

By ANDREW WELSH-HUGGINS, Associated Press

Last updated: 7:32 p.m., Saturday, July 12, 2008

PHILADELPHIA -- Former President Bill Clinton warned Saturday that the country is becoming increasingly polarized despite the historic nature of the Democratic primary.

Speaking at the National Governors Association's semiannual meeting, Clinton noted that on the one hand, following the early stages of the Democratic primary, "the surviving candidates were an African-American man and a woman."

Clinton's wife, Hillary Rodham Clinton, battled for the Democratic nomination into June with fellow Democrat Barack Obama, son of a white mother and black father.

But this achievement was overshadowed by a growing distance between Americans, said Clinton.

"Underneath this apparent accommodation to our diversity, we are in fact hunkering down in communities of like-mindedness, and it affects our ability to manage difference," Clinton said.

Clinton developed his 44-minute speech from themes he said he drew from a new book, "The Big Sort," by Bill Bishop.

He cited statistics compiled by Bishop that found that in the 1976 presidential election, only 20 percent of the nation's counties voted for Jimmy Carter or President Ford by more than a 20 percent margin.

By contrast, 48 percent of the nation's counties in 2004 voted for John Kerry or President Bush by more than 20 points, Clinton said.

"We were sorting ourselves out by choosing to live with people that we agree with," Clinton said.

Clinton has often meshed big picture admonitions with new books whose ideas he admires.

He drew similar conclusions in 2000 following the publication of Robert Putnam's "Bowling Alone," on the decline of civic engagement in the United States.

Among the approximately two dozen active governors in attendance Saturday were some of the 11 who backed Obama over Hillary Rodham Clinton.

Gov. Timothy Kaine of Virginia said he wasn't worried about how President Clinton might view his support for Obama.

"We're human beings, too, so there are feelings, but we understand this is a team sport, and we come back together as a team," Kaine said.

New York Gov. David Paterson, a Democratic superdelegate, had supported Clinton.

After weeks of not speaking to each other, Obama last month reached out to President Clinton and asked him for help winning the White House.

Clinton had portrayed Obama as too inexperienced to be president.

Clinton concluded his speech by reminding governors, who are marking the association's centennial, that the issues they face today are similar to problems President Teddy Roosevelt grappled with a century ago.

Those include inequality among rich and poor, immigration and energy policy.

If those issues are dealt with, "We're about to go into the most exciting period of human history," Clinton said.

"If we don't, in the words of President Roosevelt, dark will be the future," he said.

"I'm betting on light -- I hope you are too."

[Livyjr]

Reuters

"U.S. bank shares plummet amid stability fears"

Monday July 14, 2:56 pm ET

By Dan Wilchins

NEW YORK (Reuters) - Shares of National City Corp (NYSE:NCC) and Washington Mutual Inc (NYSE:WM) plummeted, leading U.S. financial stocks lower on Monday amid fears about bank stability and the future of the mortgage market.

IndyMac Bancorp Inc (NYSE:IMB), once one of the largest U.S. mortgage lenders, was seized by banking regulators on Friday, while the U.S. government pledged emergency support to mortgage finance companies Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE).

As the credit crunch wears on, companies previously seen as strong are looking increasingly frail, which is weighing on shares in the sector, investors said.

"The fear factor is in play right now," said Michael Nix, portfolio manager Greenwood Capital Associates, whose fund owns shares in Wachovia Corp (NYSE:WB) and regional bank BB&T Corp (NYSE:BBT).

The rout in banking stocks was widespread, and included both commercial and investment banks.

The KBW Bank index fell 7 percent.

Brokerage Merrill Lynch & Co's (NYSE:MER) shares slid 5.5 percent to $26.09.

The collapse of IndyMac was particularly sobering to investors, analysts said.

"It's the cockroach theory."

"You don't just have one bank failure -- when you have a big bank go under, there's always more than one," said James Ellman, president of hedge fund Seacliff Capital, who is short some financial stocks.

MORE RUNS?

Shares in Washington Mutual, the nation's largest savings and loan, dropped $1.80 or 36 percent to $3.15, hurt in part by concerns about the amount of money it could have to set aside to cover mortgage losses.

Lehman Brothers put out a report saying WaMu could face $26 billion in losses, with $21 billion from mortgages.

Expected write-downs on bad loans could force the thrift to set aside another $4 billion in the second quarter, creating a loss for the period of $1.48 per share, Lehman analysts said.

A Washington Mutual spokesman was not immediately available for comment.

Shares of National City Corp's, a large U.S. Midwest regional bank and one of the nation's 10 largest, were down 82 cents or 18.6 percent to $3.60 in afternoon trading after reaching as low as $2.99 earlier.

"Investors are out there saying, if this happened to IndyMac, why not NatCity?" said Matt McCormick, stock analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

The Cleveland-based bank put out a press statement assuring the public that it was fine.

"Clearly there is a lot of market speculation broadly today."

"We are experiencing no unusual depositor or creditor activity," said Kristen Baird Adams, a spokeswoman for National City.

Adding to concerns about the banking sector, regional bank M&T Bank Corp (NYSE:MTB) said on Monday that rising credit losses from residential real estate pulled second-quarter profit down by 25 percent.

The company's shares were down $12.50 or 17.9 percent to $57.20 after falling as low as $53.61 earlier.

(Reporting by Dan Wilchins, Elinor Comlay, and Jonathan Stempel, editing by Mark Porter and Gerald E. McCormick)

[Livyjr]

"Prosecutor flagged by US terror watch list"

By LARA JAKES JORDAN, Associated Press Writer

14 JULY 2008

WASHINGTON - The Justice Department's former top criminal prosecutor says the government's terror watch list likely has caused thousands of innocent Americans to be questioned, searched or otherwise hassled.

Former Assistant Attorney General Jim Robinson would know: he's one of them.

Robinson joined another mistaken-identity American and the American Civil Liberties Union on Monday to urge fixing the list that's supposed to identify suspected terrorists.

"It's a pain in the neck, and significantly interferes with my travel arrangements," said Robinson, the head of the Justice Department's criminal division during the Clinton administration.

He believes his name matches that of someone who was put on the list in early 2005, and is routinely delayed while flying — despite having his own government top-secret security clearances renewed last year.

"I suppose if I were convinced that America is a safer place because I get hassled at the airport, I might put up with it," Robinson said.

"But I doubt it."

He added: "I expect my story is similar to hundreds of thousands of people who are on this list who find themselves inconvenienced."

The government calls its watch list one of the most effective tools in its fight against terrorism.

It was created after the Sept. 11, 2001 attacks to consolidate 12 existing lists and make sure no terrorists slipped through the cracks — whether when entering the country or if otherwise stopped for questioning.

Last year, congressional investigators found "general agreement that the watch list has helped to combat terrorism."

Other audits of the watch list over the last several years, however, have concluded that it has mistakenly flagged innocent people whose names are similar to those on it.

More than 30,000 airline passengers had asked the Homeland Security Department to clear their names from the list as of October 2006.

Additionally, as many as 20 suspected terrorists were left off the list as of last year due to a technology glitch.

Chad Kolton, a spokesman for the FBI's Terrorist Screening Center that maintains the list, said the government is working to fix the gaps.

"We strive to have the watch list contain all appropriately suspected terrorists who represent a threat to the U.S., but only appropriately suspected terrorists," Kolton said.

The ACLU predicted the watch list would include 1 million names as early as Monday.

The civil liberties group reached that number by citing the 700,000 records on the watch list as of last September and adding 20,000 names each month, as forecast by the Justice Department's inspector general.

Kolton disputed that number, however, saying that only about 400,000 individuals are on the list — with the rest being records of aliases or other identifiers for those same people.

Kolton said that 95 percent of the people on the list are not Americans or legal U.S. residents — and most aren't even in the country.

The Government Accountability Office, the investigations arm of Congress, similarly concluded last year that the total number of records on the watch list "does not represent the total number of individuals," saying it contains multiple records for the same person.

For some Americans whose names match those on the list, being delayed or detained for extra screening isn't just a hassle — it's frightening.

Chicago-area computer consultant Akif Rahman, who was born in Springfield, Ill., said he has been detained at least seven times after traveling abroad.

During one such incident in May, he said, he was held for five hours, shackled to a chair and kicked by a Customs Service agent after being stopped at a U.S. checkpoint on the Canadian border.

"I was fearful for my own safety and that of my family," said Rahman, who is suing the government to have his identity cleared from the watch list.

"I simply could not believe that I, a born U.S. citizen, was going though this experience simply re-entering my own country."
___

On the Net:

ACLU: http://www.aclu.org/

Terrorist Screening Center: http://www.fbi.gov/terrorinfo/counterrorism/tsc.htm

[Livyjr]

"Stocks decline as worries about financials persist - Stocks decline as investors weigh plan for lenders, face concern about other financials"

By TIM PARADIS, Associated Press

Last updated: 5:02 p.m., Monday, July 14, 2008

NEW YORK -- Wall Street extended its slump into yet another week Monday as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac wont' head off further troubles in the financial markets.

Investors' latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports -- many of which will likely include sizable write-downs of souring mortgage debt.

The Treasury and the Federal Reserve said Sunday they would aid Fannie Mae and Freddie Mac if needed.

Wall Street has been on edge about the well-being of the government-chartered companies because they together hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States.

Washington's efforts to shore up confidence in Fannie Mae and Freddie Mac at times helped those shares Monday but troubles arose in other corners of the financial sector.

Investors worried about a run on IndyMac Bancorp Inc. that led to the bank's takeover by the government Friday.

IndyMac is the largest regulated thrift to fail.

Trading in shares of regional bank National City Corp. was briefly halted as the company responded to rumors of financial troubles.

The bank said in a statement it is experiencing "no unusual depositor or creditor activity" and that as of Friday's close it had more than $12 billion of excess short-term liquidity.

The rumors and sell-off of regional banks reflect the unease investors have about where financial troubles might emerge.

"My sense is that investors are taking a pretty cautious stance," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago.

"The government can't bail out the whole industry."

According to preliminary calculations, the Dow Jones industrial average fell 45.35, or 0.41 percent, to 11,055.19 after spiking nearly 140 points in early trading.

Worries over Fannie Mae and Freddie Mac on Friday led to a volatile session in which the Dow dipped below the 11,000 mark for the first time in about two years before paring its losses; the market suffered its fourth straight losing week.

Broader stock indicators also dropped Monday.

The Standard & Poor's 500 index fell 11.19, or 0.90 percent, to 1,228.30, and the Nasdaq composite index fell 26.21, or 1.17 percent, to 2,212.87.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 1.41 billion shares.

Bond prices jumped as investors sought the safety of government debt.

The yield on the benchmark 10-year Treasury note, which moves opposite its yield, fell to 3.86 percent from 3.96 percent late Friday.

The dollar was mixed against other major currencies, while gold prices jumped.

Light, sweet crude settled up 10 cents at $145.18 a barrel on the New York Mercantile Exchange.

Fannie Mae and Freddie Mac were volatile after tumbling last week amid concerns they would succumb to losses in their mortgage portfolios.

The Fed said it would lend to the two companies "should such lending prove necessary."

Treasury Secretary Henry Paulson said his department is asking Congress for quick approval of a plan to expand its line of credit to the two companies and to make an equity investment in them if necessary.

Fannie Mae fell 52 cents, or 5.1 percent, to $9.73, while Freddie Mac fell 64 cents, or 8.3 percent, to $7.11.

While the companies say they have adequate access to capital, the government's effort to help the companies is designed to reassure investors who have grown nervous about further fallout from the nearly year-old credit crisis.

"There's a disconnect with saving Fannie and Freddie and bailing out the shareholders," Ablin said.

"If the government steps in and ultimately creates a bailout of these entities, I'd be astounded if equity holders were left with anything."

"I think the market is realizing that."

National City fell 65 cents, or 14.7 percent, to $3.77.

Other banks declined, too: Washington Mutual Inc. fell $1.72, or 34.8 percent, to $3.23.

Jeff Kleintop, chief market strategist at LPL Financial Services in Boston, said investors are pouncing on banks in regions where the housing market pullback has been the steepest, thinking they are likely to have the greatest exposure to bad mortgage debt.

"We might not be seeing depositors make a run on the banks today but we're certainly seeing investors do that," he said.

"I think it's concern about another IndyMac -- that credit ratios are deteriorating so rapidly."

Outside the financial sector, Anheuser-Busch Cos. agreed to a sweetened $52 billion takeover bid from Belgian brewer InBev SA.

The deal involving a marquee name in American business combines the maker of Budweiser and Bud Light with the producer of Stella Artois and Beck's.

Anheuser-Busch rose 37 cents to $66.87.

Yahoo Inc. revealed Saturday it had rejected Microsoft Corp.'s latest attempt to acquire its online search engine in a joint proposal made with activist investor Carl Icahn, who is leading an effort to remove Yahoo's current board.

Yahoo fell $1, or 4.2 percent, to $22.57, while Microsoft slipped 14 cents to $22.57.

The renewed concerns about the financial sector come in what is expected to be a busy week for corporate news, with a steady stream of quarterly results due from names like Intel Corp., Cola-Cola Corp., Microsoft Corp. and Citigroup Inc.

The Russell 2000 index of smaller companies fell 10.45, or 1.55 percent, to 664.50.

Overseas, Japan's Nikkei stock average rose 0.45 percent.

Britain's FTSE 100 rose 0.74 percent, Germany's DAX index rose 0.76 percent, and France's CAC-40 advanced 1.02 percent.

------

On the Net:

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

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

[Livyjr]

"Fannie-Freddie lifeline puts taxpayers on the hook - As government steps in to help Fannie and Freddie, will other institutions be too big to fail?"

By MARTIN CRUTSINGER and ALAN ZIBEL, Associated Press

Last updated: 7:22 p.m., Monday, July 14, 2008

WASHINGTON -- Now that the federal government has thrown a lifeline to mortgage giants Fannie Mae and Freddie Mac, taxpayers could be on the hook for billions more if the crisis of confidence spreads.

There were encouraging signs Monday for the rescue plan, but also signs of concern -- notably on Wall Street, where shares of the two companies slumped further -- that the plan won't be enough.

Other banks are already teetering: National City Corp. shares fell nearly 15 percent on rumors of financial trouble, even though it said it was experiencing no unusual depositor or creditor activity.

And Washington Mutual Inc.'s shares fell 35 percent, to a paltry $3.23 amid worries about whether it had enough cash to handle the mortgage market downturn.

WaMu said that it did.

And worried customers lined up Monday to pull cash out of their accounts at IndyMac Bank, seized on Friday by the federal government.

Some critics said they fear the Fannie-Freddie rescue effort will make more bailouts inevitable by sending a message that some institutions are too big to fail and thus encouraging risky behavior.

"It sends the wrong message to the world," said Joshua Rosner, managing director of research firm Graham, Fisher & Co. in New York.

Sung Won Sohn, an economics professor at The Smith School of Business at Cal State Channel Islands, cited soaring oil costs, a weakening economy and an unstable housing market that he said will only get worse.

"I don't think these steps are enough to arrest the deterioration," he said.

As long as more homeowners default on mortgages, losses to financial institutions will mount.

Those losses already exceed $400 billion, and some analysts believe they will top $1 trillion before the housing carnage is over.

By comparison, Congress has authorized $650 billion so far to fight the Iraq war.

The Bush administration and the Federal Reserve announced an emergency rescue plan Sunday to bolster Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total.

The plan would temporarily increase a long-standing Treasury line of credit that could be provided to either company.

Treasury also said it would, if necessary, buy stock in the companies to make sure they have enough money to operate.

The Fed also announced it would allow Fannie and Freddie to get loans directly from the Fed -- a privilege previously granted only to commercial banks until this March, when the Fed extended the borrowing to investment banks to deal with the collapse of Bear Stearns.

House Financial Services Chairman Barney Frank, D-Mass., predicted Congress would grant approval for the extended line of credit as part of a broader housing measure that he believes President Bush could sign by the end of next week.

In a letter to Fed Chairman Ben Bernanke and Timothy Geithner, the president of the Fed's New York regional bank, Treasury Secretary Henry Paulson said Monday that he saw any Fed loans as an interim step designed to serve as a bridge to legislation.

He added the administration is pursuing legislation "urgently" with Congress to increase Treasury's lending authority to the two institutions.

Monday began with a good sign for Freddie Mac: It attracted more bidders than it had all year for one of its regular debt auctions which raised $3 billion in short-term securities.

Fannie and Freddie stock rose early in the day but gave up the gains.

Fannie closed down about 5 percent, at $9.73, and Freddie closed down about 8 percent, at $7.11].

Meanwhile, hundreds of worried customers lined up Monday to pull their money out of IndyMac bank, seized by the government Friday in the second biggest bank failure in U.S. history.

The Federal Deposit Insurance Corp. estimated the IndyMac failure, the largest since the collapse of Continental Illinois in 1984, would cost between $4 billion and $8 billion out of the agency's $53 billion insurance fund.

Analysts do not expect the volume of bank failures that happened from 1990 to 1992, when 834 of them folded.

But the FDIC does plan to review whether to raise the fees it charges banks to beef up its insurance fund.

Brian Bethune, chief U.S. financial economist at Global Insight, called the troubles at Fannie and Freddie a "potentially dangerous turn of events" for the U.S. economy.

He said they needed to be addressed quickly with an infusion from the government -- read "taxpayers" -- of as much as $20 billion in new capital for both institutions.

Right now, the Treasury can extend up to $2.25 billion in loans each to Fannie and Freddie.

Officials refused to discuss what the new limit might be but dismissed one report of a $300 billion limit as too high.

Treasury officials also said directly buying Fannie and Freddie stock would be a last resort.

Substantial sums are involved in any event.

Analysts say the economic risks of doing nothing are just too great.

"If the government hadn't moved and Fannie and Freddie failed, the cost to taxpayers and the overall economy would be enormous," said Mark Zandi, chief economist at Moody's Economy.com.

In Fannie and Freddie were unable to play their huge roles in financing new mortgages, the housing market would only suffer more, he said -- not to mention the turmoil for the financial institutions around the world that invest in Fannie and Freddie's debt securities.

Critics have warned for years that Fannie and Freddie had grown too large, with not enough of a financial cushion.

"They have been allowed to grow out of control to the point where they must be backed by the U.S. government," said Peter Wallison, a senior fellow at the American Enterprise Institute and a longtime critic.

"We have just ... allowed ourselves to become hostage to these two institutions."

Fannie and Freddie's financial reports remain difficult to understand, even after accounting scandals that came to light five years ago forced the companies to restate several years of earnings and oust top executives.

Wall Street analysts were spooked in May when one measurement of Freddie Mac's total assets fell to negative $5.2 billion at the end of the first quarter, a huge swing from positive $12.6 billion at the end of last year.

The company downplayed the figure, saying it reflected a frozen market for mortgage investments, and said those assets would eventually rebound in value.

The next few weeks -- in which Fannie and Freddie post their second-quarter results and may attempt to raise a bigger capital cushion -- are key, Zandi said.

He said in the best possible outcome is if the rescue plan helps the two companies stabilize their finances on their own without any loss of government loans.

"At the end of the day, with a little bit of luck, it won't cost taxpayers a dime," Zandi said.

[Livyjr]

IS AMERICAN COMMANDER-IN-CHIEF GEORGE W. "NEVER TELLS THE TRUTH" BUSH PLAYING GAMES WITH US YET AGAIN ....

THIS TIME WITH HIS CHALLENGE TO CONGRESS TO ALLOW MORE OIL DRILLING IN THE USA?

DO WE REALLY HAVE A SUPPLY PROBLEM HERE IN AMERICA?

AND IS IT CAUSED BY EXPORTING OUR FUTURE TO OTHER COUNTRIES TO ENHANCE THEIR FUTURES AS WELL AS CORPORATE PROFITS?

"As Oil Firms Seek Drilling Access, Exports Set Record"

By Reuters | 03 Jul 2008 | 03:23 PM ET

While the U.S. oil industry wants access to more federal lands to help reduce reliance on foreign suppliers, U.S.-based companies are shipping record amounts of gasoline and diesel fuel to other countries.

A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007.

Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.

The surge in exports appears to contradict the pleas from the U.S. oil industry and the Bush administration for Congress to open more offshore waters and Alaska's Arctic National Wildlife Refuge to drilling.

"We can help alleviate shortages by drilling for oil and gas in our own country," President Bush told reporters this week.

"We have got the opportunity to find more crude oil here at home."

"As a nation, we can have more control over our energy destiny by supplying more of the oil and natural gas we'll be consuming from resources here at home," Red Cavaney, president of the American Petroleum Institute, said in a letter last week to U.S. lawmakers.

But environmentalists and other opponents to expanding drilling areas could seize on the record exports to argue Congress should not open more acres if U.S. refineries are churning crude oil into petroleum products that are sent out of the American market.

"It doesn't look good to say: 'We need more oil.'"

"But then export the refined products that you're getting."

"It doesn't seem to be consistent," said Jim Presswood, energy lobbyist for the Natural Resources Defense Council.

But many energy experts say oil and petroleum products are traded globally, and it may make economic sense to export gasoline refined along the U.S. Gulf Coast to Latin America and import European-refined gasoline to U.S. East Coast markets.

"The fact is that the (United States) participates in global markets for both crude and refined products, and there are any number of variables that impact supply and prices in those markets," said Bill Holbrook, spokesman for the National Petrochemicals and Refiners Association.

The White House said it was against requiring U.S. oil products to stay at home.

"Forbidding exports of U.S. petroleum reduces the incentive for domestic suppliers to produce, and could potentially lead to higher prices if U.S. production or refining declined," said White House spokesman Scott Stanzel.

The 1.6 million barrels a day in record petroleum exports represented 9 percent of total U.S. refining capacity of 17.6 million barrels a day.

However, with refiners operating at 85 percent of capacity during the January-April period, the shipments represented a much a larger share of total U.S. oil products produced.

The exports were also equal to half the 3.2 million barrels of gasoline, diesel fuel and other petroleum products the United States imported each day over the 4-month period.

The biggest share of U.S. oil products exported went to Mexico, Canada, Chile, Singapore and Brazil.

U.S. consumers are paying record prices for gasoline and diesel fuel, which the Bush administration blames in part on tight supplies.

While the administration argues that more supplies would help to bring down prices, U.S exports of diesel fuel in April averaged 387,000 barrels per day, up almost seven-fold from 59,000 barrels a day in the same month a year earlier.

U.S. gasoline shipments in April averaged 202,000 barrels a day, the most for the month since 1945, when America was sending fuel overseas to ease supply shortages in other countries during World War II.

Gasoline exports in April 2007 were almost half at 116,000 barrels per day.

Residual fuel exports in April were 377,000 barrels per day, the fourth highest level for any month, and up 10 percent from 344,000 barrels per day a year earlier.

John Felmy, the chief economist at the American Petroleum Institute, said a portion of the oil products exported, especially diesel, was fuel that did not meet U.S. clean air requirements and therefore could not be sold in America.

"You may have some that you're not able to use," he said.

Also, while U.S. gasoline demand is down due to high prices and a weak American economy, there is "strong economic growth outside the United States" where fuel is often subsidized and demand is high, said John Cook, director of EIA's Petroleum Division.

However, both the EIA and API admitted they did not know why daily U.S. gasoline exports to Canada skyrocketed to 41,000 barrels in January-April this year from 9,000 barrels in 2007.

The EIA said more U.S. diesel is going to Latin American to fuel power plants because of a shortage of natural gas in the region, and China has switched to diesel from coal to run some of its generating facilities in order to reduce smog ahead of the summer Olympics next month in Beijing.

http://www.cnbc.com/id/25518912

[Livyjr]

AND FROM OUR COLONY OF IRAQINAM, WE HAVE ...

"Police: Iraq suicide bombers kill 28 army recruits"

By SEBASTIAN ABBOT, Associated Press Writer

15 JULY 2008

BAQOUBA, Iraq - Two suicide bombers blew themselves up in a crowd of army recruits Tuesday in a former al-Qaida in Iraq stronghold northeast of Baghdad, killing at least 28 people, Iraqi police said.

The blast at the Saad military camp in Baqouba, 35 miles from Baghdad, also wounded at least 47 recruits, a police official said.

He spoke on condition of anonymity because he was not authorized to speak to the media.

The U.S. military confirmed the attack, saying it occurred around 8 a.m.

Diyala province around Baqouba has been one of the few remaining violent areas in Iraq after offensives against extremists in the south, Baghdad's Sadr City and Mosul in the north.

Iraqi military officials said this week that they plan an offensive in the region soon to rein in remaining militants.

U.S. military officials have said they will support that effort, which they called an enhancement of existing patrols and actions there.

On June 22, a female suicide bomber concealing explosives beneath her black robe struck outside a government complex in Baqouba, capital of Diyala province.

At least 15 people were killed and more than 40 were wounded.

A car bomb across the street from the same compound killed at least 40 people in April.

[Livyjr]

GEORGE W. BUSH IS A MASTER AT STATING CONTRADICTIONS IN TERMS ...

THE AMERICAN ECONOMY IS REALLY SOUND ...

IT'S JUST TROUBLED A BIT RIGHT NOW, IS ALL ....

IT ATE SOME BAD CAVIAR THAT HAD GONE OFF ....

AND IT HAD A LITTLE TOO MUCH CHAMPAGNE ....

IT'S GOING TO SLEEP IN TIL NOON ...

AND THEN IT WILL BE ALRIGHT AGAIN, FOR TONIGHT, ANYWAY ...

And so ...

"Bush: Troubled financial system is basically sound"

By TERENCE HUNT, AP White House Correspondent

15 JULY 2008

WASHINGTON - President Bush said Tuesday the nation's troubled financial system is "basically sound" and urged lawmakers to quickly enact legislation to prop up mortgage giants Fannie Mae and Freddie Mac.

He also called on the Democratic-run Congress to follow his example and lift a ban on offshore drilling to help increase domestic oil production.

"I readily concede it won't produce a barrel of oil tomorrow, but it will reverse the psychology," Bush told a White House news conference — his first since late April.

Bush said the two troubled mortgage companies play a central role in the nation's housing-finance system and that government action to help them were not bailouts because the two would remain shareholder-owned companies.

"I don't think the government ought to be involved in bailing out companies," Bush said.

Amid soaring gas prices, the toughest real estate market in decades, falling home prices and financing that's harder to come by, Bush said:

"It's been a difficult time for many American families."

But he also said that the nation's economy continues to grow, if slowly.

Bush said that despite the woes of Fannie Mae and Freddie Mac and the recent government takeover of California bank IndyMac, U.S. depositors should not worry because their deposits are insured by the government up to $100,000.

"If you're a depositor, you're protected by the federal government," Bush said.

The administration and the Federal Reserve announced an emergency rescue plan Sunday to bolster Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages — almost half of the nation's total.

The plan would temporarily increase a long-standing Treasury line of credit that could be provided to either company.

Treasury also said it would, if necessary, buy stock in the companies to make sure they have enough money to operate.

The Fed also announced that it would allow Fannie and Freddie to get loans directly from the Fed — a privilege previously granted only to commercial banks until this March, when the Fed extended the borrowing to investment banks to deal with the collapse of Bear Stearns.

At the same time, a housing package was heading toward final congressional passage.

It would modernize the Federal Housing Administration and create a new regulator and tighter controls for Fannie Mae and Freddie Mac.

It's this legislation that Bush urged Congress to pass as soon as possible.

Congress could move as early as this week on the housing legislation to send it to Bush.

First, though, House and Senate leaders must strike a deal in consultation with Treasury Secretary Henry Paulson to resolve key differences so Bush, who has threatened to veto the measure, will sign it.

"I think the system is basically sound, I truly do," Bush said.

"I understand there's a lot of nervousness."

"The economy is growing."

"Productivity is high."

"Trade's up."

"People are working — it's not as good as we'd like."

"And to the extent that we'll find weakness, we'll move."

Bush defended his insistence that the U.S. economy was not in a recession, even though many economists believe it is.

He said the traditional definition of a recession — two quarters in a row of negative growth — had not been met.

"I'm not an economist, but I do believe we're growing," he said.

"I'm an optimist."

"I believe there's a lot of positive things for the economy."

He acknowledged, however, that "it's not growing as it should."

On Capitol Hill, Fed Chairman Ben Bernanke warned that inflation seemed likely to move even higher and economic growth would be "appreciably below its trend rate."

"In general, healthy economic growth depends on well-functioning financial markets," Bernanke said.

"Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority," he said.

Bush acknowledged it could take years before opening the Continental Shelf to oil drilling would result in increased U.S. production.

But, he said, at least it would put the nation on the right track toward reducing its reliance on imported oil.

"There is no short term solution," Bush said.

"The president doesn't have a magic wand."

"You can't just say, 'Low gas.' "

Asked about his comment earlier this year that he hadn't heard of $4 gasoline, Bush said:

"I've heard of it now."

Asked why he hasn't appealed more to Americans to conserve energy, Bush said:

"They're smart enough to figure out whether they're going to drive less or not ..."

"The marketplace works."

"If they're not in their homes, they ought not to keep the air conditioning running."

"There's a lot they can do," he added.

Bush's first full-blown exchange with reporters at the White House since April 29 came amid troubling developments in Afghanistan, where U.S. deaths have exceeded casualties in Iraq over the last two months.

There also is turmoil in the financial markets, and the government has been forced to throw a lifeline to mortgage giants Fannie Mae and Freddie Mac.

Bush opened with a statement about steps to help stabilize the housing and financial markets and his lifting of the executive ban on offshore oil drilling.

He also called on lawmakers to pass long-stalled spending bills.

On other subjects, Bush:

• Said the wars in Iraq and Afghanistan are both important fronts on the war on terrorism.

Currently, events in Iraq are going better, and some troops are coming home "based upon success," he said.

"The question really facing the country is, will we have the patience and determination to succeed in these very difficult theaters."

• Declined to comment on whether he felt betrayed by a highly critical book about his administration by former press secretary Scott McClellan.

• Expressed unhappiness with the casting of vetoes by Russia and China in the U.N. Security Council to block U.S.-sponsored sanctions on the government of President Robert Mugabe of Zimbabwe, who was has retained power in an election that the United States and many other countries have labeled a sham.

"I was displeased," Bush acknowledged.