I'M AN ORDINARY AMERICAN, DIRT-POOR, AND I EAT ARUGULA!

IT'S GOOD FOR YOU!

And so ...

"McCain unsure how many houses he owns"

Jonathan Martin, Mike Allen

Thu Aug 21, 7:34 AM ET

Sen. John McCain (R-Ariz.) said in an interview Wednesday that he was uncertain how many houses he and his wife, Cindy, own.

"I think — I'll have my staff get to you," McCain told Politico in Las Cruces, N.M.

"It's condominiums where — I'll have them get to you."

Listen Here:

The correct answer is at least four, located in Arizona, California and Virginia, according to his staff.

Newsweek estimated this summer that the couple owns at least seven properties.

In recent weeks, Democrats have stepped up their effort to caricature McCain as living an outlandishly rich lifestyle — a bit of payback to the GOP for portraying Sen. Barack Obama (D-Ill.) as an elitist, and for turning the spotlight in 2004 on the five homes owned by Sen. John F. Kerry (D-Mass.) and his wife, Teresa Heinz Kerry.

Pro-Obama labor groups have sent out mailers highlighting McCain’s wealth, and prominent Democrats have included references to it in comments to reporters.

Twice in the past two weeks, those Democrats have focused on McCain’s houses.

Sen. Charles Schumer (D-N.Y.) told Politico’s Ben Smith that it was McCain “who wears $500 shoes, has six houses and comes from one of the richest families in his state."

And David Axelrod, Obama’s chief strategist, referred in an interview with Adam Nagourney of The New York Times to an imagined meeting of McCain strategists “on the portico of the McCain estate in Sedona — or maybe in one of his six other houses.”

The Obama campaign seized on the house issue Thursday with an ad called "Seven," claiming that's the number of houses McCain has.

The ad closes with a shot of the White House and the narration:

"Here's ONE house American can't afford to let John McCain move into."

McCain spokesman Brian Rogers said in response:

"Does a guy who made more than $4 million last year, just got back from vacation on a private beach in Hawaii and bought his own million-dollar mansion with the help of a convicted felon really want to get into a debate about houses?"

"Does a guy who worries about the price of arugula and thinks regular people 'cling' to guns and religion in the face of economic hardship really want to have a debate about who’s in touch with regular Americans?"

“The reality is that Barack Obama’s plans to raise taxes and opposition to producing more energy here at home as gas prices skyrocket show he’s completely out of touch with the concerns of average Americans.”

At a campaign appearance in Chester, Va., on Thursday morning, Obama said:

"Somebody asked John McCain, 'How many houses do you have?’"

"And he said, I’m not sure."

"I’ll have to check with my staff."

"True quote: I’m not sure, I’ll have to check with my staff."

"So they asked his staff and he said, at least four."

"At least four! ... "

"If you’re like me and you’ve got one house – or you were like the millions of people who are struggling right now to keep up with their mortgage so that they don’t lose their home — you might have a different perspective."

"By the way, the answer is: John McCain has seven homes."

"So there’s just a fundamental gap of understanding between John McCain's world and what people are going through every single day here in America."

McCain’s comments came four days after he initially told Pastor Rick Warren during a faith forum on Sunday his threshold for considering someone rich is $5 million — a careless comment he quickly corrected.

In the interview, McCain did not offer an alternate number, but had a new answer ready.

“I define rich in other ways besides income,” he said.

“Some people are wealthy and rich in their lives and their children and their ability to educate them."

"Others are poor if they’re billionaires.”

McCain, by anyone's measure, is well-off, if you account for his wife's fortune.

Cindy McCain inherited control of her father’s beer distributorship, the largest in Arizona, and has an estimated worth of more than $100 million.

Carrie Budoff Brown and Ben Smith contributed to this article.

Reality Bites Again
The feeble American response to Russia's assertion of power in the Caucasus of Central Asia was appropriate, since our claims of influence in that part of the world are laughable. The US had taken advantage of temporary confusion in Russia, during the ten-year-long post-Soviet-collapse interval, and set up a client government in Georgia, complete with military advisors, sales of weapons, and even the promise of club membership in the western alliance known as NATO. These blandishments were all in the service of the Baku-to-Ceyhan oil pipeline, which was designed specifically to drain the oil region around the Caspian Basin with an outlet on the Mediterranean, avoiding unfriendly nations all along the way.
At the time this gambit was first set up, in the early 1990s, there was some notion (or wish, really) among the so-called western powers that the Caspian would provide an end-run around OPEC and the Arabs, as well as the Persians, and deliver all the oil that the US and Europe would ever need -- a foolish wish and a dumb gambit, as things have turned out.
For one thing, the latterly explorations of this very old oil region -- first opened to drilling in the 19th century -- proved somewhat disappointing. US officials had been touting it as like unto "another Saudi Arabia" but the oil actually produced from the new drilling areas of Kazakhstan, Turkmenistan, and the other Stans turned out to be preponderantly heavy-and-sour crudes, in smaller quantities than previously dreamed-of, and harder to transport across the extremely challenging terrain to even get to the pipeline head in Baku.
Meanwhile, Russia got its house in order under the non-senile, non-alcoholic Vladimir Putin, and woke up along about 2007 to find itself the leading oil and natural gas producer in the world. Among the various consequences of this was Russia's reemergence as a new kind of world power -- an energy resource power, with the energy destiny of Europe pretty much in its hands. Also, meanwhile, the USA had set up other client states in the ring of former Soviet republics along Russia's southern underbelly, complete with US military bases, while fighting active engagements in Iraq and Afghanistan. Now, if this wasn't the dumbest, vainest move in modern geopolitical history!
It's one thing that US foreign policy wonks imagined that Russia would remain in a coma forever, but the idea that we could encircle Russia strategically with defensible bases in landlocked mountainous countries halfway around the world...? You have to ask what were they smoking over at the Pentagon and the CIA and the NSC?
So, this asinine policy has now come to grief. Not only does Russia stand to gain control over the Baku-to-Ceyhan pipeline, but we now have every indication that they will bring the states on its southern flank back into an active sphere of influence, and there is really not a damn thing that the US can pretend to do about it.
We could have spent the past ten years getting our own house in order -- waking up to the obsolescence of our suburban life-style, scaling back on the Happy Motoring, reconnecting our cities with world-class passenger rail, creating wealth by producing things of value (instead of resorting to financial racketeering), protecting our borders, and taking the necessary measures to defend and update our own industries. Instead, we pissed our time and resources away. Nations do make tragic errors of the collective will. The cluelessness of George Bush is nothing less than a perfect metaphor for the failure of a whole generation. The Boomers will be identified as the generation that wrecked America.
So, as the vacation season winds down, this country greets a new reality. We miscalculated in Western and Central Asia. Russia still "owns" that part of the world. Are we going to extend our current land wars there into the even more distant and landlocked Stan-nations? At some point, as we face financial and military exhaustion, we have to ask ourselves if we can even successfully evacuate our personnel from the far-flung bases in Uzbekistan and Kyrgyzstan.
This must be an equally sobering moment for Europe, and an additional reason for the recent plunge in the relative value of the Euro, for Europe is now at the mercy of Russia in terms of staying warm in the winter, running their kitchen stoves, and keeping the lights on. Russia also exerts substantial financial leverage over the US in all the dollars and securitized US debt paper it holds. In effect, Russia can shake the US banking system at will now by threatening to dump its dollar holdings.
The American banking system may not need a shove from Russia to fall on its face. It's effectively dead now, just lurching around zombie-like from one loan "window" to the next pretending to "borrow" capital -- while handing over shreds of its moldy clothing as "collateral" to the Federal Reserve. The entire US, beyond the banks, is becoming a land of the walking dead. Business is dying, home-ownership has become a death dance, whole regions are turning into wastelands of "for sale" signs, empty parking lots, vacant buildings, and dashed hopes. And all this beats a path directly to a failure of collective national imagination. We really don't know what's going on.
The fantasy that we can sustain our influence nine thousand miles away, when we can't even get our act together in Ohio is just a dark joke. One might state categorically that it would be a salubrious thing for America to knock off all its vaunted "dreaming" and just wake the "expletive deleted" up.

August 18, 2008 in Commentary on Current Events | Permalink

http://jameshowardkunstler.typepad.com/clu...ites-again.html

RUSSIA IS MAKING GEORGE W. BUSH, THE MASTER OF THE UNIVERSE IN HIS OWN MIND LOOK LIKE A POWERLESS, HAND-WRINGING, POUTY EUNUCH ON THE WORLD STAGE ....

AND THEY SEEM TO BE SAVORING THE OPPORTUNITY HE AND HIS INEPTNESS HAVE HANDED THEM ...

SO THIS DRAMA WILL GO ON FOR QUITE A BIT LONGER, IS MY THOUGHT ....

THE HUMBLING OF THE WORLD'S ONLY SUPERPOWER BY RUSSIA ....

AND GEORGE W. BUSH BROUGHT IT ON HIMSELF ....

AND US ....

BY BEING AN ARROGANT FOOL WHO THOUGHT THAT HE KNEW EVERYTHING ....

AND THAT HE WAS GOING TO BE THE ONE WHO WROTE THE HISTORY THAT EVERYONE ELSE WAS GOING TO HAVE TO READ ....

AND SO HE WAS ....

AND HERE IS SOME OF IT NOW ...

And so ...

"Russians dig in as pullback drags on in Georgia"

By MIKE ECKEL, Associated Press Writer

20 AUGUST 2008

SACHKHERE, Georgia - Russian forces on Wednesday built a sentry post just 30 miles from the Georgian capital, appearing to dig in to positions deep inside Georgia despite pledges to pull back to areas mandated by a cease-fire signed by both countries.

Russian President Dmitry Medvedev says his troops will complete their pullback by Friday, but few signs of movement have been seen other than the departure of a small contingent that have held the strategically key city of Gori.

A convoy of flatbed trucks carrying badly needed food aid to one of the areas most heavily hit by the fighting was waved through a checkpoint by Russian soldiers.

But conditions throughout much of the country remained tense.

Russian soldiers were setting up camp Wednesday in at least three positions in west-central Georgia.

Further east, soldiers were building a sentry post of timber on a hill outside Igoeti, 30 miles from Tbilisi and the closest point to the capital where Russian troops have maintained a significant presence.

A top Russian general, meanwhile, said Russia plans to construct nearly a score of checkpoints to be manned by hundreds of soldiers in the so-called "security zone" around the border with South Ossetia.

And at a military training school in the mountain town of Sachkhere, a Georgian sentry said he feared Russian forces will make good on their threat to return after a confrontation the day before.

The sentry, who gave his name only as Corporal Vasily, said 23 Russian tanks, APCS and heavy guns showed up at the base on Tuesday and demanded to be let in.

The Georgians refused and the Russians left after a 30-minute standoff but vowed to return after blowing up facilities in the village of Osiauri, he said.

Georgia's Defense Ministry said Wednesday that Russian soldiers destroyed military logistics facilities in Osiauri, but the claim could not immediately be confirmed.

"We're trying not to provoke them; otherwise they'll stay here for five to six months," Vasily said.

He said the school itself had no heavy weapons or other significant strategic value, unlike the military base raided by Russians at Senaki, "where they even took the windows off the buildings."

Russia sent its tanks and troops into Georgia after Georgia launched a heavy artillery barrage Aug. 7 on the separatist, pro-Russian province of South Ossetia.

Fighting also has flared in a second Georgian breakaway region, Abkhazia.

The short war has driven tensions between Russia and the West to some of their highest levels since the breakup of the Soviet Union.

A cease-fire signed by the presidents of Russia and Georgia calls for Russian forces to pull back to the positions they held before Aug. 7.

The cease-fire allows Russia to maintain troops in a zone extending about 4 miles into Georgia along the South Ossetian border.

The Kremlin said Medvedev told French President Nicolas Sarkozy by phone Tuesday that Russian troops would withdraw from most of Georgia by Friday — some to Russia, others to South Ossetia and a surrounding "security zone" set in 1999.

The White House has made clear that it expects Russia to move faster.

"Both the size and pace of the withdrawal needs to increase, and needs to increase sooner rather than later," National Security Council spokesman Gordon Johndroe said.

"I don't think they need any more additional time."

Col. Gen. Anatoly Nogovitsyn, deputy head of the Russian general staff, told a briefing Wednesday that Russia will build a double line of checkpoints totaling 18 in the zone, with about 270 soldiers manning the front-line posts.

He said the security zone would be 25 miles from the strategically key city of Gori, but the city is significantly closer to the zone's presumed boundaries than that.

South Ossetia technically remains a part of Georgia, but Russia has said it will accept whatever South Ossetia's leaders decide about their future status — which is almost certain to be either a declaration of independence or a request to be incorporated into Russia.

Western leaders have stressed Georgia must retain its current borders.

A U.S. Senate Armed Services Committee delegation traveled to Georgia to show solidarity with its government and assess the situation after fierce fighting between Georgian and Russian troops.

"We're not going to let this aggression stand."

"The world is behind you," U.S. Sen. Joe Lieberman, I-Conn., told female refugees during a visit to a center for displaced people in the capital, Tbilisi.

"We can't let a bully do this, because if they do it here, they'll do it other places, and if we don't stop it here we'll have to stop it in a much more difficult way," Lieberman added.

Lieberman and South Carolina Republican Sen. Lindsey Graham met with Georgian officials as well as with the ranking U.S. general on the ground.

Graham, speaking to refugees alongside Lieberman, said that the Russians are "not going to prevent the American people from helping you."

About 80,000 people displaced by Russian-Georgian fighting are in more than 600 centers in and around Tbilisi.

U.S. Brig. Gen. Jon Miller has ordered a U.S. military assessment team to draw up a response plan to provide for semi-permanent housing for about 20,000 people who have no homes to return to.

He also wants such a housing plan to be capable of quick expansion to provide for the rest of the refugees if the Russians do not withdraw and people are unable to go home.

Zbigniew Probulski, a 55-year-old Pole who was helping aid workers at a former Soviet military hospital in downtown Tbilisi, said most people were concerned about ensuring they were prepared for the winter.

"All the infrastructure here is destroyed — there's no heating for example and nobody knows what to expect in the coming months," Probulski said.

Probulski, who was on a tourist trip to Georgia when the fighting broke out and came to Tbilisi to help out, said people also are desperately seeking information about their loved ones.

"They are really worried about their family members who are still in the war zone, and their homes," he said.
___

Associated Press writers Misha Dzhindzhikhashvili and David Rising in Tbilisi, Georgia; Christopher Torchia in Igoeti, Georgia, Jim Heintz in Moscow and Richard Lardner in Orlando, Fla. contributed to this report.

An excellent timely article, Snuf ....

Thanks for posting it here!

"Russians parade 20 prisoners, seize U.S. Humvees in Georgia - Signals still mixed as troops pull back while NATO meets"

By Bela Szandlszky and Mike Eckel

ASSOCIATED PRESS

August 20, 2008

POTI, Georgia – Russia took a step toward a troop pullback from Georgia yesterday but at the same time paraded blindfolded and bound Georgian prisoners on armored vehicles and seized four U.S. Humvees.

Russian soldiers took about 20 Georgian men, blindfolded and handcuffed, to a Russian-controlled military base yesterday, according to the mayor of a nearby Georgian city.

The mayor said he was told the men would be freed today.

The mixed signals came as NATO allies met in emergency session in Belgium and demanded Russia fulfill its promise to withdraw its forces from the small former Soviet republic.

A small Russian column consisting of three tanks, three trucks, five armored personnel carriers and a rocket launcher left Gori, a central city that straddles a vital east-west highway.

A Russian officer said they were headed for South Ossetia, the disputed province at the heart of the conflict, then home to Russia.

The move toward withdrawal came on the same day as a powerful image of Russia's grip over Georgia: Russian trucks and armored vehicles carrying about 20 Georgian men, blindfolded, handcuffed and held at gunpoint.

They were taken from the western city of Poti to the nearby, Russian-controlled military base in Senaki, according to Poti's mayor, who said he had been told they would be released today.

Mayor Vano Taginadze said the men, Georgian military and police troops, had been taken captive because the Georgians refused to let Russian armored vehicles into the port of Poti, along Georgia's Black Sea coast.

A Georgian defense spokeswoman said eight servicemen detained while trying to guard the port were among those held.

Also in Poti, Russian soldiers commandeered four Humvees that had been used in U.S.-Georgian military exercises and were destined to be shipped back to the United States, Georgian officials said.

The Pentagon said it was looking into the theft.

Russian forces in Poti also blocked access to the city's naval and commercial ports yesterday morning and towed the missile boat Dioskuria, one of the navy's most sophisticated vessels, out of sight of observers.

A loud explosion was heard minutes later, and a Georgian interior spokesman said the Russians had blown up the boat.

The acts of force demonstrated anew that Russia, days after agreeing to a cease-fire with Georgia, remained in control in much of the country, and that the state of the Georgian military was far from stable.

Georgian President Mikhail Saakashvili said Russia was not only flouting its withdrawal commitment but that its forces were “not losing time” in damaging Georgia by destroying infrastructure.

“Right now there are Russian soldiers and tanks at Poti,” Georgian Finance Minister Nika Gilavri said.

“They want to open every single container” and inspect them.

Georgian television showed footage of a tense standoff at a military training base in northwestern Georgia, where Russian troops tried to enter but were turned away by Georgian police.

There was no violence, but the report said the Russians threatened to return and destroy the base if they were not allowed in.

The two nations did exchange 20 prisoners of war – 15 Georgians and five Russians, according to the head of Georgia's Security Council – in an effort to reduce tensions.

The Georgians, appearing on local television, said they had been tortured; several had broken arms or fingers.

They said at least two Georgian soldiers were still being held in South Ossetia.

On the diplomatic front, NATO foreign ministers suspended their formal contacts with Russia as punishment.

Secretary-General Jaap de Hoop Scheffer said “there can be no business as usual with Russia under present circumstances.”

But the NATO allies, bowing to pressure from European nations that depend heavily on Russia for energy, stopped short of more severe penalties being pushed by the United States.

The U.N. Security Council was also holding emergency consultations on the conflict.

Also, more U.S. C-130 transport planes brought in tons of relief supplies for Georgians displaced by the conflict.

http://www.signonsandiego.com/uniontrib/20...n20georgia.html

I NOW HEAR THAT "CON-JOB CONNIE" RICE IS GOING TO FLY OVER TO GEORGIA AND START HITTING RUSSIAN TROOPS WITH HER PURSE ...

"U.S. demands Russia leave Georgia 'now'"

By Oleg Shchedrov

21 AUGUST 2001

SOCHI, Russia (Reuters) - Washington demanded on Friday that Russia pull its troops out of Georgia "now," but Moscow said it would be another 10 days before the bulk of its force left Georgian soil.

In a sign of growing tension between Moscow and the West over the conflict in Georgia, a Russian news agency reported that Russia had temporarily frozen cooperation with the NATO alliance, though there was no immediate confirmation.

In some of Washington's toughest comments to date, the White House declared Russia in violation of its commitments to leave the territory of Georgia after routing Georgian forces in a war that erupted two weeks ago.

White House spokesman Gordon Johndroe said he could not imagine a circumstance in which the United States would engage in military-to-military cooperation with Moscow until the Georgia situation was resolved.

U.S. impatience has been growing by the day as it waits for a full-scale pullout of troops and weaponry that Russia sent into its small Caucasus neighbor two weeks ago to counter a Georgian attack on the Moscow-backed South Ossetia region.

A Reuters reporter saw a column of T-72 main battle tanks lumbering across the border from Russia into Georgia -- the first sign of heavy armor being withdrawn from Georgian soil -- but elsewhere Russian forces remained in place.

The commander of Russia's ground forces said all troops sent to reinforce Russian peacekeepers in South Ossetia would go back to Russian within 10 days.

"These forces will be withdrawn to Russian territory," Vladimir Boldyrev told reporters in Sochi, where Russian President Dmitry Medvedev has his summer residence, in a conference call.

It was not immediately clear how that timetable would fit in with a previous Russian commitment to pull back its forces to behind a buffer zone around South Ossetia by the end of Friday.

That buffer zone was emerging as a new source of contention between Russia and Georgia.

Moscow said even after the pullout it would station 500 troops in what it called a "zone of responsibility" as part of a peacekeeping operation to protect South Ossetia.

That would leave Russian troops still inside the Georgian heartland and close to the main east-west highway on which its economy depends.

Georgian President Mikheil Saakashvili, who is backed by the United States and wants to take his tiny ex-Soviet state into the NATO alliance, said he would not stand for that.

"There will be no buffer zones."

"We will never live with any buffer zones."

"We'll never allow anything like this," he told Reuters in the Georgian capital, Tbilisi.

COLUMN OF TANKS

A Reuters reporter at the Roki tunnel, a few kilometers (miles) from the Georgian-Russian border and the main access route for Russian forces, said some equipment was being pulled out.

"I can see 21 T-72 tanks moving towards the Roki tunnel in the direction of Russia," he said.

"I can also see four Grad artillery launchers, several armored personnel carriers, and heavy trucks ready to move into the tunnel," the reporter said.

Speaking earlier at a news conference, Saakashvili said far from pulling back, the Russian army if anything was widening the areas it occupied.

"They don't show any sign that they want to give up control," he said.

"It looks like the word 'withdrawal' is understood in different ways by different people."

The crisis erupted on August 7-8 when Georgia tried to retake South Ossetia, a pro-Moscow region which broke with Tbilisi in 1992.

Russian forces hit back, thrusting beyond the region deep into Georgia and overrunning the army in fierce fighting.

NATO states have pressed Russia to pull its troops swiftly out of Georgia and the alliance this week froze contacts with Russia over the conflict.

Russia's RIA news agency quoted Dmitry Rogozin, Russia's ambassador to the alliance, as saying the defence ministry had temporarily frozen cooperation with NATO pending a decision by the Kremlin on long-term ties.

That could threaten a deal under which many of the supplies to the NATO security force in Afghanistan are flown in through Russian airspace.

Underlining Western support for Georgia, a top U.S. general said the Pentagon expects to help Tbilisi rebuild its military, which was left crippled by the Russian attack.

Valery Gergiev, Russia's best-known living conductor and an ethnic Ossetian, was holding a concert in South Ossetia on Thursday designed to focus the world's attention on what he said was the devastation Georgian forces inflicted on the region.

But Georgia has accused Russia and their South Ossetian separatist allies of exploiting the Georgian defeat to drive ethnic Georgians out of their homes in the region, and torching their villages.

(Writing Christian Lowe; Editing by Giles Elgood)

"Tropical Storm Fay floods hundreds of Fla. homes"

By BRIAN SKOLOFF, Associated Press Writer

20 AUGUST 2008

PORT ST. LUCIE, Fla. - Emergency crews launched airboats into submerged streets Wednesday to rescue central Florida residents trapped by rising floodwaters from a stalled Tropical Storm Fay, which soaked the state for a third consecutive day.

Hundreds of homes were flooded in areas of Brevard and St. Lucie counties, some by up to 5 feet of standing water.

In three towns, rising floodwaters backed up sewage systems.

It wasn't immediately clear how many residents were stranded, but county officials reported making dozens of rescues.

"We can't even get out of our house," said Billie Dayton of Port St. Lucie, as waters lapped at her porch.

"We're just hoping that it doesn't rain anymore."

The Florida National Guard mobilized about a dozen guardsmen and some high-water vehicles to assist with damage assessment and help with evacuations, said Jon Myatt, spokesman for the Florida Department of Military Affairs.

The storm could dump 30 inches of rain in some areas of Florida and the National Hurricane Center said up to 22 inches had already fallen near Melbourne, just south of Cape Canaveral on the state's central Atlantic coast.

Forecasters originally expected Fay to energize over the ocean and possibly become a hurricane before landing in Florida for the third time later this week.

The erratic storm first struck Monday in the Florida Keys island chain, then veered out to sea before traversing east across the state, briefly strengthening, before losing steam and stalling.

The storm barely moved for most of Wednesday, dumping inches and inches of rain over central Florida.

"In some areas, it's waist-deep," said Erick Gill, a spokesman for St. Lucie County.

"We've had reports of people having 3 to 5 feet of water in their home."

Tom Christopher, St. Lucie County emergency management coordinator, said between 85 and 140 people were rescued by boat or high-clearance vehicle by Wednesday afternoon.

He said no more were stranded, though other families seemed to be stuck without a way to leave.

Steve Grenon, 40, was sitting in the bed of his truck in front of his house.

He said he'd been holed up there for two days, unable to leave with water was up to six feet deep in the street in front of him.

A dodge sedan was partly submerged in front of him.

"I had no idea what it looked like out there until today," Grenon said.

The storm remained near Cape Canaveral at 2 p.m. EDT Wednesday.

Its maximum sustained winds were back up to about 50 mph and it was expected to resume slowly moving north later Wednesday.

Gill said hundreds of homes had been flooded, though a count was incomplete.

Homes also were flooded in Brevard County, said Bob Lay, the county's emergency operations director.

Floodwaters also had caused sewage to back up, affecting another 40,000 to 50,000 people in three towns.

Fay formed over the weekend in the Atlantic and was blamed for 20 deaths in the Caribbean before hitting Florida's southwest coast, where it first fell short of predictions it could be a Category 1 hurricane when it came ashore.

Though no one in Florida had been killed, some were close.

Joe McMannis, 27, said he jumped into them to help three people in a submerged truck in Jensen Beach.

McMannis said the driver accidentally drove into a retention pond, confusing it for a driveway.

"I didn't think it was going to be that deep," he said.

"It pretty much came up to my ears and chin."

"I saw this little kid coming toward me so I grabbed him and swam him back to the shore line and went back for other two guys that were still stuck in there."

The rain was welcome in dry Florida and Georgia cropland, but could also hurt farmers' production.

Forecasters predicted parts of northern Florida could get 10 to 15 inches of rain, while southern Georgia could receive 3 to 6 inches.

"They're probably areas of the state that found the rains very beneficial."

"There are other areas of the state getting 10-12 inches that have crops in the ground and are getting too much," said Terence McElroy, spokesman for the Florida Department of Agriculture and Consumer Services.

McElroy said the rain could pool around and damage citrus trees and flood pastures and hay fields, but said it was too soon to quantify the damage.

Before moving east, the storm flooded streets in Naples, downed trees and cut power to some 95,000 homes and businesses.

Tornadoes spawned by the storm damaged 51 homes in Brevard County, southeast of Orlando, including nine homes that were totaled.

In the Keys, officials estimated 25,000 tourists evacuated.

In the Jacksonville area north of the flooding, officials prepared shelters and cleared drainage areas in anticipation the storm would jut left and drench residents there later this week.

Public schools canceled Wednesday and Thursday classes, and mobile home residents were encouraged to find sturdier shelter.

In southeast Georgia, Camden County public works crews cleaned storm drains and ditches in preparation for possible flooding.

The Georgia Emergency Management Agency also began 24-hour operations to monitor the storm.
___

Associated Press Writer Russ Bynum reported from Savannah, Ga.; Kelli Kennedy, Matt Sedensky and Travis Reed reported from Miami; Christine Armario reported in Tampa, Tamara Lush reported in Punta Gorda, Bill Kaczor and Brendan Farrington reported from Tallahassee and Sarah Larimer from Orlando.

"Tropical Storm Fay expected to hit Fla. 3rd time"

By BRIAN SKOLOFF, Associated Press Writer

21 AUGUST 2008

PORT ST. LUCIE, Fla. - Tropical Storm Fay lumbered offshore for what was likely to be a brief stay over the Atlantic Ocean's energizing waters after flooding hundreds of homes, trapping residents and leaving much of Florida a soggy mess.

Forecasters expected the storm to complete its zig-zag course by hitting the state for a third time in a week, along with Georgia, but didn't think it would strengthen to a hurricane over the open waters.

The storm flooded hundreds of homes in Brevard and St. Lucie counties, some with up to 5 feet of water, forcing dozens of rescues.

The Federal Emergency Management Agency was reviewing Gov. Charlie Crist's request for a federal emergency disaster declaration to defray rising debris and response costs.

"I want to stress that this storm is becoming a serious catastrophic flooding event," Crist said.

The storm was just offshore of the Florida coast early Thursday but continued to dump heavy rain.

At 5 a.m. EDT, the storm's center was located about 20 miles east-southeast of Daytona Beach.

The storm had moved very little but was expected to begin slowly moving toward the west-northwest later in the day.

The storm's maximum sustained winds were near 60 mph.

The National Hurricane Center said some strengthening was possible while the center was still over water.

But the storm was expected to weaken after moving back over land.

The erratic storm first struck Monday in the Florida Keys, then veered out to sea before traversing east across the state, briefly strengthening, then stalling.

For much of Wednesday, the storm barely moved, dumping inches and inches of rain over coastal central Florida.

If Fay strikes Florida again as expected, it would be just the fourth storm in recorded history to hit the peninsula with tropical storm intensity three separate times.

The most recent was Hurricane Donna in 1960, said Daniel Brown, hurricane specialist at the National Hurricane Center.

Though no deaths have been reported in the state as a result of the storm, its effects have been significant.

Emergency crews launched airboats into submerged streets Wednesday to rescue Florida residents trapped by rising floodwaters.

The Florida National Guard mobilized about a dozen guardsmen and some high-water vehicles to assist with damage assessment and help with evacuations.

In St. Lucie County alone, an estimated 150 residents were assisted in evacuating by boat or high-clearance vehicle, and water was 3 to 5 feet in some people's homes, Erick Gill, a county spokesman, said.

Meanwhile, officials in Brevard County said 118 people were in shelters Wednesday night.

By the end of Wednesday, overall numbers of displaced residents and flooded homes weren't available.

"We can't even get out of our house," said Billie Dayton of Port St. Lucie, as waters lapped at her porch.

"We're just hoping that it doesn't rain anymore."

Billy Johnson, 45, and his girlfriend walked four blocks through waist-high water to reach rescue vehicles after his Melbourne apartment was flooded with knee-high water.

"Everything I had is all underwater," he said.

"You can't grab your food."

"You can't grab your TV..."

"Grab what you can and go."

In Florida communities north of the flooding and in southeast Georgia, storm preparations included canceling school, clearing storm drains and ditches and encouraging mobile home residents to find sturdier shelter.

Fay formed over the weekend in the Atlantic and was blamed for 20 deaths in the Caribbean before hitting Florida's southwest coast, where it first fell short of predictions it could be a Category 1 hurricane when it came ashore.

Before moving east, the storm flooded streets in Naples, downed trees and cut power to some 95,000 homes and businesses.

Tornadoes spawned by the storm damaged 51 homes in Brevard County, southeast of Orlando, including nine homes that were totaled.

In the Keys, officials estimated 25,000 tourists evacuated.

Fay could dump 30 inches of rain in some areas of Florida and the National Weather Service said nearly 25 inches had already fallen near Melbourne, just south of Cape Canaveral on the state's central Atlantic coast.
___

Associated Press Writer Russ Bynum reported from Savannah, Ga.; Ron Word reported from Jacksonville; Lisa Orkin Emmanuel, Curt Anderson, Kelli Kennedy, Matt Sedensky and Travis Reed reported from Miami; Christine Armario reported in Tampa, Bill Kaczor and Brendan Farrington reported from Tallahassee and Sarah Larimer from Orlando.

"Go Away Fay: Storm soaks Florida for a 4th day"

By BRIAN SKOLOFF, Associated Press Writer

21 AUGUST 2008

MELBOURNE, Fla. - For a fourth weary day, Tropical Storm Fay continued its soggy march through Florida Thursday, forcing dozens more residents to flee floodwaters and even driving alligators and snakes out of their habitats and into streets.

Residents were beginning to get tired of Fay, which has made landfall in the state three times this week.

Flooding was especially acute along the Atlantic coast from Port St. Lucie to Cape Canaveral, with water reaching depths of 5 feet in some neighborhoods.

"This is the worst I've absolutely ever seen it," said Mike White, 57, after he was rescued by the National Guard from floodwaters lapping at the doorstep of his mobile home.

The erratic and stubborn storm has dumped more than two feet of rain along parts of Florida's low-lying central Atlantic coast.

It is just the fourth storm in history to make landfall as a tropical storm three times, the last in 1960.

Before it eases across the Panhandle by the weekend, it could bring buckets more.

If the water itself wasn't enough, people in flooded parts of the area known as the Space Coast were warned to keep watch for alligators, snakes and other wildlife forced from their habitats and swimming in search of dry land.

At least two alligators were captured in residential neighborhoods and several others spotted.

Florida National Guardsman Steve Johnson, 45, said he was wading through hip-deep water Wednesday night with a flashlight when an alligator drifted by.

"I said 'What the heck is that?' and there was an alligator floating by," Johnson said Thursday.

"I took my flashlight and was like, 'You've got to be kidding me, a big old alligator swimming around here.'"

In Carla Viotto's backyard in Indialantic, located outside of Melbourne, snakes were swimming around in 4 inches of water amid a pair of empty 5-gallon water jugs.

"It looked just like a junk yard," she said Thursday.

Florida Gov. Charlie Crist, who visited the area Thursday, has already asked the Bush administration to declare a federal disaster in the region to help with the storm's costs.

"This storm is going to be with us for a while," Crist said at a news conference.

The outer bands of Fay continued to pour sporadic rains Thursday along the 100-mile Georgia coast, with some areas reporting winds of 20 to 30 mph.

The National Weather Service said southern Georgia could see some flooding from 5 to 10 inches of rain across southern Georgia as the storm moved west through northern Florida.

Mary Neff watched the rain come and go for a second straight day Thursday in coastal St. Marys, Ga., two blocks from the downtown waterfront at the Spencer House Inn, which she owns with her husband.

"We're kind of just waiting," Mary Neff said Thursday afternoon.

"It needs to come and get gone so we can get back to what we were doing."

At 2 p.m. EDT, the storm began slugglishly moving west at about 2 mph, still with maximum sustained winds of 60 mph.

The storm's center was located almost directly above Flagler Beach, south of St. Augustine.

It was expected to move northwest bringing heavy rains to northern Florida and southern Georgia.

No deaths have been reported in Florida because of Fay, which is responsible for at least 20 deaths when it passed through the Caribbean.

With the rain deluge passing to the north, the sun began to dry out some Florida neighborhoods hit by floods earlier in the week.

The mood was considerably brighter for many residents who were finally able to get out of their homes.

"I'm ready to get back to work."

"This is insane."

"It'll drive you nuts being stuck like this," said Barry Johnson, 44, of Port St. Lucie.
___

Associated Press writers Ron Word reported from Jacksonville; Lisa Orkin Emmanuel, Curt Anderson and David Fischer reported from Miami; Bill Kaczor reported from Tallahassee; Russ Bynum reported from Savannah, Ga.; and Brendan Farrington reported from St. Augustine.

"Oil jumps $5 on US-Russia tensions, sliding dollar"

By STEVENSON JACOBS, AP Business Writer

21 AUGUST 2008

NEW YORK - Oil prices shot up more than $5 a barrel Thursday, rising to the highest level in over two weeks as escalating tensions with Russia stoked fears of supply disruptions to the West.

Crude's rally mimicked the wild price swings seen last month and have at least temporarily halted oil's slide back toward $100 a barrel.

A weaker U.S. dollar and worries about tightening output from OPEC countries are also supporting prices.

After days of brushing off geopolitical flare-ups and a tropical storm, oil spiked above $122 a barrel as traders became rattled over increasingly hostile Russian rhetoric toward a U.S.-Poland deal to install a missile defense system in Eastern Europe — a move Moscow views as a threat.

The continued presence of Russian troops in Georgia — a key conduit for Western-bound oil shipments — injected even more bullish sentiment into a market that had appeared to be losing momentum on the idea that high energy prices were curbing demand.

Oil watchers said the market's sudden reaction to the standoff reflects a growing acknowledgment of Russia's bear-like influence over world energy supplies.

"People are finally realizing that this Russian situation has the potential to be bad for a very long time," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.

"The Russians have shown evidence that they're willing to cut off energy supplies to advance their aims."

"There is concern that they are now going to be much more assertive in that area."

Light, sweet crude for October delivery jumped $5.62 to settle at $121.18 a barrel on the New York Mercantile Exchange after earlier rising as high as $122.04, crude's highest trading level since Aug. 4.

Crude prices have settled higher for three straight sessions.

Russia is the world's second largest oil exporter after Saudi Arabia.

It supplies a quarter of the European Union's oil and half of its natural gas.

If those shipments were cut off, EU countries would be forced to seek supplies elsewhere at a time when spare crude capacity is already stretched to an extremely thin margin of about 2 million barrels per day, analysts say.

"If military activity heats up again, pipeline flows into Europe could be disrupted and that would affect the United States as well," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

The price jump came as retail gas prices continued to fall, shedding more than a penny overnight to a new national average of $3.702, according to auto club AAA, the Oil Price Information Service and Wright Express.

Prices have now fallen 10 percent from record highs above $4 a gallon set July 17, but the pace of the drop off could slow if oil holds onto Thursday's gains.

"This is probably about it in terms of a retail gas drop."

"We may be a few cents away from the August bottom," said Tom Kloza, publisher and chief analyst at the Oil Price Information Service in Wall, N.J.

Prices were supported Thursday by a weaker dollar compared to the euro.

The 15-nation currency rose to $1.4874 in afternoon trading in New York from $1.4768 late Wednesday.

A falling greenback encourages investors to seek commodities such as oil as a hedge against inflation and a weaker dollar.

"The slide in the dollar has taken some of the wind out of the bear's sail in the energy complex," oil analyst and trader Stephen Schork said in a note.

Oil's rise came despite a huge increase in U.S. crude inventories reported Wednesday.

But other supplies were less abundant.

Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels in the week ended Aug. 15, the U.S. Energy Department's Energy Information Administration said Wednesday.

Meanwhile, distillate inventories — which include heating oil and diesel fuel — rose by less than expected, the EIA said.

That was enough to offset a hefty 9.4 million barrel rise in U.S. crude stocks last week when the average analyst forecast had been for a 1.7 million barrel increase, according to energy information provider Platts.

But growing concerns over Russia's standoff with Georgia and NATO grabbed the attention of most oil traders Thursday.

On Wednesday, Secretary of State Condoleezza Rice and her Polish counterpart signed a deal to build an American missile defense base in Poland.

Last week, a top Russian general warned Poland was risking an attack, possibly a nuclear one, by developing the base.

JBC Energy in Vienna said the "political risk premium of oil prices" had widened to more than $10 a barrel, which could be attributed at least in part to the Russian angle.

Investors are also anxious about the next Organization of the Petroleum Exporting Countries meeting in early September.

Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.

U.S. energy consultancy Cameron Hanover noted in its daily market report that some members of the oil group were "terrified of allowing Western countries to build any kind of cushion for the unexpected, because it has the potential to return prices to normal or sustainable economic levels" and interfere with OPEC's ability to keep building massive foreign currency reserves.

Oil prices have rebounded after falling about $35, or nearly a quarter, from their all-time trading record $147.27 on July 11.

Many investors expect that high gasoline prices and slowing economic growth in the U.S., Europe and Japan will undermine global energy demand.

In other Nymex trading, heating oil futures rose 13.71 cents to settle at $3.3006 a gallon, while gasoline prices gained 13.49 cents to settle at $3.0452 a gallon.

Natural gas futures increased 17.5 cents to settle at $8.252 per 1,000 cubic feet.

In London, October Brent crude rose $5.83 to $120.19 a barrel.

___

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

"Feds: Fire took down building next to twin towers"

By DEVLIN BARRETT, Associated Press Writer

21 AUGUST 2008

GAITHERSBURG, Md. - Federal investigators said Thursday they have solved a mystery of the Sept. 11, 2001, attacks: the collapse of World Trade Center building 7, a source of long-running conspiracy theories.

The 47-story trapezoid-shaped building sat north of the World Trade Center towers, across Vesey Street in lower Manhattan in New York.

On Sept. 11, it was set on fire by falling debris from the burning towers, but skeptics long have argued that fire and debris alone should not have brought down such a big steel-and-concrete structure.

Scientists with the National Institute of Standards and Technology say their three-year investigation of the collapse determined the demise of WTC 7 was actually the first time in the world a fire caused the total failure of a modern skyscraper.

"The reason for the collapse of World Trade Center 7 is no longer a mystery," said Dr. Shyam Sunder, the lead investigator on the NIST team.

Investigators also concluded that the collapse of the nearby towers broke the city water main, leaving the sprinkler system in the bottom half of the building without water.

The building has been the subject of a wide range of conspiracy theories for the last seven years, partly because the collapse occurred about seven hours after the twin towers came down.

That fueled suspicion that someone intentionally blew up the building in a controlled demolition.

Critics like Mike Berger of the group 9/11 Truth said he wasn't buying the government's explanation.

"Their explanation simply isn't sufficient."

"We're being lied to," he said, arguing that there is other evidence suggesting explosives were used on the building.

Sunder said his team investigated the possibility that an explosion inside the building brought it down, but found there was no large boom or other noise that would have occurred with such a detonation.

Investigators also created a giant computer model of the collapse, based partly on news footage from CBS News, that they say shows that internal column failure brought down the building.

Investigators also ruled out the possibility that the collapse was caused by fires from a substantial amount of diesel fuel that was stored in the building, most of it for generators for the city's emergency operations command center.

The 77-page report concluded that the fatal blow to the building came when the 13th floor collapsed, weakening a critical steel support column that led to catastrophic failure.

"When this critical column buckled due to lack of floor supports, it was the first domino in the chain," said Sunder.

The NIST investigators issued more than a dozen building recommendations as a result of their inquiry, most of which repeat earlier recommendations from their investigation into the collapse of the two large towers.

In both instances, investigators concluded that extreme heat caused some steel beams to lose strength, causing further failures throughout the buildings until the entire structure succumbed.

The recommendations include building skyscrapers with stronger connections and framing systems to resist the effects of thermal expansion, and structural systems designed to prevent damage to one part of a building from spreading to other parts.

No one was killed in the collapse of building 7 because it had been fully evacuated.

A new, slightly taller World Trade Center 7 opened in 2006.

A spokesman for the leaseholder of the World Trade Center, developer Larry Silverstein, praised the government's work.

"Hopefully this thorough report puts to rest the various 9/11 conspiracy theories, which dishonor the men and women who lost their lives on that terrible day," said Silverstein spokesman Dara McQuillan.

In discussing the findings, the investigator Sunder acknowledged that some may still not be convinced, but insisted the science behind their findings is "incredibly conclusive."

"The public should really recognize the science is really behind what we have said," he said, adding: "The obvious stares you in the face."
___

On the Net:

National Institute of Standards and Technology: http://www.nist.gov/

9/11 Truth: http://www.911truth.org/

"IKB to be bought by Lone Star Funds - Lone Star Funds to buy IKB, German victim of US subprime mortgage crisis"

By MATT MOORE, Associated Press

Last updated: 4:22 p.m., Thursday, August 21, 2008

FRANKFURT, Germany -- German lender IKB Deutsche Industriebank AG, which has been badly hit by the U.S. subprime mortgage crisis, will be sold to U.S.-based private equity firm Lone Star Funds, the German company's biggest shareholder said Thursday.

Germany's state-owned KfW development bank did not give the precise terms of its deal to sell 90.8 percent of IKB to Dallas-based Lone Star, but officials said at a news conference that the purchase price was in the low three-digit million euro range.

That would be below the 800 million euros ($1.2 billion) that the German government had initially targeted.

KfW chief executive Wolfgang Kroh said the deal would likely be concluded by October, pending regulatory approval.

While he did not disclose the exact final price, he said that this was "not a normal sale of shares but rather a complex project made up of myriad elements."

Kroh said the result was a "fair, positive purchase price."

Investors appeared happy that IKB was sold, regardless of the price.

The bank's shares rose 7.8 percent to 2.89 euros ($4.30) in Frankfurt.

"We are enthusiastic about the prospect of investing our capital, expertise, time, and energy to put IKB back on a sustainable path to long-term value creation for all stakeholders," said Bruno Scherrer, senior managing director and head of European Investments for Lone Star.

"Lone Star has the solid basis to support the strategy of strengthening IKB as a leading provider of financial solutions for Germany's Mittelstand."

IKB lends to small and medium-sized German companies.

KfW currently holds a 45.5 percent stake in Duesseldorf-based IKB, but that will rise to 90.8 percent as part of an already agreed-upon capital increase.

KfW had been shopping IKB around for nearly a year and its governing council agreed late Wednesday that Lone Star would be the right buyer.

Lone Star, founded in 1995, currently manages more than $13 billion in assets.

Lone Star agreed last month to buy asset-backed securities with a nominal value of $30.6 billion for $6.7 billion from Merrill Lynch & Co.

The value of asset-backed securities -- especially those backed by mortgages -- have plummeted over the past year as the underlying loans have increasingly defaulted.

Those losses have forced investment banks like Merrill Lynch to raise new capital to offset the losses.

Duesseldorf-based IKB's problems sprang from its Rhineland Funding investment vehicle's apparent inability to cover its funding needs because of exposure to U.S. subprime loans.

That prompted a series of rescue packages for the bank that totaled more than 8 billion euros ($11.8 billion).

------

On the Net:

http://www.ikb.de

http://www.lonestarfunds.com

"Fannie, Freddie rescue plans leave many anxious - Various rescue plans for Fannie, Freddie could harm insurance, banking industries, taxpayers"

By ALAN ZIBEL, Associated Press

Last updated: 4:32 p.m., Thursday, August 21, 2008

WASHINGTON -- A government rescue of Fannie Mae and Freddie Mac could be costly for scores of investment, banking and insurance companies that hold billions in preferred shares of the mortgage finance giants as assets.

Speculation has been building on Wall Street that a government investment to rescue Fannie and Freddie would come in the form of a cash infusion through the acquisition of preferred shares in the companies.

Those shares, which pay a bond-like yield, get preference over common shares in the event a company is liquidated.

While existing common stockholders would likely see the value of their stakes reduced to zero, the outcome is less certain for preferred shareholders.

"That depends on how big Fannie and Freddie blow up," said Michael Shedlock, an investment adviser for SitkaPacific Capital Management who writes the financial blog "Mish's Global Economic Trend Analysis."

With Fannie and Freddie's existing preferred shares currently paying yields of around 17 percent to 19 percent, compared with original yields of about 6 percent, credit markets are indicating that "some hit is going to come from existing preferred shareholders," Shedlock said.

Investors generally believe that stakes in Fannie and Freddie's debt would be protected under any government rescue plan.

But congressional analysts estimate a government rescue of the mortgage giants could cost taxpayers $25 billion, with the exact amount based on how far the housing market falls and how severe their financial situation turns out to be in the long run.

Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte, said the entire financial industry is trying to figure out what will happen to Fannie and Freddie because investment in their equity and debt is so widespread.

"There's not protection for shareholders of common or preferred shares," he said.

The U.S. insurance industry has $4 billion in exposure to Fannie and Freddie's preferred stock, according to A.M. Best Co. Inc.

But that represents less than 1 percent of the surplus the industry holds against losses.

"While some companies will probably have some writedowns, I don't think there's a widespread effect on the whole industry," said Edward Keane, senior financial analyst with A.M. Best Co.

Fannie and Freddie are the largest source of funding for home mortgages in the U.S.

But they have struggled with soaring losses from mortgage defaults.

Washington-based Fannie and McLean, Va.-based Freddie, have lost a combined $3.1 billion between April and June, and investors fear the losses will continue to grow.

The Bush administration last month unveiled a plan to provide unlimited government loans to the two mortgage giants and to purchase stock in the two companies if needed for a period covering the next 18 months.

Many observers say Treasury Secretary Henry Paulson is not interested in protecting common shareholders, only in Fannie and Freddie's ability to support the battered mortgage market.

That means a government rescue might not occur until there is evidence the mortgage companies' are unable to sell short-term debt -- an indication they would no longer be able to operate normally.

Shares of the two companies -- which together hold or guarantee half the U.S. mortgage debt -- have lost more than half their value this week on fears that a government bailout would wipe out common stockholders.

Fannie Mae shares rose 35 cents, or 8 percent, to $4.75 in afternoon trading, while Freddie Mac fell 13 cents, or 4 percent, to $3.12.

Freddie in particular has investors and analysts fearful.

The company earlier this year promised to raise $5.5 billion to shore up its finances but has not yet done so and its sinking share price makes raising that money far less feasible.

Fannie Mae's chief executive has sought to reassure investors that no bailout is imminent, and that the company's financial position remains solid.

------

AP Business Writer Ieva M. Augstums in Charlotte, N.C. contributed to this report.

"Economy remains stuck in low gear - Economy languishes as July's leading indicators fell sharply, weekly jobless claims improved"

By ELLEN SIMON, Associated Press

Last updated: 5:52 p.m., Thursday, August 21, 2008

NEW YORK -- A private sector measure of the economy's health showed the largest drop in a year, and while new jobless claims fell for the second straight week, they remain near the highest levels since 2002.

The reports are the latest evidence the languishing American economy remains stuck in low gear.

The New York-based Conference Board said Thursday its monthly forecast of future economic activity fell 0.7 percent in July, far more than the consensus estimate of a 0.2 percent decline by Wall Street economists surveyed by Thomson/IFR.

The last time the index showed a drop this great was last August, when it fell by 1 percent.

The largest drag on the index was the decline in building permits, followed by dropping stock prices, rising unemployment claims, a tightened money supply and falling manufacturers' orders for consumer goods.

The index has slipped 0.9 percent for the six months ending in July.

"The economy is stuck somewhere between sluggish growth and recession," said Mark Vitner, senior economist at Wachovia Corp.

"We're in economic purgatory."

Lehman Brothers economist Zach Pandl blamed the drop on technical factors, saying a change in New York City's building code, effective July 1, led to a June spike in new permits followed by last month's steep decline.

He also attributed part of high jobless claims data to the 13-week extension of unemployment benefits approved by Congress in June.

"The decline in the leading index should therefore not be interpreted as a sign the outlook is quickly deteriorating," Pandl wrote in a research note.

Meanwhile, the Labor Department's jobless claims data showed new filings dropped to 432,000, down by 13,000 from the previous week, a greater improvement than analysts expected.

However, the four-week average climbed to 445,750, the highest level since November 2003.

"The labor market is soft, but not collapsing," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

"That's critical."

"While consumers may be cautious and conservative in their spending, as long as the rate does not spike ... there should be enough income growth to keep the economy muddling along."

Unemployment claims have increased in the past several weeks, partly reflecting an outreach effort by the Labor Department to notify people of the benefit extension.

The action has turned up some people eligible to file new claims.

That effort -- coupled with businesses cutting jobs due to higher energy costs, tighter credit markets and a slowing economy -- caused claims to spike to a six-year high of 457,000 for the week of Aug. 2.

The number of people continuing to receive benefits last week also dropped slightly to 3.36 million, but the four-week average rose to 3.33 million, its highest level in almost five years.

That number doesn't include the government's extended benefits program.

The Labor Department estimated an additional 1.29 million unemployed workers are getting benefits under that program.

Wall Street shrugged off the numbers.

Financial stocks rebounded after an analyst upgraded Lehman Brothers Holdings Inc. to "buy," saying the investment bank has become a hostile takeover candidate.

The Dow Jones industrial average rose 12.78 to 11,430.21.

The Standard & Poor's 500 rose 3.18 to 1,277.72, and the Nasdaq composite lost 8.70 to 2,380.38.

Still, companies likely will increase layoffs in the next several months as profits continue to suffer from higher food and energy prices, Vitner said.

The unemployment rate could reach 6.5 percent by mid-2009, from 5.7 percent in July, he added.

Several companies have announced job cuts recently.

Newspaper publisher Gannett Co. Inc. said it would lay off 600 workers, Ford Motor Co. said it would cut 300 workers at an engine plant, and chip designer Rambus Inc. is trimming 90 jobs.

To be sure, some companies are bucking that trend.

"We're always hiring," said Fred Bock, vice president of marketing and business planning at Peerless Pump Co. in Indianapolis, which makes fire protection pumps for high rises.

Peerless Pump has seen international sales increase 20 percent in the last four years, helped by new construction in the Middle East and Asia.

------------

AP Business Writer Christopher S. Rugaber contributed to this report.

"Stocks end mixed on rising oil, financial worries - Stocks end mixed as oil prices rise; financials see partial recovery on bullish call on Lehman"

By TIM PARADIS, Associated Press

Last updated: 6:12 p.m., Thursday, August 21, 2008

NEW YORK -- Wall Street finished mixed Thursday after investors largely shrugged off a jump in oil prices and focused instead on a bullish call on Lehman Brothers Holdings Inc. that eased worries about the financial sector.

Stocks closed off their lows of the session after a Ladenburg Thalmann analyst raised his rating on Lehman to "buy," saying he believes the nation's fourth-biggest investment bank has become a hostile takeover candidate.

That call helped ease concerns about that company as well as the financial sector, which has been hit by a spike in bad mortgage debt.

The partial recovery in financials as well as gains by energy producers themselves helped contain investors' anxiety over a jump in oil of more than $5 a barrel.

Prices rose as investors questioned whether tensions with Russia would disrupt energy shipments from the world's second-largest oil producer.

Often an uptick in oil will fan Wall Street's fears of inflation.

"It's remarkable how well the market has held up," said Quincy Krosby, chief investment strategist for The Hartford, referring to the performance of stocks in the face of a jump in oil.

She said the gains by the energy sector helped corral selling pressure on a day of light volume, which can lead to volatility.

The Dow Jones industrial average rose 12.78, or 0.11 percent, to 11,430.21.

It was the second straight session of moderate gains for the blue chips after heavy losses the first two days of the week.

Broader stock indicators ended mixed Thursday.

The Standard & Poor's 500 index rose 3.18, or 0.25 percent, to 1,277.72, and the Nasdaq composite index fell 8.70, or 0.36 percent, to 2,380.38.

Bond prices fell.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.80 percent late Wednesday.

Gold prices jumped as the dollar moved lower against other major currencies.

Light, sweet crude surged $5.62 to settle at $121.18 a barrel on the New York Mercantile Exchange.

Stocks recovered after oil retreated from a session high of $122.04 -- a trading level not seen since Aug. 4.

While oil prices remain well off their July 11 high of $147.27, any rebound can be worrisome because inflation readings this week and last week showed prices rose for consumers and businesses at a faster pace than expected.

Investors responded to Thursday's climb in oil by sending shares of energy companies higher.

Exxon Mobil Corp. and Chevron Corp. were among the strongest performers of the 30 stocks that make up the Dow industrials.

Exxon rose $1.54, or 2 percent, to $80.35, while Chevron rose $2.06, or 2.4 percent, to $88.52.

But the rise in oil also weighed on some sectors, such as airlines.

United Airlines parent UAL Corp. fell $1.07, or 8.6 percent, to $11.33, while Continental Airlines Inc. fell 82 cents, or 5.4 percent, to $14.34.

With the focus on oil and financials, investors looked past most economic readings.

The Philadelphia Fed said regional manufacturing activity was negative for the ninth straight month.

The Conference Board's leading economic indicators report, which is designed to predict economic activity in the next three to six months, showed its largest drop in a year in July.

Investors also seemed unimpressed by a larger-than-expected decrease in weekly unemployment claims from newly laid-off workers.

The Labor Department said claims fell by 13,000 to 432,000 last week.

But the four-week moving average rose to 445,750, a nearly seven-year high.

A shaky job market has been slamming consumers who also face a tighter credit climate, rising costs and falling home prices.

That is troubling to investors as consumer spending accounts for more than two-thirds of U.S. economic activity.

"All three reports tend to indicate that we're bottoming out but that there is no real end in sight and that's what I think the market has to get used to," said Doug Roberts, chief investment strategist at Channel Capital Research.

The fluctuations of oil and financials again dictated the mood on Wall Street Thursday.

A slew of analysts have been downgrading banks and brokerages over the past few weeks, and late Wednesday, a Citigroup analyst lowered his third-quarter estimates for Lehman Brothers, Goldman Sachs Group Inc. and Morgan Stanley.

He predicted Lehman will write down its assets by $2.9 billion, that Goldman will write down $1.8 billion and that Morgan will write down $1.7 billion.

But the Ladenburg Thalmann analyst's note helped the sector, by arguing that Lehman Brothers' management values the company at a premium and would be willing to sell at the right price.

Lehman ended down 1 cent at $13.72, while Goldman Sachs fell $1.83 to $156.42 and Morgan Stanley fell 34 cents to $37.06.

The shifting sentiment came a day after fresh worries emerged about the possibility of a government bailout of government-chartered mortgage companies Fannie Mae and Freddie Mac.

Such a move could wipe out shareholder equity.

Fannie and Freddie ended mixed after falling more than 20 percent Wednesday.

Fannie rose 45 cents, or 10 percent, to $4.85, while Freddie fell 9 cents, or 2.7 percent, to $3.16.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to a light 3.94 billion shares compared with 4.45 billion shares traded Wednesday.

The Russell 2000 index of smaller companies fell 6.35, or 0.87 percent, to 725.25.

Overseas, Japan's Nikkei stock average fell 0.77 percent.

Britain's FTSE 100 slipped 0.03 percent, Germany's DAX index fell 1.28 percent, and France's CAC-40 fell 1.40 percent.

------

On the Net:

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

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

"Saber-toothed cat fossils discovered in Venezuela"

By FABIOLA SANCHEZ, Associated Press Writer

21 AUGUST 2008

CARACAS, Venezuela - An ancient tar pit exposed when Venezuelan oil workers laid a pipeline has yielded a rich trove of fossils, including a type of saber-toothed cat that paleontologists had never found before in South America.

Scientists say the find holds the promise of many discoveries to come.

The fossils are 1.8 million years old and include skulls and jawbones of six scimitar-toothed cats — a variety of saber-toothed cat with shorter, narrower canine teeth than other species.

Researchers led by Venezuelan paleontologist Ascanio Rincon announced the discovery this month, saying in addition to proving the cat once lived here, the find also should offer a rare window into the environment shortly after North and South America became connected following an age of separation.

"The deposit could be one of the most important in South America in the last 60 years," Rincon told The Associated Press.

Other experts agree.

"The find is one of the most spectacular and scientifically interesting discoveries of the last decade," said University of Kansas professor Larry D. Martin, an expert on saber-toothed cats who was not involved in the find.

"The genus hadn't been known from South America before."

The tar pits are larger than two football fields and near the surface of the soil in the eastern state of Monagas, an oil-rich area.

The state oil company set aside the site for research in 2006 and contacted Rincon at the Venezuelan Institute for Scientific Studies.

After months of digging, he and his team found the prized fossils in April 2007.

But for the past year, Venezuela's Cultural Heritage Institute has inexplicably barred researchers from the site, which Rincon says has left it exposed to sun and rain, and potentially damaged the fossils.

The Cultural Heritage Institute revoked Rincon's permit last year, and has yet to publicly explain why.

Rincon said his institution is negotiating with the agency so that researchers may return.

Rincon first spoke of the discovery at a symposium on scimitar-toothed cats in Pocatello, Idaho, in May.

Rincon and other researchers say the find suggests scimitar-toothed cats — of the genus Homotherium — crossed from North America to South America shortly after the continents grew together and became linked in modern-day Panama following a 65-million-year separation, a "moment of great exchange" between the continents.

Another expert, Argentine paleontologist Francisco Prevosti, called the Venezuelan discovery of "utmost importance for South American paleontology."

Prevosti and other experts say the now-extinct scimitar-toothed cat was previously confirmed to have inhabited Africa, Europe, Asia and North America — but not South America.

"At top of Greenland, new worrisome cracks in ice"

By SETH BORENSTEIN, AP Science Writer

21 AUGUST 2008

WASHINGTON - In northern Greenland, a part of the Arctic that had seemed immune from global warming, new satellite images show a growing giant crack and an 11-square-mile chunk of ice hemorrhaging off a major glacier, scientists said Thursday.

And that's led the university professor who spotted the wounds in the massive Petermann glacier to predict disintegration of a major portion of the Northern Hemisphere's largest floating glacier within the year.

If it does worsen and other northern Greenland glaciers melt faster, then it could speed up sea level rise, already increasing because of melt in sourthern Greenland.

The crack is 7 miles long and about half a mile wide.

It is about half the width of the 500 square mile floating part of the glacier.

Other smaller fractures can be seen in images of the ice tongue, a long narrow sliver of the glacier.

"The pictures speak for themselves," said Jason Box, a glacier expert at the Byrd Polar Research Center at Ohio State University who spotted the changes while studying new satellite images.

"This crack is moving, and moving closer and closer to the front."

"It's just a matter of time till a much larger piece is going to break off...."

"It is imminent."

The chunk that came off the glacier between July 10 and July 24 is about half the size of Manhattan and doesn't worry Box as much as the cracks.

The Petermann glacier had a larger breakaway ice chunk in 2000.

But the overall picture worries some scientists.

"As we see this phenomenon occurring further and further north — and Petermann is as far north as you can get — it certainly adds to the concern," said Waleed Abdalati, director of the Center for the Study of Earth from Space at the University of Colorado.

The question that now faces scientists is: Are the fractures part of normal glacier stress or are they the beginning of the effects of global warming?

"It certainly is a major event," said NASA ice scientist Jay Zwally in a telephone interview from a conference on glaciers in Ireland.

"It's a signal but we don't know what it means."

It is too early to say it is clearly global warming, Zwally said.

Scientists don't like to attribute single events to global warming, but often say such events fit a pattern.

University of Colorado professor Konrad Steffen, who returned from Greenland Wednesday and has studied the Petermann glacier in the past, said that what Box saw is not too different from what he saw in the 1990s: "The crack is not alarming... I would say it is normal."

However, scientists note that it fits with the trend of melting glacial ice they first saw in the southern part of the massive island and seems to be marching north with time.

Big cracks and breakaway pieces are foreboding signs of what's ahead.

Further south in Greenland, Box's satellite images show that the Jakobshavn glacier, the fastest retreating glacier in the world, set new records for how far it has moved inland.

That concerns Colorado's Abdalati: "It could go back for miles and miles and there's no real mechanism to stop it."
___

On the Net:

Ohio State University images and data: http://bprc.osu.edu/MODIS/

"Massive floods as Tropical Storm Fay holds still over Florida"

21 AUGUST 2008

MIAMI (AFP) - Tropical Storm Fay began a second slow slog across mainland Florida Thursday, as President George W. Bush declared an emergency in the waterlogged, wind-battered state.

"The president today declared an emergency exists in the state of Florida and ordered federal aid to supplement state and local response efforts, due to the emergency conditions resulting from Tropical Storm Fay," spokesman Gordon Johndroe said in a statement.

Holding stationary over the northeastern part of Florida for hours, Fay dumped rains of 50 to 75 centimeters (20 to 30 inches) in some parts of the state, and caused widespread flooding.

"This storm is turning into a serious catastrophic flooding event, particularly in southern Brevard County," Crist said on Wednesday as he sought the emergency declaration giving Florida access to US federal disaster assistance funds.

As of 5 pm (2100 GMT), Fay's center was just west of the location where it made landfall two and a half hours earlier, at Flagler Beach, 120 kilometers (75 miles) north of Cape Canaveral, where the US space agency NASA has a launch pad.

"Fay is moving toward the west near five miles per hour (seven kilometers per hour.)"

"This general slow motion should continue for the next couple of days," the National Hurricane Center said in its latest bulletin.

The storm had maximum sustained winds of near 95 kilometers (60 miles) an hour with higher gusts, though it was expected to weaken as it moves west toward Florida's Gulf Coast panhandle by early Saturday.

Tropical storm force winds extended outward up to 150 miles (240 kilometers), mainly to the east of the storm's center, the NHC said.

The storm is expected to produce rainfall accumulations of five to 10 inches (13 to 25 centimeters) with isolated amounts of 15 inches (38 centimeters) possible across northern Florida, the center said.

Since it powered up from the Caribbean just short of hurricane strength last weekend, Fay has crisscrossed the southeastern US state, first blasting the tourist-heavy Keys, then plowing up the west coast before making landfall Tuesday and crossing very slowly to the northeast.

The storm has spawned tornadoes, flooded some 50,000 homes and knocked out power to 100,000 people.

Earlier in the Caribbean, Fay left a trail of destruction and at least 40 deaths -- particularly in Haiti, where a truck carrying around 60 passengers plunged into a swollen river during the storm.

"Battlefield park touts advances at scene of retreat - Project will offer access to Saratoga site where beaten British encamped"

By DENNIS YUSKO, Staff writer, Albany, New York Times Union

First published: Friday, August 22, 2008

SARATOGA -- New pedestrian trails are being built to offer visitors access to a 22-acre forested hillside where defeated British soldiers made their final encampment after the 1777 Battles of Saratoga.

Construction of the pathways and planned exhibits and signs along the trails are a final step in Saratoga National Historical Park's effort to offer public access to the site, known as Victory Woods, which still contains British earthen barricades, American Indian roasting platforms and more.

The property in the village of Victory has been unused since Wheelabrator-Frye Inc., owners of Victory Packaging Corp., donated the land to the park in 1974.

"There's some really great stories up there," said Gina Johnson, chief of education and visitor services at the park in nearby Stillwater.

The park completed a plan for the site four years ago, and secured nearly $600,000 to make it an attraction.

Once completed next summer, the historic site will allow the park to illustrate one of the final elements of the battles that turned the tide in America's fight for independence.

The Victory Woods project was broken into two phases.

Phase One involved planning.

Phase Two consists of stabilizing archaeological remains, restoring the historic vistas of Fish Creek and the Hudson River and building boardwalks, trails and 11 wayside exhibits.

The signs will feature original art dedicated to several subjects, such as the camp's horrendous conditions and how British soldiers became trapped by the American forces in the days leading up to the British surrender.

In the autumn days following their humiliating defeat in 1777, British Gen. John Burgoyne and some 6,500 fighters retreated seven miles north to this elevated bluff.

With no means of resupply, they were forced to ration food.

A thunderstorm that brought torrential rain kept Burgoyne, British wagons and war materiel mired in mud.

"The rain makes a complete mess of things, and the men are very tired, very worn," Park Ranger Eric Schnitzer said.

Some 17,000 American troops pursued and surrounded the bedraggled British.

Four days of negotiations commenced.

Burgoyne agreed to terms on Oct. 16, Schnitzer said.

The British laid down their arms in what is now Fort Hardy Park in the village of Schuylerville.

Burgoyne's famous surrender of his sword to American Gen. Horatio Gates occurred later at a site along what is now Route 4.

Dennis Yusko can be reached at 454-5353 or by e-mail at dyusko@timesunion.com.

"US, Iraq close in on deal for pullout of US troops"

By QASSIM ABDUL-ZAHRA and ROBERT BURNS, Associated Press Writers

22 AUGUST 2008

BAGHDAD - Iraq and the U.S. pushed close to a deal Thursday setting a course for American combat troops to pull out of major Iraqi cities by next June, with a broader withdrawal from the long and costly war by 2011.

Subject to final approval by the top Iraqi leadership, the exit date for U.S. troops would be December 2011, although the Americans insist on linking that target to additional security and political progress.

President Bush has long resisted a timetable for pulling out, even under heavy pressure from a nation distressed by American deaths and discouraged by the length of the war that began in 2003.

But that has softened in recent weeks.

The timing has major political importance in both Iraq and the United States.

The two contenders to replace Bush as commander in chief, Republican John McCain and Democrat Barack Obama, spar almost daily over the future course of the war.

Obama wants all U.S. combat forces out of Iraq within 16 months of his taking office, saying they are needed more urgently in Afghanistan.

McCain says recent security improvements in Iraq show that decisions on the timing of further pullouts should be determined by circumstances on the ground rather than by prearranged timetables — a position the White House has vigorously held until recently.

The administration has inched toward the Iraqi view that setting at least a target date for withdrawal would make it politically palatable for Iraq's government to accept a substantial U.S. troop presence beyond this year.

The rationale for the pullout is that Iraqi security forces will be ready to stand on their own, although it remains possible that some U.S. military training role would continue.

In Iraq, provincial elections are supposed to be held later this year, followed by national balloting in 2009.

In one key part of the draft agreement, private U.S. contractors would be subject to Iraqi law, unlike at present, but the American side held firm in its insistence that U.S. troops would remain subject exclusively to U.S. legal jurisdiction, officials said.

Immunity remains the main point of contention between the two sides in finalizing the agreement.

The Iraqis are reluctant to allow U.S. military contractors to have free rein when outside U.S. bases and without any Iraqi legal authority over them, according to a senior U.S. official who spoke on condition of anonymity to describe delicate negotiations.

There is an additional sense of urgency to complete a deal because the U.N. Security Council resolution that sets the legal basis for the U.S. troop presence in Iraq is due to expire at the end of this year.

Asked about withdrawal, Secretary of State Condoleezza Rice, said Thursday in Baghdad, "We have agreed that some goals, some aspirational timetables for how that might unfold are well worth having in such an agreement."

Her use of the term "aspirational" suggested that the timetables would be linked in some undisclosed way to the attainment of measurable progress in the security, political and perhaps economic fields.

Other U.S. officials said the deal includes agreement that by June 30, 2009, U.S. combat forces would be out of Iraq's cities, set up elsewhere in the country in what the military calls an overwatch role — available to assist Iraqi security forces as needed, while continuing to train and advise Iraqi troops.

At a joint news conference, Rice and Foreign Minister Hoshyar Zebari said the two sides had accepted the draft agreement and would await a review by Prime Minister Nouri al-Maliki and other top Iraqi leaders — some of whom oppose some parts of the deal — as well as the Iraqi parliament.

The next step is consideration by al-Maliki and his executive council Friday.

Rice's visit was meant to push al-Maliki so he would take the draft agreement to Iraqis for approval, U.S. officials said.

In the Sadr City section of eastern Baghdad, more than 500 followers of the anti-American Shiite cleric Muqtada al-Sadr held a rally Thursday evening to denounce the Rice visit and the proposed security arrangement.

Marchers carried flags and al-Sadr's picture, chanting, "No to the agreement."

Saleh al-Mutlaq, leader of the second-largest Sunni faction in parliament, issued a statement saying the Americans should not depend on any agreement signed with the Shiite-dominated government.

He called on the government to put the deal to a popular referendum rather than simply submit it to parliament.

U.S. officials in Washington, speaking on condition of anonymity because the deal is not final, said Bush administration acceptance of the arrangements was not in doubt unless Iraqi leaders insisted on changes.

The administration has pledged to inform Congress but not submit the agreement for formal approval.

In Baghdad, Rice met with Zebari, al-Maliki and other officials on a brief visit intended to push the Iraqis toward agreement.

Said Zebari: "This agreement determines the principal provisions, requirements to regulate the temporary presence and the time horizon, the mission, of U.S. forces."

Bush has stood firmly behind al-Maliki, and the U.S. resisted pressure last year from its Sunni Arab allies elsewhere in the Middle East to dump the Shiite prime minister in favor of a more secular leader.

But al-Maliki has apparently taken a tough stand in the negotiations to refurbish his nationalist credentials and avoid the label of "America's man" ahead of coming elections.

The Shiite political establishment is also anxious to run the country without U.S. constraints, believing it has the right as leaders of Iraq's largest community, which had been marginalized politically since the modern Iraqi state was established following the collapse of the Ottoman Empire after World War I.

Rice spoke optimistically of completing a deal but stressed that it still needed top-level Iraqi approval.

She also said it was made possible by security improvements.

"I have to say, if I could just make the point, the reason we are where we are going, talking about this kind of agreement, is that the surge worked, Iraqi forces have demonstrated that they are strong and getting stronger," she said.

Zebari, asked about fears expressed by neighboring countries over such a pact, said in Arabic:

"This decision (agreement) is a sovereign one and Iran and other neighboring countries have the right to ask for clarifications."

"... There are clear articles (that) say that Iraq will not be used as a launching pad for any aggressive acts against neighboring countries and we already did clarify this."

A State Department transcript of Zebari's remarks said he added that Iran had been advised of that provision.
___

Associated Press reporters Matthew Lee and Robert Reid contributed to this story from Baghdad.

"Campaigns vie over whether McCain is Bush clone"

By TOM RAUM, Associated Press Writer

Fri Aug 22, 12:56 AM ET

WASHINGTON - Barack Obama likes to say, "We can't afford to give John McCain the chance to serve out George Bush's third term."

Bush's "third term" has become a favorite attack line for Democrats, repeated almost daily by the candidate and his surrogates.

They argue that McCain favors failed Bush administration economic policies and would keep U.S. troops in Iraq for the forseeable future.

But if McCain is running as a Bush stand-in, it's news to the McCain campaign and the White House.

Although he almost always supported Bush's positions in Congress, McCain has done his best on the campaign trail to shun the widely unpopular Republican president, whose job approval rating sunk to a record low 28 percent in AP-Ipsos polls in April and July.

The last time the two Republicans were together was a closed-door McCain fundraiser in Arizona back in May.

The only photo of the two was a departure shot at the airport.

McCain seldom mentions the unpopular president whose job he seeks.

The White House rarely talks about McCain.

So far McCain's strategy hasn't convinced the public.

Six in 10 adults think McCain will follow the policies of Bush, including more than half of whites and nearly six in 10 independents, according to an AP-Yahoo News poll in late June.

McCain has begun airing a television ad in crucial states to defend himself against this perception.

An announcer asserts, "We're worse off than we were four years ago."

Pictures of the White House, the Capitol and the floor of the House of Representatives flash on the screen.

The ad calls McCain "the original maverick."

While McCain spurns Bush as he hunts for general-election votes, the Obama camp melds the two together.

"Four more years of what we've had," warns Sen. Evan Bayh, D-Ind.

"More of the same," echoes former Rep. Jim Leach of Iowa, a moderate Republican supporter of Obama.

"The John McCain of 2000 wouldn't even consider voting for the John McCain of 2008," suggests Howard Dean, chairman of the Democratic National Committee.

The DNC sends out e-mail messages enumerating "100 Ways McCain and Bush are the Same."

The strategy plays on Bush's low approval ratings, public weariness with the Iraq war, high gasoline prices and general economic angst.

It challenges McCain's reputation for independence and helps Obama push his theme of change.

Democrats acknowledge McCain's maverick past, as when he challenged Bush for the GOP nomination in 2000, but say those days are long gone.

"The price he paid for his party's nomination has been to reverse himself on position after position," Obama told a recent town-hall meeting in Indiana.

"And now he embraces the failed Bush policies over the last eight years — politics that helped break Washington in the first place."

"And that doesn't exactly meet my definition of a maverick."

McCain did try to shore up his Republican base by promising to extend and expand Bush tax cuts he once opposed.

He abandoned his opposition to offshore drilling.

He made peace with television evangelists Pat Robertson and Jerry Falwell, whom he once called "agents of intolerance."

And he vowed to appoint judges in the mold of Supreme Court Justices John Roberts and Samuel Alito, both Bush nominations.

But he hardly qualifies as a carbon copy of Bush.

Even now, he opposes Bush's support for drilling in the Arctic National Wildlife Refuge.

Along with Obama, he backs more stem cell research and new restrictions on greenhouse gases that contribute to global warming.

He's slammed the Bush administration's handling of Hurricane Katrina.

He opposed a 2005 administration-backed energy bill that gave big tax breaks to oil and gas companies, a measure Obama supported.

The Obama campaign says that was because it contained lots of money for renewable energy and that the Illinois Democrat voted for an amendment, which failed, that would have scrapped the tax breaks for Big Oil.

McCain was an early critic of the administration's execution of the Iraq war.

Long before Bush agreed last year, McCain pushed to send more U.S. troops to Iraq.

This one of his sharpest differences with Obama, who opposed the Iraq war from the start.

McCain also has taken a much harder line than Bush on Russia's Vladimir Putin.

A longtime Senate Armed Services Committee member, McCain strongly denounced the Russian military incursion into Georgia even before the president himself.

McCain wants to expel Russia from the Group of Eight top industrial democracies.

In the Senate, McCain has often crossed swords with other Republicans on campaign-finance laws and their pet pork-barrel projects.

"I don't think the Obama campaign has done a particularly good job of linking McCain to George Bush," said Democratic pollster Doug Schoen, who has worked for former President Clinton and New York Mayor Michael Bloomberg and is unaffiliated with the Obama campaign.

"I think Obama has not delivered the message with the degree of focus and repetition he needs to be successful in a presidential campaign."

McCain's overall Senate voting record lends support to the Democrats' case.

On legislation on which the president had a clear position, McCain voted with Bush 90 percent of the time from the day Bush took office in 2001 to when Congress left for its August 2008 recess, according to a study by Congressional Quarterly.

For 2007, he voted with the president 95 percent of the time.

Obama voted with Bush 40 percent of the time since joining the Senate in 2005, CQ found.

Andrew Kohut, director of the nonpartisan Pew Research Center, said equating McCain with a third Bush term isn't having as much impact now as it might because "the conversation lately hasn't been about Bush and the state of the country."

"It's been more about Obama."

Also, Kohut said, despite McCain's roll-call record for supporting the president, "McCain is seen as a different kind of Republican."

"He's not seen as politically like Bush."

"When we ask people to rate the ideology of the candidates, Bush is way off to the right and McCain is sort of in the middle."

"So he can be seen as an agent of change, too."

For McCain, distancing himself from Bush while also courting his party's conservative base is a balancing act.

Support for Bush is still strong in some conservative GOP quarters, and the Arizona senator doesn't want to alienate these Republicans.

"We've constantly got to pay attention to the need to excite our base," said McCain campaign manager Rick Davis.

"At the start of the election cycle, the Republican party was pretty dispirited after the 2006 election."

"And in many cases, that remains true today."

James Thurber, a political scientist at American University, said trying to paint McCain as a Bush follower may yet pay off for Democrats.

"All campaigns have to have a clear strategy, theme and message."

"And this is a pretty strong one."

"I think they'll keep hammering at it."

Back to economic reality - thought you would find this interesting Liv:

Inflation may abate with energy prices this year, but oil prices will remain an inflationary threat until America weans itself off oil. Robert Reich sheds light on the disparate energy plans of McCain and Obama. One key to progress in reducing oil dependence will be increasing policy independence from the oil industry. Governments exist ostensibly to look out for the common interest, but in a corporate predator state, as Thomas Palley describes America, democracy deteriorates into rule by the highest bidders such as Big Oil and Big Banks. Palley laments, "Money gives the power to buy the political process, and that power is defended by a gospel of free speech that takes no account of the fact that out-shouting someone is qualitatively equivalent to silencing them." See Palley's “Social Origins of the American Corporate Predator State” for how corporate interests took the helm of economic policy away from the public interest.

Another timely and relevant post, Snuf ....

Thanks again for posting it in here ....

Safe travels this weekend ...

THE BEARDED BUSHIAN "GENTLE BEN" BERNANKE HAS DEFINITELY MASTERED THE POLITICIAN'S "ART" OF TALKING OUT OF BOTH SIDES OF HIS MOUTH AT ONCE IN THIS SPEECH HERE ....

WHICH IS PROBABLY WHY GEORGE W. BUSH PICKED HIM TO BE FED CHIEF IN THE FIRST PLACE ....

BECAUSE HE IS A MEALY-MOUTH ....

WHO WILL SAY WHAT NEEDS TO BE SAID FOR THE SAKE OF POLITICAL EXPEDIENCY ....

ALL THE WHILE, PROTECTING AND ENHANCING THE STATUS QUO ...

And so ...

"Bernanke: Financial crisis taking toll on economy - Regulators might assess health of entire financial system, not just each bank"

By JEANNINE AVERSA, Associated Press

Last updated: 1:12 p.m., Friday, August 22, 2008

JACKSON, Wyo. -- Federal Reserve Chairman Ben Bernanke said Friday the financial crisis that has pounded the country -- coupled with higher inflation -- is taking a toll on the economy and poses a major challenge to Fed policymakers as they try to restore stability.

"Although we have seen improved functioning in some markets, the financial storm that reached gale force" around this time last year "has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," Bernanke said in a speech to a high-profile economics conference here.

While Bernanke welcomed the recent drops in oil and other commodities' prices, and believes inflation will moderate this year and next, the Fed chief also warned the inflation outlook remains highly uncertain.

The Fed, he said, would monitor the situation closely and will "act as necessary" to make sure that inflation doesn't get out of hand.

The current financial and economic environment is one of the most challenging to Fed policymakers "in memory," he acknowledged.

Given those dueling economic cross-currents-- weak economic growth and higher inflation -- many economists believe the Fed will leave rates where they are at its next meeting on Sept. 16, and probably through the rest of this year.

"They won't act until the coast is clear on financial stability and the state of the economy," said Allen Sinai, chief global economist at Decision Economics Inc.

Many fear the economy will hit a rough patch later this year as the bracing effect of the government's tax-rebate checks fades.

Wall Street was buoyed by Bernanke's remarks, a dip in oil prices and growing speculation that Lehman Brothers Holdings Inc. could be sold.

In afternoon trading, the Dow rose 135.49 to 11,565.70, the Standard & Poor's 500 index added 7.45 to 1,285.17, and the Nasdaq composite index rose 19.41 to 2,399.79.

The economy is the top concern for voters and of keen interest to presidential contenders Sens. Barack Obama and John McCain, who are gearing up for their party's conventions.

Financial and credit problems are expected to smolder into next year.

And, the unemployment rate, which jumped to a four-year high of 5.7 percent in July, is expected to keep rising.

The bulk of Bernanke's speech dealt with the need to bolster oversight of the nation's financial system to make it better able in the future to withstand future shocks.

To that end, Bernanke recommended that regulators work on ways to assess the health of the entire financial system, rather than the condition of individual banks, Wall Street investment firms or other financial companies -- as is currently the focus.

"Such an approach would appear well justified as our financial system has become less bank centered," he said.

"Some caution is in order, however, as this more comprehensive approach would be technically demanding and possibly very costly both for the regulators and the firms they supervise."

He added that "stress tests" for a range of financial firms might also be helpful.

Bernanke's remarks come amid renewed worries on Wall Street about the financial health of Fannie Mae and Freddie Mac.

The mortgage giants' stocks have gotten hammered this week as investors became increasingly convinced a government bailout is inevitable.

Although the Fed chief didn't mention the companies, he said one of the critical questions facing the country is how to strengthen the financial system and at the same time protect against "moral hazard," where financial companies might feel more inclined to gamble with risks because they believe the Fed or the government will ultimately bail them out.

"Some particularly thorny issues are raised by the existence of financial institutions that may be perceived as 'too big to fail,' and the moral hazard issues that may arise when governments intervene in a financial crisis," Bernanke said.

Mitigating that problem is another challenge facing policymakers, he said.

Bernanke repeated his call for Congress to provide new regulatory powers to insulate the economy from damage if a Wall Street firm collapses.

He again urged Congress to give the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms and banks.

This year's Fed conference examines past and present financial crises, and the challenges confronting Bernanke and other central bankers as they try to help stabilize financial markets worldwide.

The Fed's handling of the credit, financial and housing debacles is likely to spur debate at the forum, which is sponsored by the Federal Reserve Bank of Kansas City and draws Fed policymakers, economists, academics and international central bank officials.

The Fed has taken unprecedented steps over the past year to battle the nation's worst credit and financial crises in decades.

To brace the wobbly economy, the Fed has slashed its key interest rate by 3.25 percentage points, the most aggressive rate-cutting campaign in decades.

The Fed also has taken some unconventional -- and controversial -- actions to shore up the shaky financial system and to get credit -- the economy's lifeblood -- flowing more freely.

In the broadest expansion of its lending powers since the 1930s, the Fed agreed in March to let investment houses draw emergency loans directly from the central bank.

As part of JPMorgan Chase & Co.'s takeover of Bear Stearns Cos., the Fed provided a $28.82 billion loan.

In July, the Fed said Fannie and Freddie also could tap the program.

For years, such lending privileges were extended only to commercial banks, which are subject to stricter regulatory supervision.

Critics question whether taxpayers are being put at risk and if expanded safety nets will encourage financial companies to act more recklessly in the future.

But Bernanke on Friday again defended the Fed's decisions saying they were needed to avert a financial catastrophe that could have plunged the economy into a deep recession.

"Most owners say their homes depreciated: survey"

By Julie Haviv

22 AUGUST 2008

NEW YORK (Reuters) - A record number of homeowners thought their homes depreciated in value in August, according to a Reuters/University of Michigan survey published on Friday.

Among all homeowners surveyed, 46 percent reported declines in their home's value, twice the level recorded in August of last year and above the previous record of 41 percent set in July.

There was a considerable disparity across the regions, however, as 60 percent of Western homeowners reported declines compared with 34 percent of Southern residents.

A year ago the difference was just as sharp, but at about half the levels, with 33 percent of Western homeowners reporting declines compared with 15 percent of Southern residents.

While consumers more often expected continued declines rather than increases in their home's value during the year ahead, the extent of the expected decline has continued to narrow.

Homeowners expected their home to decline in value by 0.3 percent during the year ahead, down from a peak of 0.9 percent in the second quarter of 2008.

"There were sharp differences in year-ahead home price expectations depending on whether home prices had increased or decreased in the past year," the survey said.

Among the 46 percent who reported past home price declines, an additional decline of 2.4 percent was anticipated.

Among the 21 percent that reported an increase in their home's price during the past year, an additional gain of 2.7 percent was expected.

"Importantly, home price expectations over the next five years also improved," the survey said.

Homeowners anticipated an annual gain of 3.1 percent during the next five years, up from 2.3 percent in July, returning to the levels recorded in late 2007.

"Given long-term inflation expectations, however, this implied that consumers expected no real gains in home prices over the next five years," the survey said.

Home purchase plans remain quite negative, which is not because of negative views about buying conditions, but because of the most negative views of home selling conditions ever recorded, the survey said.

Among all homeowners, 93 percent viewed the current selling conditions unfavorably in August, unchanged from July, but up 76 percent from a year ago and well above the low of 18 percent recorded in August of 2005.

These negative views are based on their reluctance to sell their home at reduced prices, with more than three-in-four of all homeowners citing this reason.

(Reporting by Julie Haviv; Editing by Kenneth Barry)

"Death toll at 5 as Fay pours more rain on Florida"

By BRIAN SKOLOFF, Associated Press Writer

22 AUGUST 2008

MELBOURNE, Fla. - Tropical Storm Fay hobbled across Florida for a fifth day Friday as the state's death toll rose to five, while residents began plodding through muddy water to assess the flood damage to their homes.

Fay has dumped more than two feet of rain along parts of Florida's low-lying central Atlantic coast and was making its third pass through the state in a week.

Before Fay crosses the Panhandle over the weekend, it could bring four to eight inches in some areas.

Driving conditions on interstate highways in north Florida were difficult enough in a car, but Jim Frazier and Deb Fairchild were crossing the state on a motorcycle trying to get back to Illinois after a week in Daytona Beach.

"It's pretty brutal," said Frazier, 47, of Danville, Ill., adding the high winds have caused him to swerve several times on the highway.

State officials tallied storm casualties Friday, saying three people died in traffic accidents in the heavy rain and two others drowned in surf kicked up by the storm.

Overall, the storm has been blamed for 28 deaths, most in the Caribbean.

A man also died in Florida days before the storm while testing generators.

A 16-year-old girl died in Duval County when her car collided with an SUV after spinning on wet pavement Wednesday.

A 44-year-old was killed when his truck rolled while going around a curve on a rain-soaked road Thursday, and a 43-year-old man died Wednesday in Indian River County when his vehicle spun and hit a traffic light post.

Two swimmers drowned in heavy surf Thursday on the Atlantic coast, a 21-year-old woman in Duval and a 35-year-old woman in Volusia County.

President Bush issued a federal disaster declaration Thursday for the affected parts of Florida, as hundreds of residents fled floodwaters that drove alligators and snakes out of their habitats and into streets.

At 11 a.m. EDT, the center of the storm was located about 45 miles northeast of Cedar Key with sustained winds weakening slightly to near 45 mph.

National Hurricane Center meteorologists say isolated tornadoes are possible over portions of northeastern Florida, southern Georgia and southern South Carolina.

A casino ship broke free early Friday morning then grounded in the St. Johns River east of the Jacksonville Pilot's Station, Coast Guard officials said.

A small tug moored nearby pull the vessel free and towed the ship back to its berth.

Emergency officials planned to begin surveying damage along the coast Friday as the floodwaters slowly recede.

In Brevard and St. Lucie Counties, residents welcomed the sight of muddy brown water lines on homes — signifying the receding of flood waters.

Friday morning, officials in Melbourne carried boats down streets where just a day earlier 4 feet of water made roads look like rivers.

About 150 people in Brevard county were evacuated by authorities; 100 others left their homes voluntarily.

"You had people here who didn't want to leave but after a few days of being stranded, they were saying, 'OK, it's time to go,'" said Hector Rodriguez, who works for the private firm Critical Intervention Services, which was hired by property managers to assist with evacuations.

Water as high as several feet still remained in some parts of this neighborhood, but most of the area had drained, leaving behind a half-inch thick layer of muck and mud.

One resident stood in his driveway boiling coffee on a propane grill.

Power outages plagued the area.

As of 6:15 a.m. Friday, Jacksonville Electric Authority reported 66,000 customers without power.

The storm first made landfall in the Florida Keys earlier this week, then headed out over open water again before hitting a second time near Naples.

It then advanced slowly across the state, popped back out into the Atlantic Ocean and struck again.

A tropical storm warning was posted for the Gulf coast of Florida from Aripeka in Hernando County to Indian Pass, and a tropical storm watch is also in effect from west of Indian Pass to Destin.

There also was still a tropical storm warning on the Atlantic Coast from Sebastian Inlet, Fla., north to the Savannah River on the border between Georgia and South Carolina.
___

Associated Press writers Ron Word reported from Jacksonville; Lisa Orkin Emmanuel, Curt Anderson, David Fischer and Tamara Lush reported from Miami; Bill Kaczor reported from Tallahassee; Russ Bynum reported from Savannah, Ga.; and Brendan Farrington reported from St. Augustine.

"Brooklyn commemorates battle America lost"

By RICHARD PYLE, Associated Press

Last updated: 11:22 a.m., Friday, August 22, 2008

NEW YORK -- It was the dog days of August when the British launched a massive attack to smash the rebellion spreading through the colonies.

Landing from ships on the Brooklyn shore, 15,000 British troops outflanked and then routed Gen. George Washington's amateur army in what would be the biggest battle of the American Revolution.

Trapped, outnumbered and facing certain defeat, the ragtag Americans managed a stealthy escape across the East River to Manhattan, where they would continue the fight, losing battle after battle until they won the war seven years later.

That exploit on Aug. 29, 1776, ended the Battle of Brooklyn, being remembered this week on its 232nd anniversary -- a lopsided British victory that humiliated Washington in his first outing as commander and nearly scuttled the American patriots' fight for liberty, less than two months after the Declaration of Independence.

The observance of Battle Week began last weekend with a ceremonial reading of that document and will end on Sunday when re-enactors in Revolutionary War uniforms staging mock battles on two original sites including Brooklyn's Green-Wood Cemetery.

On Saturday, history-minded citizens also will mark the 100th anniversary of the Prison Ship Martyrs Monument, a 149-foot granite obelisk erected over the mass grave of 11,500 people who died aboard British prison ships off Brooklyn during the revolution.

"These were America's first POWs," notes Ted General, vice president of the Society of Old Brooklynites, one of whose members, Brooklyn poet Walt Whitman, first proposed the monument.

Recently restored, the memorial in Brooklyn's Fort Greene Park is the largest Revolutionary War marker in New York City, whose population at the time was far more sympathetic to the British than to a rebellion led by radicals from Boston, Philadelphia and Virginia.

In fact, once a series of further debacles drove Washington's forces into New Jersey, New York became British military headquarters and would remain so until the war ended in 1783.

For all its historical significance, the Battle of Brooklyn has never achieved the iconic status of Paul Revere's ride, the Minutemen at Concord or Bunker Hill.

"The reason is simple -- we lost," says Kenneth T. Jackson, a history professor at Columbia University and former director of the New-York Historical Society.

"Americans like happy stories."

"Disaster for the American side does not fit into the larger narrative of American history."

The escape of Washington's defeated army from Brooklyn to Manhattan was accomplished in a flotilla of small boats.

Aided by darkness, fog and winds that kept Admiral Richard Howe's fleet from entering the East River, the operation was so deftly executed that the British didn't know it was happening.

Jackson compares it to Britain's famous evacuation of troops trapped on French beaches at Dunkirk in 1940.

"Dunkirk is better known but this was more dramatic," he said.

"If it fails, essentially the war is over."

Brooklyn being no Gettysburg, one must look hard to find the places where fighting occurred.

Many are immersed in residential neighborhoods, layered with subsequent history unrelated to the birth of a nation.

Easily missed, for example, is a plaque on a building in downtown Brooklyn, where Washington is said to have watched the British overwhelm his forces at Gowanus Creek.

That mile-long waterway through south Brooklyn is now the Gowanus Canal, notorious for industrial pollution.

Two blocks further east is the reconstructed Old Stone House, a 1699 Dutch farmhouse where 400 Maryland soldiers fought a bloody delaying action allowing 10,000 of Washington's troops to get away.

The Old Stone House, now a center for interpretive history, had 14,000 visitors last year despite being open only on weekends, said director Kim Maier.

As part of Battle Week, a new plaque detailing its history was erected nearby.

Graceful townhouses and a public esplanade now top the 66-foot bluff called Brooklyn Heights, from where the battered colonials escaped to Manhattan.

The only clue to this history, until now, has been a small plaque at the site of a temporary fort.

On Monday, two new markers also were put in place in Brooklyn Bridge Park, an 85-acre park scheduled for completion in 2012 along 1.3 miles of the East River waterfront.

------

On The Web:

http://www.theoldstonehouse.org

http://www.frauncestavernmuseum.org/war--brooklyn.htm

"Judge won't jail 2 Marines for refusing to testify"

By CHELSEA J. CARTER, AP Military Affairs Writer

22 AUGUST 2008

RIVERSIDE, Calif. - A judge has refused to jail two Marines but found them in contempt of court for refusing to testify against a former squad leader accused of killing unarmed detainees in Iraq.

U.S. District Judge Stephen Larson rejected a plea Friday by a prosecutor to jail Sgt. Ryan Weemer and Sgt. Jermaine Nelson.

Instead, he ordered them to return to court in 30 days to begin proceedings on the contempt charges.

Weemer and Nelson were previously given immunity by Larson to testify in the case charging Luis Nazario Jr. with shooting and killing unarmed detainees in November 2004 in Fallujah.

The two were told their testimony would not be used against them in their own military cases involving detainee deaths.

They declined to accept immunity because their attorneys do not believe their testimony would be withheld from their upcoming courts martial.

"Bush consults with Iraqi on troop withdrawal"

By RICHARD LARDNER, Associated Press Writer

22 AUGUST 2008

CRAWFORD, Texas - President Bush and Iraqi Prime Minister Nouri al-Maliki spoke Friday by secure video as work on a plan to withdraw U.S. troops from Iraq by 2011 continued.

"There are still discussions ongoing," said White House spokesman Gordon Johndroe.

"It's not done until it's done."

"And the discussions are really ongoing."

"And ongoing and ongoing."

"But hopefully drawing to a conclusion."

Bush is vacationing at his ranch in Texas.

The deal being discussed by U.S. and Iraqi negotiators sets a course for American combat troops to pull out of major Iraqi cities by next June, with a broader exit two years later from the long and costly war that began in March 2003.

The dates could be adjusted if security and political progress in Iraq deteriorate.

There are about 140,000 U.S. forces in Iraq, according to United States Central Command, and more than 4,100 American troops have been killed there.

Johndroe would not discuss specifics of the plan being negotiated, including the dates when U.S. troops might begin to leave.

The president has previously resisted a timetable for the departure of U.S. troops.

"There are a lot of details that have to be worked out," Johndroe said.

Increased security in Iraq, which the Bush administration said is due to the so-called surge of U.S. forces more than a year ago, created the conditions for the troop withdrawal negotiations to take place, Johndroe said.

The talks take place as Sens. John McCain and Barack Obama regularly trade shots over progress in Iraq and argue over who is better suited to be commander in chief when Bush leaves office in January.

Obama, the Democratic nominee in waiting, wants all U.S. forces out of Iraq within 16 months of his taking office, saying they are needed in Afghanistan.

Violence in Afghanistan and neighboring Pakistan has increased due to a resurgent Taliban and political instability in Pakistan.

"I am glad that the administration has finally shifted to accepting a timetable for the removal of our combat troops from Iraq," Obama said in a statement released Friday.

"Senator McCain has stubbornly focused on maintaining an indefinite U.S presence in Iraq, but events have made his bluster and record increasingly out of touch with reality," Obama said.

Obama opposed the U.S. invasion of Iraq.

And he's said the surge of troops has not led to the political reconciliation needed to ensure the country will remain secure once all U.S. troops are gone.

McCain, the Republican candidate, supported the president's January 2007 decision to add 30,000 U.S. troops in Iraq.

Those additional troops have returned home.

McCain has also said the security situation in Iraq should dictate any pullout schedule.

And he's criticized Obama for not only opposing the troop surge but trying to block the funding that would have allowed the increase.
__

On the Net:

http://www.whitehouse.gov

"Signs of pullback by Russian forces in Georgia"

By MIKE ECKEL, Associated Press Writer

22 AUGUST 2008

IGOETI, Georgia - Russian military convoys rolled out of three key positions in Georgia and headed toward Moscow-backed separatist regions Friday in a significant withdrawal two weeks after thousands of troops roared into the former Soviet republic.

In Moscow, Defense Minister Anatoly Serdyukov said the pullback into separatist South Ossetia was finished late Friday — but the United States was less than impressed.

"(Russians) have without a doubt failed to live up to their obligations," U.S. State Department spokesman Robert Wood said in Washington.

"Establishing checkpoints, buffer zones are definitely not part of the agreement."

President Bush, vacationing at his ranch in Texas, conferred with French President Nicolas Sarkozy and the two agreed that Russia is not in compliance with the agreement Sarkozy helped negotiate, White House spokesman Gordon Johndroe said.

"Compliance means compliance with that plan," he said.

"We haven't seen that yet."

"It's my understanding that they have not completely withdrawn from areas considered undisputed territory, and they need to do that."

Georgia's state minister on reintegration, Temur Yakobashvili, told The Associated Press the formation of a buffer zone outside South Ossetia "is absolutely illegal."

In western Georgia, a column of 83 tanks, APCs and trucks hauling artillery moved away from the Senaki military base north toward the border of Georgia's breakaway Abkhazia region on Friday afternoon.

Georgian police said the vehicles came from the base, which has been under Russian control for more than a week.

In central Georgia, at least 40 Russian military vehicles left the strategic crossroads city of Gori, heading north toward South Ossetia and Russia.

Gori straddles the country's main east-west highway south of South Ossetia, the separatist region at the heart of the fighting.

After Russian forces left Gori, cranes began dismantling a Russian checkpoint.

An Associated Press reporter in Igoeti, meanwhile, confirmed that Russian forces had pulled up from their former checkpoints and roadside positions around the village.

Igoeti, on the road between Gori and the Georgian capital of Tbilisi, had been the Russians' closest position to the Georgian capital.

Russian President Dmitry Medvedev had promised to have his troops out of Georgia by Friday — but a top Russian general later amended that prediction, saying it could take at least 10 days before the bulk of Russian troops and hardware could be withdrawn.

The short but intense war near Russia's southern border has deeply strained relations between Moscow and the West.

Russia has frozen its military cooperation with NATO, Moscow's Cold War foe, underscoring a growing division in Europe.

Georgia's pro-Western leaders are pushing to join NATO, angering a resurgent Russia.

The major fighting began Aug. 7 when Georgia launched a barrage targeting South Ossetia, which claims independence and has Russian support.

Russian forces quickly drove the Georgians back and drove deep into Georgia.

Under an EU-brokered cease-fire deal, Russian forces are to pull back to positions they held before the fighting erupted, and Western leaders have called for a complete withdrawal from Georgia.

But Russia says it will keep troops it calls peacekeepers in South Ossetia and Abkhazia as well as in buffer zones stretching into Georgia proper.

There were still questions about the extent of the Russian pullout on Friday.

Outside Poti, Russian troops were seen digging large trenches Friday morning near a bridge that provides the only access to the city.

Five trucks, several armored personnel carriers and a helicopter were parked nearby.

Another Russian position was seen in a wooded area outside the city.

The mayor of Poti, Vano Saginadze, said late Friday that two Russian roadblocks remained in or near the city.

Poti is far from any zone that Russian troops could be allowed to be in under the cease-fire.

Regardless of the timing and extent of the withdrawal, Russia, Georgia and the West are bound to become embroiled in disputes over the status of South Ossetia and Abkhazia, which broke from central government control in early 1990s wars after the Soviet breakup.

The Russian parliament was expected to discuss recognizing the independence of the separatist regions Monday.

In South Ossetia, whose capital Tskhinvali suffered the most in fighting, Russian troops were clearly establishing a long-term presence, erecting 18 peacekeeping posts in a so-called "security zone" around the border with Georgia.

Col. Gen. Anatoly Nogovitsyn, deputy head of Russia's general staff, said Friday the move was aimed at preventing looters and Georgian arms smugglers.

He said Russia still expected Georgia to try future military offensives in South Ossetia and Abkhazia, where another further 18 peacekeeping posts are to be set up.

The heavily armed soldiers that Russia calls peacekeepers have been working closely with regular Russian troops and their separatist allies against Georgian forces.

A total of 2,142 Russian peacekeepers are to be deployed on the Abkhazia de facto border, while 452 will man the South Ossetia de facto border, Nogovitsyn said.

In an interview with The Associated Press, South Ossetian leader Eduard Kokoity signaled that ethnic Georgians will not be allowed return to the region, charging that ethnic Ossetians were not allowed to return to Georgia after a previous conflict.

Asked whether the ethnic Georgians will be able to come back and where they will settle, Kokoity said, "Exactly, the main question is where, there is nothing left anymore."

That's because deserted ethnic Georgian villages around Tskhinvali have been burned and looted — many days after fighting ended.

In the village of Achabeti, an AP reporter saw Ossetians remove chairs, window frames and whatever else they could carry from abandoned Georgian houses.

Many houses stood smoldering in the August heat and another building went up in flames.

An excavator was dismantling a destroyed house.

Russian emergency officials arrived in Achabeti to evacuate the elderly who were too frail to flee in an operation they have been conducting in Georgian villages for the past several days.

The Georgians were taken to Gori, where officials would attempt to get them in touch with their relatives.

Many of the elderly were happy to be evacuated, having been left behind with no food or care.

But some did think it was an ingenious effort by Ossetians and the Russians to deport all Georgians from Ossetia.

"They are erasing this village from the face of earth so that Ossetians would come here," Aliosh Maisuradze, 83, said with tears in his eyes.

The U.N. estimates 158,000 people have fled their homes due to the fighting.

The United States has carried out 20 aid flights to Georgia since Aug. 19, and three U.S. warships were heading toward Turkey carrying blankets, hygiene kits and baby food to Georgia.
___

Associated Press writers Christopher Torchia in Igoeti, Georgia; Bela Szandelszky and Raul Gallego in Poti, Georgia; David Rising in Tbilisi, Georgia; and Douglas Birch, Maria Danilova, David Nowak and Jill Lawless in Moscow contributed to this report.

"9 polar bears observed on risky open ocean swims"

By DAN JOLING, Associated Press Writer

Thu Aug 21, 8:41 PM ET

ANCHORAGE, Alaska - Nine polar bears were observed in one day swimming in open ocean off Alaska's northwest coast, an increase from previous surveys that may indicate warming conditions are forcing bears to make riskier, long-distance swims to stable sea ice or land.

The bears were spotted in the Chukchi Sea on a flight by a federal marine contractor, Science Applications International Corp.

It was hired for the Minerals Management Service in advance of future offshore oil development.

The MMS in February leased 2.76 million acres within an offshore area slightly smaller than Pennsylvania.

Observers Saturday were looking for whales but also recorded walrus and polar bears, said project director Janet Clark.

Many were swimming north and ranged from 15 to 65 miles off shore, she said.

Department of Interior Secretary Dirk Kempthorne in May declared polar bears a threatened species because of an alarming loss of summer sea ice and forecasts the trend will continue.

Polar bears spend most of their lives on sea ice, which they use as a platform to hunt their primary prey, ringed seals.

Shallow water over the continental shelf is the most biologically productive for seals, but pack ice in recent years has receded far beyond the shelf.

Conservation groups fear that one consequence of less ice will be more energy-sapping, long-distance swims by polar bears trying to reach feeding, mating or denning areas.

Steven Amstrup, senior polar bear scientist for the U.S. Geological Survey in Anchorage, said the bears could have been on a patch of ice that broke up northwest of Alaska's coast.

"The bears that had been on that last bit of ice that remained over shallow shelf waters, are now swimming either toward land or toward the rest of the sea ice, which is a considerable distance north," he said in an e-mail response to questions.

It probably is not a big deal for a polar bear in good condition to swim 10 or 15 miles, Amstrup said, but swims of 50 to 100 miles could be exhausting.

"We have some observations of bears swimming into shore when the sea ice was not visible on the horizon," he said.

"In some of these cases, the bears arrive so spent energetically, that they literally don't move for a couple days after hitting shore."

Only further research can tell the effect of greater swimming distances on polar bear populations, he said.

"Polar bears can swim quite well, but they are not aquatic animals," he said.

"Their home is on the surface of the ice."

Satellite data Saturday showed the main body of pack ice about 400 miles offshore with one ribbon about 100 miles off Alaska's coast, said Mark Serreze of the National Snow and Ice Data Center.

Clark said the animals' origin and destination could not be known without radio collar monitoring.

"To go out there and say they were going from this point to this point would be complete speculation," Clark said.

Observers have no indication of the fate of the nine polar bears observed Saturday.

"Study finds new earthquake dangers for NYC"

By JIM FITZGERALD, Associated Press

Last updated: 4:42 p.m., Friday, August 22, 2008

WHITE PLAINS, N.Y. -- An analysis of recent earthquake activity around New York City has found that many small faults that were believed to be inactive could contribute to a major, disastrous earthquake.

The study also finds that a line of seismic activity stretching from Stamford, Conn., to Peekskill comes within two miles of the Indian Point nuclear power plant in Buchanan.

Another fault line near the plant was already known, so the findings suggest Indian Point is at an intersection of faults.

The study's authors, who work at Columbia University's Lamont-Doherty Observatory in Palisades, acknowledge that the biggest earthquakes -- in the 6 or 7 magnitude range -- are rare in the New York City region.

They say a quake of magnitude 7 probably comes about every 3,400 years.

But they note that no one knows when the last one hit, and because of the population density and the concentration of buildings and financial assets, many lives and hundreds of billions of dollars are at risk.

Co-author Leonardo Seeber said in an interview that although the metropolitan area does not have a single great fault like the San Andreas fault in California, "Not having a major fault is not a reason not to worry about earthquakes."

"Instead of having a single major fault or a few major faults, we tend to have a lot of very minor and sort of subtle faults," he said.

"It's a family of faults, and that can contribute to the severity of an earthquake."

John Ebel, director of seismology at Boston College's Weston Observatory, said he agreed with the study's finding that small faults can contribute to large earthquakes.

"A quake can jump from one fault to another," he said.

The study, published in the Bulletin of the Seismological Society of America, analyzed 383 known earthquakes over the past 330 years in or near New York City.

The biggest were three that reached magnitude 5 in 1737, 1783 and 1884.

Data on earthquakes since the early 1970s, when Lamont deployed dozens of new detectors, enabled the authors to see patterns from smaller quakes, including the magnitude 4.1 quake that was centered on Ardsley, in Westchester County, in 1985.

The report inferred from the data that there is a seismic zone, previously undetected, running from Stamford to Peekskill and intersecting with the large, well-known Ramapo fault near Indian Point.

Lynn Sykes, the lead author, said the finding means the danger of a big quake near the nuclear plants is greater that had been thought.

Sykes acknowledged in an interview with The Associated Press that he is opposed to an application from Entergy Nuclear, which owns the nuclear plant, to extend the licenses of the two reactors, but he said, "I try to keep that as independent from my work as possible."

Columbia spokesman Kevin Krajick said the study had been provided before publication to state Attorney General Andrew Cuomo, who argued unsuccessfully earlier this year that the Nuclear Regulatory Commission should consider the new earthquake data as it decides whether to extend the licenses.

Ebel said the report's suggestion of a fault line was "a purely circumstantial, speculative argument, but while it's speculative it's within the scientific bounds of reason."

He praised the study and urged other scientists to build on it.

Jim Steets, a spokesman for Entergy, said the plant was designed to withstand a seismic event.

He said that even if the frequency and intensity of earthquakes is greater than was believed when the plant was built, it wouldn't drastically change the outlook for plant safety.

He said the plant "may very well be among the safest places to go during a seismic event."

------

On the Net:

Seismological Society of America, http://www.seismosoc.org/

"Billionaires say US debts need attention - 'I.O.U.S.A.' film and billionaires behind it want nation's debts to get attention in campaign"

By JOSH FUNK, Associated Press

Last updated: 1:22 a.m., Friday, August 22, 2008

OMAHA, Neb. -- Two billionaires used the screening of a documentary in theaters across the United States on Thursday to urge the country to come to grips with its staggering debt load.

Warren Buffett and Pete Peterson were at the premiere of the movie "I.O.U.S.A." to add their views to the film's message: An economic disaster will befall the nation if the federal government's $53 trillion in debts continue to grow.

But Buffett said at a news conference before the movie's showing that he doesn't think the country's financial picture is quite as dire as the filmmakers portray.

"I do not regard our national debt as unduly alarming," said Buffett, who is chairman and chief executive of Berkshire Hathaway Inc., and is listed by Forbes magazine as the world's richest man.

Buffett said he's confident the country will be able to address its debts and remain prosperous, but he doesn't want to see the share of the U.S. gross domestic product devoted to debt continue to grow.

"We've overcome things far worse than what is going on right now," Buffett said, who was interviewed in the movie but is not backing it financially.

The film that was shown Thursday in 358 theaters nationwide details the federal government's debts.

The movie is backed by Peterson -- who co-founded the Blackstone Group LP private equity firm and served as commerce secretary under President Nixon -- and is part of his foundation's campaign to give the ballooning debt a central role in the presidential campaign.

"What concerns me more than anything is our savings rate," Peterson said.

Peterson said the meager U.S. rate of savings today means that roughly 70 percent of the nation's debts are being bought by foreign investors, and that could create geopolitical and economic problems for the country.

A panel discussion in Omaha followed the movie and was broadcast live to the other theaters, except on the West Coast where it was shown tape-delayed.

Thursday's panel discussion featured Buffett, Peterson, AARP Chief Executive Bill Novelli and William Niskanen, chairman of the libertarian-leaning CATO Institute.

Niskanen said the nation has to increase the retirement age in Social Security to at least 70 from the current range of 65 to 67.

He also backed adding an income test to Medicare so those with more money pay a larger share of their health costs.

Peterson said he hopes the movie will help explain the problems debt can bring, so politicians will feel more pressure to act.

"The problem is getting the public understanding and the political will to do something about it," he said.

The "I.O.U.S.A." filmmakers followed former U.S. Comptroller David Walker as he toured the country, speaking to college groups, newspaper editorial boards and community groups about the nation's financial problems.

Most of the talks in the movie took place while Walker still ran the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Walker and the movie cite GAO figures that show the U.S. government owed roughly $53 trillion more than it had at the end of the 2007 fiscal year, the most recent figure available.

About $11 trillion of that covers publicly traded government debt, the amount the federal government owes to employee pensions and the cost of environmental cleanup of federal land.

The rest of the $53 trillion figure accounts for projected shortfalls in Medicare and Social Security.

The cost of covering those obligations is expected to soar as more baby boomers become eligible for the two programs.

Buffett said he doesn't believe those programs that help provide for the elderly will consume the bulk of the government's resources in the future because America will be wealthier.

"The important thing to remember is that the pie gets larger over time, and there's more to divide up," Buffett said.

But Walker, who also took part in the panel discussion, said he disagrees with Buffett's assessment because the predictions the movie highlights about the country's debt already assume the nation will be wealthier.

Walker said he hopes both the Democratic and Republican candidates for president will acknowledge the staggering amount of debt the nation carries, and pledge to appoint a bipartisan coalition next year to look for solutions.

The film also featured interviews with prominent businessmen and officials from both major political parties, such as former Federal Reserve chairmen Alan Greenspan and Paul Volcker and former U.S. Treasury secretaries Paul O'Neill and Robert Rubin.

Greenspan warned that the nation cannot continue consuming more than it produces indefinitely.

"Without savings, there is no future," Greenspan said in the movie.

Thursday's screenings and panel discussion will be followed by a 12-city theatrical run beginning Friday.

Peterson says he wants to have the movie shown on TV next year.

------

On the Net:

I.O.U.S.A. movie: http://www.iousathemovie.com

Peter G. Peterson Foundation: http://www.pgpf.org

NCM Fathom: http://www.fathomevents.com

Roadside Attractions: http://www.roadsideattractions.com

Berkshire Hathaway Inc.: http://www.berkshirehathaway.com

"UK economic growth ground to a halt in Q2 - UK economic growth ground to a halt in Q2, ending more than 15 years of continuous growth"

By EMILY FLYNN VENCAT, Associated Press

Last updated: 7:02 a.m., Friday, August 22, 2008

LONDON -- British economic growth ground to a halt between April and June, ending more than 15 years of continuous expansion, the government said Friday, as many fear the country is headed for recession.

The growth figure of 0.0 percent is below even the modest 0.2 percent that the Office for National Statistics had predicted.

It ends a run of 63 consecutive quarters -- nearly 16 years -- of growth since the April to June period of 1992, when Britain's gross domestic product shrank.

The figures are the strongest indicator yet -- amid a crashing housing market, falling consumer confidence and inflation running at double government targets -- that Britain is teetering on the brink of a recession.

Economists say that preliminary data shows that the British economy is performing even worse now than it did in the second quarter, meaning that GDP shrinkage is likely to be recorded in the upcoming July to September quarter.

"We've entered a period of quite acute weakness that's unlikely to be short-lived," said Jonathan Loyns, chief European economist at Capital Economics.

"There's a good chance we're facing at least two consecutive quarters of negative growth."

Two quarters of contraction is one common definition of a recession.

In the midst of the worst housing crash for 30 years, Britain's construction industry has been hit the hardest, the national statistics office said, with construction output falling 1.1 percent.

Meanwhile, manufacturing output fell by 0.8 percent, according to the government figures.

That confirms a survey published by the Chartered Institute of Purchasing and Supply earlier this month showing that the Britain's manufacturing activity declined by the most in almost a decade in July.

"Buffett says economy's troubles will continue - Buffett says recession will persist as ripples of credit mess spread but economy will recover"

By JOSH FUNK, Associated Press

Last updated: 4:52 p.m., Friday, August 22, 2008

OMAHA, Neb. -- Billionaire investor Warren Buffett said Friday the economy continues to be in a recession, by his definition, and will continue to be for at least several more months.

During a live appearance on CNBC, Buffett said ripples of the credit crunch are continuing to cause problems in financial businesses and the economy.

Earlier this year he said a financial crisis reveals which players have been "swimming naked," because the tide goes out.

That picture has worsened along with the crisis.

"We found out that Wall Street has been king of a nudist beach," said Buffett, who is chairman and chief executive of Berkshire Hathaway Inc., which is based in Omaha.

Buffett said activity at businesses Berkshire owns, especially ones related to housing construction such as Shaw carpet and Acme Brick, continued to slow during the summer.

He's confident the nation will be doing better five years from now, Buffett said, but the economy could be worse five months from now.

Buffett said the economy is in a recession because most Americans aren't doing as well today as before.

The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.

Regarding the nation's credit crunch, Buffett said he believes mortgage giants Fannie Mae and Freddie Mac are too big to fail, but that doesn't mean that all the shareholder equity in those companies can't be wiped out.

"They're looking for help, obviously."

"And the scale of help is such that I don't think it can come from the private sector," Buffett said.

So the Oracle of Omaha predicted that the federal government eventually will have to step in to help because the troubles of Fannie Mae and Freddie Mac seem to be growing and feeding on themselves.

Together the companies hold about half of U.S. mortgage debt and are the largest source of funding for home mortgages.

But they are seeing too many defaults.

Losses between April and June for the two companies totaled $3.1 billion, and investors fear they will continue to grow.

Buffett said it's likely more banks will fail, especially in areas where there was a real estate bubble and the bank got heavily involved in the housing market.

"What we'll see is failures where the bankers were dumb in what they did," Buffett said.

But Buffett said the Federal Deposit Insurance Corp.'s guarantee on accounts up to $100,000 should prevent bank failures driven by panic.

Buffett said the nation's current economic struggles create investment opportunities, and his phone is ringing more lately than it was three months ago.

But Buffett said many of those calls have come from desperate people and didn't represent good investment opportunities.

As the stock market problems continue, Buffett is looking for ways to use Berkshire's roughly $31 billion in cash.

"The cheaper they get, the harder I'll look," he said, referring to shares.

He said Berkshire added to some of its holdings because share prices fell enough to be attractive.

The company had been buying shares of either Wells Fargo & Co. or American Express Co. in recent months, he said, but wouldn't specify which.

On Friday, American Express shares gained $1.78, or 4.8 percent, to close at $38.79, while Wells Fargo gained 92 cents, or 3.2 percent, to $29.36.

Buffett also said Friday he sold nearly two-thirds of Berkshire's 35.6 million shares of Anheuser-Busch Cos. stock because he hadn't been sure Belgian brewer InBev SA's takeover bid of $65 a share would succeed.

Anheuser agreed to the $52 billion bid in July.

"In retrospect, I was wrong to partially sell the holdings," Buffett said, disclosing that he sold the stock for about $61 or $62 a share.

At the end of June Berkshire still held 13.8 million shares of Anheuser.

Buffett said the trip he and friend Bill Gates took earlier this week to Canada to look at Alberta's oil sands shouldn't be interpreted as a sign that he or Berkshire will invest in mining companies.

Buffett said what he learned on the trip may be useful a couple years down the road, but he has no current plans to invest in oil sands mining.

On the political front, Buffett encouraged Americans not to expect perfection from candidates.

He said the presidential race features two good candidates this year, but he favors Democrat Barack Obama even though he doesn't agree with all of his proposals.

"The only way to get somebody who agrees with you 100 percent is to run yourself, and I have no interest in that," Buffett said.

Berkshire subsidiaries include insurance, clothing, furniture, candy companies, restaurants, natural gas and corporate jet firms.

Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

------

On the Net:

Berkshire Hathaway Inc.: http://www.berkshirehathaway.com

WHAT IS THE REAL COST TO AMERICA OF A HUGE STACK OF LIES?

"Freddie Mac courts investors, Buffett passes - Freddie Mac tries to get investors to buy its stock to raise capital, but Buffett passes"

By J.W. ELPHINSTONE, Associated Press

Last updated: 6:12 p.m., Friday, August 22, 2008

NEW YORK -- Freddie Mac talked to investors this week about possibly buying its stock to raise much-needed capital but billionaire investor Warren Buffett said he passed on an opportunity to help the troubled mortgage giant.

The likelihood Freddie will find willing investors took another hit after Moody's Investors Service lowered the company's preferred stock ratings and those of its sister company Fannie Mae to near junk status.

Shares of the government-sponsored enterprises tumbled in midday trading.

Freddie spokesman Douglas Duvall confirmed to The Associated Press Friday that the company's management has been in talks with potential investors this week as part of ongoing discussions to raise capital.

He declined to give any details about the meetings, possible investors or structures.

The Wall Street Journal reported on the talks Friday.

Freddie promised in May to raise $5.5 billion to shore up its finances, but hasn't yet and its declining share price makes raising that money far less feasible.

Fannie Mae spokeswoman Amy Bonitatibus declined to comment on whether the company is pursuing similar talks.

Warren Buffett acknowledged during a live appearance on CNBC Friday that he had been approached by Freddie and Fannie and passed on getting involved.

The timing of the incident was not immediately clear.

Buffett's company Berkshire Hathaway Inc. was the largest Freddie shareholder around 2000 and 2001, he said.

The company sold its shares after Buffett realized that both companies were trying "to report quarterly earnings to please Wall Street."

Buffett said he believes the federal government will have to step in because the pair's troubles seem to be growing and feeding on themselves.

Losses between April and June for the two totaled $3.1 billion as defaults in their portfolios mount.

The pair hold about half of outstanding U.S. mortgage debt and are the largest source of funding for home loans.

"They're looking for help, obviously."

"And the scale of help is such that I don't think it can come from the private sector," Buffett said.

Investors appear to believe existing common stockholders would get nothing if there is a government bailout, a view Buffett also shares.

What remains unclear is whether investors in preferred shares -- a type of investment that incorporates elements of both stocks and bonds -- will also be wiped out.

On Friday, Moody's cut its ratings on the companies' preferred stock five notches to "Baa3" from "A1."

A rating of "Baa3" is one notch above junk status.

It also put them on review for possible downgrade, saying they each have limited ability to raise equity.

The ratings agency believes the likelihood of government intervention has risen.

While Freddie's stock has lost more than half its value this week and Fannie's is down 37 percent, most observers think that's not enough to force the government to step in.

Only when there's evidence the companies can't sell short-term debt -- an indication they would no longer be able to operate normally -- will the government intervene, they say.

Treasury Department spokeswoman Jennifer Zuccarelli said Friday that the department is "staying on top of the situation and communicating regularly with the companies, their regulator, and the Federal Reserve."

Fannie and Freddie's shares have lost more than 90 percent of their value this year.

Fannie Mae fell 30 cents, or 6.2 percent, to $4.55, and Freddie Mac fell 42 cents, or 13.3 percent, to $2.74.

------

AP Business Writer Josh Funk in Omaha, Neb., contributed to this report.

"Oil prices fall over $6 on stronger dollar - Oil prices plunge $6 a barrel after dollar strengthens, Russia begins Georgia pullback"

By STEVENSON JACOBS, Associated Press

Last updated: 5:42 p.m., Friday, August 22, 2008

NEW YORK -- Oil prices tumbled more than $6 a barrel Friday -- the biggest one-day percentage plunge in nearly four years -- after a rebounding dollar and a Russian troop pullback in Georgia sparked another frenzied sell-off.

Crude's nosedive wiped out all the gains from the previous day's big rally and reaffirmed the belief that high energy prices and a softening global economy are still cutting into consumer demand for fossil fuels in the U.S. and overseas.

Light, sweet crude for October delivery fell $6.59, or 5.43 percent, to settle at $114.59 a barrel on the New York Mercantile Exchange.

It was crude's largest single-day price drop percentage-wise since Dec. 27, 2004, when prices dropped 6.47 percent.

In dollar terms, it was oil's steepest one-day slide since Jan. 17, 1991, just after the start of the Gulf War.

Crude prices had risen for three straight days, including an almost $6 rally on Thursday.

"This is extreme volatility," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

"The fact that we erased all of yesterday's gains so fast suggests that we're still in a bear market."

"There's just not much demand out there."

At the pump, a gallon of regular fell another penny overnight to a new national average of $3.692, according to auto club AAA, the Oil Price Information Service and Wright Express.

Prices had peaked at $4.114 a gallon on July 17, but have come down as high energy costs force Americans cut back on their driving.

Crude's violent fall accelerated throughout the day on renewed bullishness in the U.S. dollar and an apparent easing of geopolitical tensions.

Speaking at an economic conference Friday, Federal Reserve Chairman Ben Bernanke said he would "act as necessary" to control inflation -- comments which sent the greenback higher compared to rival currencies.

A falling dollar encourages selling from investors who bought crude oil and other commodities as a hedge against inflation and weakness in the U.S. currency.

The euro fell to $1.4806 in early New York trading Friday from $1.4772 late in New York the night before.

"The dollar got pounded yesterday and everybody rushed to buy commodities as a safe haven."

"Now the dollar is strengthening so everybody's dumping commodities again," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

On Thursday, worries about Russian hostilities helped push crude prices up $5.62 to $121.18, crude's highest settlement price in over two weeks.

"Obviously, yesterday's rally was overcooked and we're simply taking back some of that speculative risk premium we injected into the market," said Ritterbusch.

Russian troops began withdrawing from key Georgian positions on Friday, the day the pullback was to be completed under a U.S.-backed cease-fire.

Still, there were conflicting statements about the extent of Russia's withdrawal.

Russia's defense minister said Friday the pullback from most Georgian territories to pro-Moscow separatist regions was complete, but U.S. State Department spokesman Robert Wood said that establishing buffer zones was "definitely not part of the agreement."

Oil traders were still eyeing the conflict amid concerns that another flare-up of violence could sever key oil shipments bound for Western countries.

Russia is the world's second largest oil exporter, providing a quarter of EU countries' crude supplies and half of their natural gas.

"It's still speculative whether Russia will use oil as a weapon to punish the West," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"But it has certainly focused the market on that geopolitical threat."

The United States and Poland signed a deal Wednesday to place a U.S. missile defense base just 115 miles from Russia's westernmost border, a provocative move that was immediately denounced by Moscow.

Russia's Foreign Ministry warned that Moscow's response to further development of the missile defense shield would go beyond diplomacy.

U.S. Secretary of State Condoleezza Rice has dismissed any suggestion that the missile defense interceptors to be based in Poland constitute a threat to Russia.

Washington insists the base is intended only as a defense against long-distance missiles from Iran.

London-based BP PLC last week shut down its Baku-Supsa oil pipeline -- which runs through the center of Georgia from Baku in Azerbaijan to Supsa on Georgia's Black Sea coast -- because of security concerns.

The line, which has a 150,000-barrel-a-day capacity, had recently been pumping around 90,000 barrels a day, according to a BP spokeswoman.

The British oil company also said that testing was to begin Wednesday on the closed Baku-Tbilisi-Ceyhan oil pipeline -- which runs through Georgia as well -- ahead of a move to restart full operations as early as next week.

That line, owned by a consortium of energy companies led by BP, has been closed for more than two weeks after a fire on its Turkish stretch.

Kurdish rebels have taken responsibility for that blaze.

In other Nymex trading, heating oil fell 16.95 cents to settle at $3.1311 a gallon, while gasoline futures fell 17.66 cents to settle at $2.8686 a gallon.

Natural gas futures fell 40.9 cents to settle at $7.843 per 1,000 cubic feet.

In London, October Brent crude fell $6.24 to settle at $113.92 a barrel.

------

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

"Merrill Lynch settlement with SEC worth up to $7B - Merrill Lynch buying back up to $7 billion in securities in settlement with SEC"

Associated Press

Last updated: 5:12 p.m., Friday, August 22, 2008

WASHINGTON -- Federal regulators said Friday that investors who bought risky auction-rate securities from Merrill Lynch & Co. before the market for those bonds collapsed will be able to recover up to $7 billion under a new agreement.

The largest U.S. brokerage will buy back the securities from thousands of investors under a settlement with the Securities and Exchange Commission, New York Attorney General Andrew Cuomo and other state regulators over its role in selling the high-risk bonds to retail investors.

Under that deal, announced Thursday, Merrill agreed to hasten its voluntary buyback plan by repurchasing $10 billion to $12 billion of the securities from investors by Jan. 2.

Merrill also agreed to pay a $125 million fine in a separate accord with state regulators.

The $330 billion market for auction-rate securities collapsed in mid-February.

The SEC's estimate of a $7 billion recovery is based on its projection of the eventual amount of the bonds that will be cashed in by the affected investors, who bought them before Feb. 13.

The $10 billion to $12 billion is the total amount that Merrill is committing to buy back.

The firm has to offer redemptions to all investors, though not all may cash in the securities.

The SEC said the new agreement will enable retail investors, small businesses and charities who purchased the securities from Merrill "to restore their losses and liquidity."

New York-based Merrill neither admitted nor denied wrongdoing in agreeing to the federal settlement, which is subject to approval by SEC commissioners.

The firm wasn't fined under the accord, but the SEC said Merrill "faces the prospect" of a penalty after completing its obligations under the agreement.

The amount of the penalty, if any, would take into account the extent of Merrill's misconduct in marketing and selling auction-rate securities, and an assessment of whether it fulfilled its obligations, the SEC said.

"Merrill Lynch's conduct harmed tens of thousands of investors who will have the opportunity to get their money back through this agreement," Linda Thomsen, the agency's enforcement director, said in a statement.

"We will continue to aggressively investigate wrongdoing in the marketing and sale of auction-rate securities."

Merrill, Goldman Sachs Group Inc. and Deutsche Bank on Thursday brought to eight the number of global banks that have settled a five-month investigation into claims they misled customers into believing the securities were safe.

The auction-rate securities market involved investors buying and selling instruments that resembled regular corporate debt, except the interest rates were reset at regular auctions -- some as frequently as once a week.

A number of companies and retail clients invested in the securities because, thanks to the regular auctions, they could treat their holdings as liquid, almost like cash.

Major issuers included companies that financed student loans and municipal agencies like the Port Authority of New York and New Jersey.

When big banks ceased backstopping the auctions with supporting bids because of concerns about credit exposure, the bustling market collapsed.

That left some issuers paying double-digit interest rates because of the terms under which they issued the securities.

Regulators have been investigating the collapse in the market to determine who was responsible for its demise and whether banks knowingly misrepresented the safety of the securities when selling them to investors.

"Stocks jump on falling oil, inflation forecast - Stocks jump as oil plunges, Bernanke indicates Fed won't likely raise interest rates soon"

By TIM PARADIS, Associated Press

Last updated: 6:32 p.m., Friday, August 22, 2008

NEW YORK -- Wall Street capped a volatile week with sharp gains Friday as oil prices tumbled and after Federal Reserve Chairman Ben Bernanke said inflation pressures are likely to moderate.

The Dow Jones industrial average rose nearly 200 points.

Speculation that Lehman Brothers Holdings Inc. could be sold helped buoy the financial sector and the overall market.

Analysts warned this week that the investment bank could book large write-downs for bad debt.

But reports Friday that Korea Development Bank is considering buying the company sent investors rushing for the stock.

Lehman rose 69 cents, or 5 percent, to $14.41 but finished well off its highs of the session.

Investors also appeared cheered by an inflation forecast from Bernanke who said at the Kansas City Fed's annual economic symposium that inflation pressures should moderate this year amid tepid economic growth.

But he also added that the inflation forecast remains "highly uncertain."

John Massey, senior portfolio manager at AIG SunAmerica Asset Management, said investors are encouraged by Bernanke's comments on interest rates and by the possibility of a buyer for Lehman.

"We're seeing the potential for maybe another white knight," he said, referring to prospects of a deal to acquire all or part of the investment bank.

The health of the financial sector and rising inflation are two of the market's greatest concerns.

Although Bernanke refrained from making predictions about inflation, the market was mollified when light, sweet crude plunged $6.59 to settle at $114.59 a barrel on the New York Mercantile Exchange, after surging by more than $5 a barrel on Thursday.

The Dow rose 197.85, or 1.73 percent, to 11,628.06, near its highs of the session.

Broader stock indicators also rose.

The Standard & Poor's 500 index rose 14.48, or 1.13 percent, to 1,292.20, and the Nasdaq composite index rose 34.33, or 1.44 percent, to 2,414.71.

The run-up Friday left stocks with mostly modest losses for the week that again saw a series of triple-digit moves in the Dow.

The Dow is down 0.27 percent, the S&P 500 is off 0.46 percent and the technology-heavy Nasdaq is down 1.54 percent.

Bond prices pulled back as investors rushed from the safety of government debt to stocks.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.87 percent from 3.83 percent late Wednesday.

The dollar rose against other major currencies, while gold prices fell.

Massey cautioned against making too much of the market's moves given the light volume this week.

With traders squeezing in late-summer vacations, Wall Street has shown erratic trading.

The Dow industrials lost more than 300 points over Monday and Tuesday before ending moderately higher Wednesday and finishing mixed Thursday.

"The light volumes are really sort of the reasons behind why you've got some outsize moves."

"I think the issues over all for the economy and the market are fairly well understood," he said.

"The market is of this mind-set that we're going to continue to be flattish to down."

He doesn't expect the stock market to more accurately reflect investor sentiment until after Labor Day, when trading volumes should pick up.

Until then, he'll be looking next week at readings on consumer confidence and unemployment to determine where the economy might be headed.

Remarks Friday from Bernanke and investor Warren Buffett appeared to dim Wall Street's hopes that mortgage financiers Fannie Mae and Freddie Mac might be able to get by without a government bailout.

While such a move could help prop up the government-chartered companies, which together hold or back nearly half the nation's mortgage debt, it could also wipe out shareholder equity.

While Bernanke didn't mention them by name he said he said one of the critical questions facing the country is how to strengthen the financial system and guard against the "moral hazard" of companies making risky choices thinking that the government will ultimately offer a safety net.

Buffett said on CNBC that Fannie and Freddie are too big to fail but that shareholder equity in those companies can be lost.

Fannie Mae rose 15 cents to $5, while Freddie Mac fell 35 cents, or 11 percent, to $2.81.

Linda Duessel, the equity market strategist at Federated Investors, said the financial sector is key to a broader recovery on in stocks, which are down more than 10 percent this year.

"We need to absolutely find a bottom in financials to really believe that the bear can be behind us," she said, referring to the pullback in stocks since last fall.

While most sectors gained ground Friday, some materials companies pulled back as commodity prices fell.

United States Steel Corp. fell $5.44, or 3.9 percent, to $133.76, while miner Freeport-McMoRan Copper & Gold Inc. declined $3.06, or 3.3 percent, to $90.60.

In corporate news, Gap Inc. rose 87 cents, or 4.6 percent, to $19.88 after reporting late Thursday that profits in the most recent quarter rose 51 percent from a year earlier, thanks to tight inventory and cost control.

King Pharmaceuticals Inc. said it is prepared to take its bid for Alpharma Inc. directly to shareholders after the company rejected King's $1.4 billion buyout overture.

King disclosed the $33 a share offer publicly for the first time Friday.

Alpharma surged $10.47, or 44 percent, to $34.51, while King rose 95 cents, or 8.5 percent, to $12.19.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to a light 3.62 billion shares compared with 3.94 billion shares traded Thursday.

The Russell 2000 index of smaller companies rose 12.35, or 1.70 percent, to 737.60.

Overseas, Japan's Nikkei stock average fell 0.68 percent.

Britain's FTSE 100 rose 2.52 percent, Germany's DAX index rose 1.69 percent, and France's CAC-40 advanced 2.23 percent.

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The Dow Jones industrial average ended the week down 31.84, 0.27 percent, at 11,628.06.

The Standard & Poor's 500 index finished down 6.00, or 0.46 percent, at 1,292.20.

The Nasdaq composite index ended the week down 37.81, or 1.54 percent, at 2,414.71.

The Russell 2000 index finished the week down 15.77, or 2.09 percent, at 737.60.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,185.26, down 86.62 points, or 0.65 percent, for the week.

A year ago, the index was at 14,896.21.

------

On the Net:

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

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

AND AS "GENOCIDAL GEORGE, STINK OF DEATH" BUSH CONTINUES TO WIN HEARTS AND MINDS IN AFGHANISTNAM, WE HAVE ...

"Afghan President Karzai condemns civilian deaths"

By JASON STRAZIUSO and RAHIM FAIEZ, Associated Press Writer

23 AUGUST 2008

KABUL, Afghanistan - An Afghan human rights group said Saturday that at least 88 people were killed in a battle between U.S.-led coalition forces and militants in western Afghanistan.

Meanwhile, President Hamid Karzai condemned the violence and said most of the dead were civilians.

The U.S. coalition said it would investigate the claims of civilian deaths.

An Afghan Independent Human Rights Commission researcher visited Azizabad — the village in Herat province where the airstrikes took place early Thursday — and found 88 people had died, 15 houses were destroyed and others were damaged.

Ahmad Nader Nadery, the group's commissioner, said the information was preliminary and that the group would publish a final report.

He did not provide a breakdown of how many of the 88 were civilians or militants.

He said 20 women were among the dead, and that the rest were men and children.

The Interior Ministry has said that 76 civilians were killed, including 50 children under the age of 15.

Karzai's office said at least 70 civilians died.

Karzai, lamenting that his efforts to get the U.S. and NATO to prevent civilian deaths had gotten nowhere, said the Afghan government would soon announce "necessary measures" to prevent civilian casualties, but provided no details.

U.S. coalition spokeswoman Rumi Nielson-Green said Saturday that the operation was led by Afghan National Army commandos, with support from the coalition.

The operation was launched after an intelligence report that a Taliban commander, Mullah Siddiq, was inside the compound presiding over a meeting of militants, Defense Ministry spokesman Gen. Mohammad Zahir Azimi said.

Siddiq was one of those killed during the raid, Azimi said.

Originally the coalition said the battle killed 30 militants, but Nielson-Green said that five civilians — two women and three children connected to the militants — were among the dead.

"Obviously there's allegations and a disconnect here."

"The sooner we can get that cleared up and get it official, the better off we'll all be," said U.S. coalition spokesman 1st Lt. Nathan Perry.

"We had people on the ground."

Ghulam Azrat, 50, the director of the middle school in Azizabad, said he collected 60 bodies Friday morning after the bombing.

"We put the bodies in the main mosque," he told The Associated Press by phone, sometimes pausing to collect himself in between tears.

"Most of these dead bodies were children and women."

"It took all morning to collect them."

Azrat said villagers on Saturday threw stones at Afghan soldiers who tried to give food and clothes to them.

He said the soldiers fired into the crowd and wounded eight people, including one child critically wounded.

"The people were very angry," he said.

"They told the soldiers, 'We don't need your food, we don't need your clothes."

"We want our children."

"We want our relatives."

"Can you give it to us?"

"You cannot, so go away.'"

A spokesman for Afghan police in western Afghanistan, Rauf Ahmadi, confirmed that the demonstration took place against the soldiers, who he said fired into the air.

Ahmadi said two Afghans were wounded by the gunfire.

The competing claims by the U.S. coalition and the two Afghan ministries were impossible to verify because of the remote and dangerous location of the battle site.

Complicating the matter, Afghan officials are known to exaggerate civilian death claims for political payback, to qualify for more compensation money from the U.S. or because of pressure from the Taliban.

More than 3,400 people — mostly militants — have been killed in insurgency-related violence this year, according to figures from Western and Afghan officials.

HISTORY IS MADE RIGHT BEFORE OUR EYES ....

"Fay kills 10 in Fla., makes record 4th landfall"

By BILL KACZOR, Associated Press Writer

23 AUGUST 2008

APALACHICOLA, Fla. — Tropical Storm Fay began wrapping up its disastrous slog across Florida on Saturday by making a record fourth landfall on the Panhandle's coast.

Emergency officials said 10 people have been killed in the state alone.

Across the Florida peninsula, communities began cleaning up the damage from several inches of rain that flooded homes, destroyed crops and prompted Gov. Charlie Crist to ask for a major disaster declaration from the federal government.

Fay's center made landfall around 1 a.m. EDT about 15 miles north-northeast of Apalachicola, according to the National Weather Service's National Hurricane Center.

Fay was expected to finally leave the state on Saturday and reach the coasts of Mississippi and Alabama on Sunday.

Though Fay never became a hurricane, downpours along its zigzagging path have been punishing and deadly.

The storm has killed 10 people in the state, Florida Law Enforcement Commissioner Gerald Bailey said in a briefing from the emergency operations center in Tallahassee.

The identities of all the victims and the causes of their deaths weren't immediately released, but at least three were killed Friday in weather-related traffic accidents and two drowned in heavy surf.

Another man died from carbon monoxide poisoning while testing power generators before the storm hit.

At least 23 people were killed last week in Haiti and the Dominican Republic by flooding from Fay.

"The damage from Fay is a reminder that a tropical storm does not have to reach a hurricane level to be dangerous and cause significant damage," said Florida Gov. Charlie Crist, who toured flooded communities this week.

Crist on Friday asked the White House to elevate the disaster declaration President Bush issued to a major disaster declaration.

Crist said the storm damaged 1,572 homes in Brevard County alone, dropping 25 inches of rain in Melbourne.

At 11 a.m. Saturday, the center of the storm was located about 100 miles east-southeast of Pensacola and was moving west near 7 mph with sustained winds near 45 mph.

The storm was expected to keep its strength and remain a tropical storm into Sunday.

Fay's fourth landfall was underwhelming for some in the Apalachicola area.

"It's been peaceful and quiet so far," said Franklin County Emergency Management Director Butch Baker, who lives in Carabelle, where the storm's center came ashore.

"I slept through the whole thing."

"It wasn't very dramatic when it came onshore."

Baker said his office received reports of sporadic power outages, but roads were clear and they hadn't received any calls for help.

Martha Pearl Ward, 72, and Pam Nobles, 52, were heading for breakfast in downtown Apalachicola on Saturday morning.

"I just think we're so fortunate we didn't have high tide and a stronger wind because (Hurricane) Dennis is still fresh in our mind, the tidal surge we had in here," Ward said.

Fay's wake caused widespread flooding along Florida's east coast, especially in Jacksonville near the storm's third landfall.

Some areas of Duval County reported up to 20 inches of rain, and authorities reported an unknown number of homes and businesses flooded.

Floodwaters began receding in some of the hardest-hit areas of South Florida.

Fay has been an unusual storm, even by Florida standards.

It first made landfall in the Florida Keys on Monday, then headed out over open water again before hitting a second time near Naples on the southwest coast.

It limped across the state, popped back out into the Atlantic Ocean and struck again near Flagler Beach on the central coast.

It was the first storm in almost 50 years to make three landfalls in the state, as most hit and exit within a day or two.
__

Associated Press writers Brent Kallestad and Bill Kaczor reported from Tallahassee; Ron Word from Jacksonville; Brian Skoloff from Melbourne; Melissa Nelson from Pensacola; Russ Bynum from Savannah, Ga.; and David Fischer and Tamara Lush from Miami.

"Fragging suspect held in solitary - Lawyers for guardsman from Schaghticoke say cell conditions stressful"

Associated Press

First published: Saturday, August 23, 2008

FORT BRAGG, N.C. -- A guardsman from Schaghticoke charged with killing his superior officers in Iraq three years ago will remain in solitary confinement while he awaits court-martial, a military judge ruled Friday.

New York Army National Guard Staff Sgt. Alberto B. Martinez will stay in "special quarters" -- the term for solitary -- at the military prison at Camp Lejeune Marine Corps Base in Jacksonville, N.C., Col. Stephen Henley ruled during a motions hearing at Fort Bragg.

Lawyers for Martinez, 41, argued the living conditions in the 48-square-foot cell are stressful, The Fayetteville Observer reported.

Henley said if Martinez is convicted, he will get extra credit for the time spent in solitary.

Army prisoners are routinely held at the Marine base because Fort Bragg doesn't have prison facilities.

Martinez is required to sit or stand most of the time in the 6-by-8-foot cell and his only infraction has been when he once laid on his bed without permission, the defense said.

Lawyers also said Martinez is shackled when he showers or visits the library and must stay in his cell 23 hours a day.

Government lawyers said Martinez is kept in solitary because of the nature of the charges against him, but the defense said he isn't a threat.

Martinez is charged with premeditated murder in the 2005 deaths of Capt. Phillip T. Esposito, 30, of Suffern, N.Y., and 1st Lt. Louis E. Allen, 34, of Milford, Pa.

Both were members of the 42nd Infantry Division.

Martinez has been in custody since he was arrested in 2005 at a base near Tikrit, Iraq.

He is accused of planting a mine that killed the officers and faces a possible death sentence if convicted.

On Thursday, the judge refused to dismiss the murder charges after the defense complained that the prosecution intimidated and misled witnesses whose testimony could have helped Martinez.

Earlier in the week, the judge ruled that there will be a video feed from the courtroom to a room at the U.S. Military Academy at West Point, so family and media can see the proceedings.

The trial is scheduled to begin Oct. 7, and although it's unclear how long the proceedings will last, the judge set a tentative Dec. 31 end date.

A final motions hearing will be held Oct. 6.

Henley arranged the dates after attorneys discussed 49 pretrial motions over three days.

"Tropical Storm not done yet, threatens Gulf cities"

By BILL KACZOR, Associated Press Writer

23 AUGUST 2008

APALACHICOLA, Fla. — Fay just won't quit.

The tropical storm that set a record with four landfalls in Florida chugged west across the Gulf Coast on Saturday and cities from Pensacola to New Orleans prepared for several inches of rain.

Proving that a slow-moving tropical storm can be as deadly and damaging as a hurricane, Fay killed at least 11 people in Florida, emergency officials said.

Thousands of homes and businesses were inundated with flood waters this week as the storm worked its way north from its first landfall in the Florida Keys and zigzagged across the peninsula.

Fay's center made its fourth landfall around 1 a.m. EDT Saturday about 15 miles north-northeast of Apalachicola, according to the National Hurricane Center.

While the landfall was mostly uneventful in that area, bands of heavy rain and high winds comprising the eastern half of the storm pelted inland areas.

Rains and strong wind gusts blitzed Tallahassee, the state capital, for more than 24 hours, knocking down trees and power lines and cutting electricity to more than 12,000 customers, city officials said.

At 5 p.m. EDT, the storm's center was about 55 miles east of Pensacola and 105 miles east of Mobile, Ala., and was moving west about 7 mph.

Forecasters said they expected Fay to remain a tropical storm through Saturday and weaken the longer it remained over land.

Warnings and watches west of the Alabama-Mississippi border were discontinued, but a tropical storm warning remained for the northeastern Gulf Coast from Suwanee River, Fla., west to the Alabama-Mississippi border.

In southern Georgia, Fay's winds toppled trees and utility poles and ripped small pieces off some homes near the Florida border.

In Grady County in southwest Georgia, a 10-year-old boy drowned in a drainage ditch swollen by 10 to 12 inches of rain near Cairo on Saturday as the storm dumped heavy rain.

"He was playing in a culvert," said Jim Ellis, emergency management director for Grady County.

"I presume he was sucked down into it and he was overcome by the rush of waters."

Ellis said another person, possibly an adult, who was with the boy had been taken to Grady General Hospital with injuries.

Their identities were not immediately available.

Further south, as winds picked up and skies darkened along Pensacola Beach, Alex Davis took his morning jog.

The longtime beach resident said he wasn't too worried.

"I doubt we'll see any flooding out here."

"The wind is starting to sting a little but that's about it," he said.

"This won't be much at all."

"If a storm doesn't have a category in front of it doesn't worry us much," said Tamara Josey, who watched Fay's approach from the parking lot of a beach condominium complex in Pensacola.

But emergency officials in low-lying cities in Fay's path weren't taking any chances.

In the New Orleans area, which is approaching the third anniversary of Hurricane Katrina, emergency officials were monitoring the storm and telling residents of the potential for heavy rain and the need to avoid low areas that could flood.

City officials in Slidell, La., where forecasters predicted 3 to 5 inches of rain could fall late Sunday and through Monday, said emergency vehicles had been fueled and workers were on call.

Forecasts called for 1 to 3 inches of rain in the New Orleans area, on the south shore of Lake Pontchartrain.

In St. Bernard Parish, the site of some of the worst post-Katrina flooding, emergency officials were handing out sandbags to residents Saturday.

Sandbags also were distributed by authorities in Ocean Springs, Gulfport and Biloxi on the Mississippi coast Saturday.

No shelters had been opened, but officials said they were closely monitoring the storm.

The Air Force Reserve's 403rd Wing evacuated aircraft Saturday from Keesler Air Force Base to locations in South Florida and Texas.

The 403rd includes planes known as "hurricane hunters" that officials said would be available to continue to monitor Fay and other disturbances.

The Gulf Islands National Seashore closed a campground area Saturday and four barrier islands to the public Saturday as the storm continued to hug the coast.

The head of the Federal Emergency Management Agency, R. David Paulison, visited the National Hurricane Center in Miami on Saturday to discuss concerns of flooding in the Gulf Coast if the storm continues to creep on its path, a FEMA spokeswoman said.

"The flooding is definitely something that we are monitoring and tracking and he was down there to see what kind of handle he could get on that," spokeswoman Mary Margaret Walker said.

The 11 people killed in the storm in Florida brings the death toll from Fay to at least 34.

A total of 23 died in Haiti and the Dominican Republic from flooding.

Fay's wake caused widespread flooding along Florida's east coast, especially in Jacksonville near the storm's third landfall.

The Office of Insurance Regulation reported Saturday that roughly 6,700 homeowners filed claims, although only some were because of flooding.

That number was expected to change, and Gov. Charlie Crist has asked the federal government to declare the worst-hit areas major disaster areas.

Fay has been an unusual storm since it was named Aug. 15.

After hitting the Keys Monday, it crossed open water again before hitting a second time near Naples on the southwest coast.

It limped across the state, popped back out into the Atlantic Ocean and struck again near Flagler Beach on the central eastern coast.

It was the first storm in almost 50 years to make three landfalls in the state as a tropical storm.

Its fourth landfall as such was the first in recorded history.

"This is unprecedented in terms of the slow nature of this storm, the large circulation and the fact that its impacted probably about 90 percent of the state with heavy rains and severe weather," state meteorologist Ben Nelson said.
___

Associated Press writers Brent Kallestad in Tallahassee, Melissa Nelson in Pensacola, Sarah Larimer in Miami, Russ Bynum in Savannah, Ga., and Alan Sayre in New Orleans contributed to this story.

"Analysis: Biden fills attack role"

By LIZ SIDOTI, Associated Press Writer

23 AUGUST 2008

DENVER - Barack Obama says Joe Biden is ready to step in as president.

He's not bad in the role of attack dog, either, wasting no time gnawing at GOP rival John McCain.

"He will have to figure out which of the seven kitchen tables to sit at" when considering his own economic future, Biden said — a blistering reference to McCain's embarrassing admission, particularly during a period of financial turmoil, that he didn't know how many homes he and his ultra-wealthy wife own.

Named Obama's running mate before dawn Saturday, a feisty Biden appeared with the top of the ticket at an afternoon rally in Springfield, Ill.

He gave a speech filled with subtle jabs and outright punches at McCain, a sharp tone intended to send a message to nervous Democrats: Never fear, the vice presidential attack dog is here — and he's itching for a fight.

As polls show the race tightening, Democrats increasingly have been questioning whether Obama can play the game of brass-knuckle politics against McCain.

Some are fearing a repeat of 2004 when a Republican-aligned group called the Swift Boat Veterans for Truth got the best of slow-to-respond John Kerry and his soft-touch No. 2 John Edwards.

Biden, however, left no doubt he's comfortable going for the jugular.

In one breath, he called McCain "generally a friend of mine" over a 35-year period.

In the next, the Democrat skewered his decades-old Republican colleague and linked McCain to the unpopular President Bush at every turn.

"The American dream under eight years of Bush and McCain, that American dream is slipping away," Biden said — suggesting that McCain, too, served in the White House during that period and overlooking the times when the Arizona senator broke from his own party's standard-bearer.

He jabbed at McCain, a Vietnam prisoner of war who is arguably the county's most vocal supporter of the U.S. mission in Iraq, next to Bush.

Said Biden:

"These times require more than a good soldier."

"They require a wise leader."

"A leader who can deliver."

The Delaware senator also used McCain's own words against him to argue that the Republican can't change the country when he offers more of the same, though he left out details and cherry-picked quotes as he sought to make his case.

He noted that McCain voted with Bush some 90 percent of the time and read McCain quotes that he said has been "totally in agreement and support of President Bush" on "the most important issues of our day," and that "in the Bush administration we make great progress economically."

Biden also quoted McCain saying "no one has supported President Bush in Iraq more than I have."

At the same time, Biden charged, without backing up his assertions, that McCain "signed on to Bush's scheme of privatizing Social Security" and said McCain continued to "support tax breaks for companies who ship our jobs overseas" after 3 million manufacturing jobs disappeared.

Said Biden:

"You can't change America when you know your first four years as president will look exactly like the last eight years of George Bush's presidency."

Striking at the heart of what McCain holds most dear, his integrity and honor, Biden accused McCain of pandering to the GOP's conservative base and engaging in negative politics he has shunned before.

"I've been disappointed in my friend, John McCain, who gave in to the right wing of his party and yielded to the very 'Swift Boat' politics that he once so deplored," Biden said.

"Folks, campaigns for presidents are a test of character and leadership."

He insinuated McCain has failed that test.

Yet, Biden overlooked moves Obama has made to court the Democratic Party's liberal base and the Illinois senator's own recent flare-ups of hard-hitting politics.

Biden's most direct hit came as he raised McCain's housing gaffe, which had caused the campaign to spiral to a low point on Thursday.

Obama's campaign seized on the remark and used it to assail McCain as out of touch.

McCain's campaign hit back by raising Obama's ties to scandal-scarred Chicago businessman Antoin "Tony" Rezko and his role in Obama's Chicago property.

One of the poorest members of the Senate, Biden lamented how people like him sit at the kitchen table at night worrying about how to get by in tough economic times.

"That's not a worry John McCain has to worry about."

"It's a pretty hard experience."

"He will have to figure out which of the seven kitchen tables to sit at."

McCain spokesman Brian Rogers hit back: "Of course Senator Biden is comfortable on the attack — he spent the entire primary highlighting Barack Obama's inexperience and failed judgment on national security."

But that was then.

And this, call it Target McCain, is now.
___

EDITOR'S NOTE — Liz Sidoti covers the presidential campaign for The Associated Press and has covered national politics since 2003.

"Wall Street bailout aid questioned at Fed event - Fed conference speakers say US central bank too responsive to Wall Street on bailout issues"

By JEANNINE AVERSA, Associated Press

Last updated: 3:42 p.m., Saturday, August 23, 2008

JACKSON, Wyo. -- Do Washington policymakers listen too much to Wall Street?

A possible bailout of Fannie Mae and Freddie Mac, on the heels of similar action involving investment firm Bear Stearns, seems to send a loud signal to financial companies that the government will clean up their messes.

That's the feeling of some analysts and academics here Saturday, the final day of a high-profile economics conference.

The Federal Reserve's handling of the worst financial crisis to hit the country in decades spurred much debate.

"The Fed listens to Wall Street," said Willem Buiter, professor of European political economy at the London School of Economics and Political Science.

"Throughout the 12 months of the crisis, it is difficult to avoid the impression that the Fed is too close to the financial markets and leading financial institutions, and too responsive to their special pleadings, to make the right decisions for the economy as a whole," he wrote in a paper presented to the conference.

Critics like Buiter worry that the Fed's unprecedented actions -- including financial backing for JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. -- are putting taxpayers on the hook for billions of dollars of potential losses.

They also say it encourages "moral hazard," that is, allowing financial companies to gamble more recklessly in the future.

Fed Chairman Ben Bernanke, who spoke to the conference on Friday, defended the Fed's actions, saying they were "necessary and justified" to avert a meltdown of the entire financial system, which would have devastated the U.S. economy.

Yet, Bernanke also acknowledged that mitigating moral hazard is one of the critical challenges policymakers face as they weigh steps -- including strengthening regulation -- to make the financial system better able to withstand shocks down the road.

"If no countervailing actions are taken, what would be perceived as an implicit expansion of the safety net could exacerbate the problem of `too big to fail,' possibly resulting in excessive risk-taking and yet greater systemic risk in the future," Bernanke said.

At the start of the conference, on Thursday night, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, which sponsored the forum, gave Bernanke a white hard hat -- like those worn by construction workers -- in case he needed protection from critics during the sessions.

Even as Bernanke and others discussed these thorny issues, concern on Wall Street grew about the financial health of Fannie Mae and Freddie Mac.

Investors are becoming increasingly convinced that a government bailout of the mortgage giants will be inevitable.

Those fears hammered the companies stocks again this week.

The Treasury Department, under a new law enacted last month, has the power to inject the companies with huge amounts of cash -- through loans or buying stock in them.

"It creates a troubling perception when Washington policymakers appear to be hitting the fast-forward button when major institutions are on the line but are between the pause and the slow-motion button when massive home foreclosures are on the line," said Gene Sperling, a former official in the Clinton administration and now a senior fellow for economic studies at the Council on Foreign Relations.

The roots of the current crisis can be traced to lax lending for home mortgages -- especially subprime loans given to borrowers with tarnished credit -- during the housing boom.

Lenders and borrowers were counting on home prices to keep rising.

But when the housing market went bust, home prices plummeted in many areas of the country.

Foreclosures spiked as people were left owing more on their mortgage than their home was worth.

Rising rates on adjustable mortgages also clobbered some homeowners.

"Market participants failed to soundly manage, measure and disclose risks, with ignorance, greed or hubris playing their customary roles," said Mario Draghi, the governor of the Bank of Italy, who is involved in international efforts to deal with the worldwide financial crisis.

As U.S. financial companies racked up multibillion-dollar losses on soured mortgage investments, and credit problems spread globally, firms hoarded cash and clamped down on lending.

That has crimped consumer and business spending, dragging down the national economy -- a vicious cycle the Fed has been trying to break.

To brace the wobbly economy, the Fed has slashed its key interest rate by a whopping 3.25 percentage points, the most aggressive rate-cutting campaign in decades.

Yet, those cuts also aggravated inflation.

Some wonder whether the Fed made money too cheap, something that could feed into other bubbles in the future.

"The alarms of the financial sector have been overstated."

"The real economy has slowed down but is not yet in severe difficulty," said C. Fred Bergsten, director of the Peterson Institute for International Economics.

Anil Kashyap, professor of economics and finance at the University of Chicago's Graduate School of Business, however, said the Fed did the right thing.

"It headed off disaster."

"The history of financial crises tells you the economy doesn't get sick the next week."

"It takes a while."

In fact, a growing number of analysts believe the economy could hit a deep pothole later this year as the bracing impact of the government's tax rebate checks wears off.

The Fed also has taken a number of unconventional -- and some controversial -- actions to shore up the shaky financial system and to get credit, the economy's lifeblood, flowing more freely.

It agreed in March to let investment houses draw emergency loans directly from the central bank.

And, in July, the Fed said Fannie Mae and Freddie Mac also could tap the program.

For years, such lending privileges were extended only to commercial banks, which are subject to stricter regulatory supervision.

In providing financial backing to JP Morgan's takeover of Bear Stearns, the Fed worried that the investment house's collapse could cascade, taking down others.

But some were skeptical.

"In the case of Bear Stearns it is not clear from publicly available information how much contagion there would have been had it been allowed to fail," according to a paper presented at the conference by Franklin Allen, professor at the University of Pennsylvania, and Elena Carletti, professor at the University of Frankfurt.

"Calif. won't probe NY Sen. Schumer over IndyMac"

Associated Press

Last updated: 7:02 p.m., Saturday, August 23, 2008

NEW YORK -- New York Sen. Charles Schumer won't face a California investigation into whether he helped fuel IndyMac Bancorp Inc.'s collapse by expressing concerns about the mortgage lender's soundness.

The California Attorney General's office said in a letter Thursday that there was "insufficient evidence" to investigate Schumer.

A Schumer spokesman declined to comment Saturday.

Some former IndyMac employees say Schumer's remarks in June 26 letters to regulators spurred a run on the bank that led to a government takeover.

They want the senator to be prosecuted under a California law against making false statements about a bank's solvency.

Assistant Attorney General Thomas Greene said Schumer's statements were true and drawn from public information.

"Long Island drone test touched off terror scare"

Associated Press

Last updated: 10:52 p.m., Friday, August 22, 2008

NEW YORK -- Officials say an entrepreneurial engineer launched a counterterrorism investigation when he tested an unmanned aircraft in Long Island last year, but authorities determined he posed no threat.

WNBC-TV first reported the probe Friday on its Web site and didn't identify the engineer.

He brought the drone to an airfield in Calverton, about 70 miles east of Manhattan.

The aircraft never left the ground during the nighttime test in February 2007.

New York City Police Commissioner Raymond Kelly says his department became concerned because the drone was being designed to fly for up to 10 hours and carry more than 600 pounds of explosives.

The state's deputy secretary for public safety, Michael Balboni, says the engineer hoped to sell the aircraft to the U.S. military.

He wasn't charged with any crime.

------

Information from: WNBC-TV, http://www.wnbc.com

"Clashing views of woman suspected of terrorism"

By LARRY NEUMEISTER, Associated Press Last updated: 11:12 a.m., Saturday, August 23, 2008

NEW YORK -- To supporters, Aafia Siddiqui is a devout Muslim and MIT and Brandeis-educated scholar who fled to Pakistan after 9/11 because of anti-Muslim sentiment.

To U.S. authorities, she is the lunatic fringe of its terrorist enemies, willing to shoot at an Army officer or blow up the Statue of Liberty.

Siddiqui, 36, now sits in a federal lockup in Brooklyn, nursing bullet wounds sustained in a shoot-out last month in Afghanistan.

Prosecutors say she was shot by a U.S. Army officer after she grabbed his Army M-4 rifle from the floor and pointed it at an Army captain, crying "Allah Akbar!"

One of her lawyers, Elaine Whitfield Sharp, said witnesses to the shoot-out have said Siddiqui never lunged for a weapon and that they never heard rifle shots.

A day earlier, she had been arrested outside an Afghan governor's compound carrying bottles and jars of chemicals, papers describing U.S. landmarks, and instructions on how to make chemical weapons, according to an FBI affidavit.

A government official briefed on the case told The Associated Press on condition of anonymity that the list of targets included the Empire State Building, Grand Central Terminal and the Statue of Liberty.

The official, however, described the targets as a "wish list" and said there doesn't appear to be evidence of a credible plot to attack any landmarks.

Nonetheless, the official described her as a fanatical al-Qaida supporter.

Siddiqui remains something of a mystery.

She was born into a middle-class Pakistani family, the daughter of a doctor and homemaker who had two other children.

Her brother, an architect, lives in Houston.

Her sister, a Harvard-trained neurologist, lives in Karachi, Pakistan.

After moving to the United States in 1990, Siddiqui studied at the University of Houston and then the Massachusetts Institute of Technology, where she got a bachelor's degree in biology in 1995.

She later studied cognitive neuroscience as a graduate student at Brandeis University.

Brandeis psychology professor Paul DiZio, Siddiqui's dissertation adviser, recalled her as an intelligent, reserved woman in a head scarf.

"It's clear she was a woman of faith," he said.

"She would describe an experiment and say 'Thanks to Allah it turned out well.'"

He described her research as an examination of how people learn -- nothing that would be useful to al-Qaida.

"It's hard to imagine any possible connection," he said.

Elizabeth Fink, another defense lawyer, said U.S. authorities repeatedly cite her background in neuroscience to make it seem she might have expertise in mixing chemicals -- knowledge necessary to construct bombs, for instance.

She said Siddiqui was actually studying cognitive science with a focus on teacher training and had hoped to return to Pakistan to teach.

One of her college papers, for instance, showed it was easier for someone to learn skills like how to tie shoes by seeing it done rather than being told about it.

In the mid-1990s, Siddiqui married Mohammed Amjad Khan, an anesthesiologist from Pakistan, and had three children.

Several months after the Sept. 11, 2001 terrorist attacks, the couple returned to Pakistan.

Within a year, they had split up.

Sharp, who was hired by Siddiqui's family several years ago when the FBI inteviewed her brother and mother, said they left because of anti-Muslim sentiment in America.

In March 2003, Siddiqui dropped out of sight entirely along with her three children.

Her disappearance came shortly after 9/11 mastermind Khalid Sheik Mohammed mentioned her name during an interrogation.

(Mohammed later claimed he had named some innocent people just to please his captors, and Siddiqui's lawyers believe he gave up her name under torture.)

In 2004, former U.S. Attorney John Ashcroft publicly identified her as being among seven suspected al-Qaida operatives the FBI wanted to find.

Sharp believes her client was actually held captive by the United States after being abducted in Karachi in 2003.

She said Siddiqui's children are in U.S. custody as well, and that Pakistan may have played a role in inaccurately casting her client as a supporter of terrorism.

"What we have learned from her is that she was in custody for over five years," Sharp said.

Siddiqui has been charged in federal court in Manhattan with shooting a rifle at an Army officer.

At a recent court appearance, she was hunched over in a wheelchair, in obvious pain, as her lawyers asked the court to allow her to be seen by a physician.

Fink, the lead lawyer in the criminal case, said her attorneys have temporarily stopped visiting her to spare her the pain of strip searches required before the meetings.

Sharp said she had received hundreds of letters from Pakistani Americans and Muslim Americans saying they were touched by Siddiqui's plight and wondering how they can help.

"I have no doubt that there really are real terrorists out there but she isn't one of them," Sharp said.

Rep. Peter King, R-N.Y., senior Republican on the House Homeland Security Committee, sees it differently.

"She's a dangerous person with a lot of ability."

"And the investigation will show how far along she may have been with any plot," he said.

------

Associated Press writers Devlin Barrett in Washington; Nancy Kelsey and Mark Pratt in Boston; and AP researcher Rhonda Shafner in New York contributed to this story.

"Forecasters downgrade Fay to a tropical depression"

By BILL KACZOR, Associated Press Writer

24 AUGUST 2008

APALACHICOLA, Fla. - Tropical Storm Fay was downgraded to a tropical depression Saturday night, but cities along the Gulf Coast were still bracing for heavy rain.

As a tropical storm, Fay set a record with four landfalls in Florida and was blamed for at least 11 deaths there and another in Georgia, emergency officials said.

Though the storm weakened as it traveled inland Saturday, with maximum sustained winds of about 35 mph, cities from Pensacola to storm-wary New Orleans were still preparing for possible flooding.

"People automatically assume that if it weakens, the hazards go down with it, but in the case of rainfall, it's not a function of wind speed," said Jamie Rhome of the National Hurricane Center.

"Slow moving systems dump a lot of rainfall."

At 11 p.m. EDT, the tropical depression was 60 miles northeast of Mobile, Ala., and moving west at 8 mph.

The forecast indicates the depression could slow in the next few days and possibly stall over southern Mississippi or eastern Louisiana, Rhome said.

Thousands of homes and businesses in Florida were inundated with flood waters this week as the storm worked its way north from its first landfall in the Florida Keys and zigzagged across the peninsula.

Fay's center made its fourth landfall early Saturday about 15 miles north-northeast of Apalachicola, according to the National Hurricane Center.

Rains and strong wind gusts blitzed Tallahassee, the state capital, for more than 24 hours, knocking down trees and power lines and cutting electricity to more than 12,000 customers, city officials said.

In southwest Georgia, officials said a boy drowned Saturday while playing in a drainage ditch swollen by 10 to 12 inches of rain.

The storm was expected to move over southern Alabama and Mississippi on Sunday.

The U.S. Coast Guard in Mobile, Ala., closed numerous ports and waterways between Panama City in Florida and the Alabama coast to the east.

Emergency officials in low-lying cities in the storm's path weren't taking any chances.

In Alabama, officials opened shelters in the coastal counties of Mobile and Baldwin.

Trucks capable of rescuing people from floodwaters were also in place, said Yasamie Richardson, spokeswoman for the Alabama Emergency Management Agency.

In the New Orleans area, which is approaching the third anniversary of Hurricane Katrina, forecasts called for 1 to 3 inches of rain on the south shore of Lake Pontchartrain.

In St. Bernard Parish, site of some of the worst post-Katrina flooding, emergency officials were handing out sandbags Saturday.

City officials in Slidell, La., where forecasters predicted several inches of rain late Sunday and through Monday, said emergency vehicles had been fueled and workers were on call.

Sandbags were also distributed in Ocean Springs, Gulfport and Biloxi on the Mississippi coast.

The Air Force Reserve's 403rd Wing evacuated aircraft Saturday from Keesler Air Force Base in Mississippi to locations in South Florida and Texas.

The 403rd includes planes known as "hurricane hunters" that officials said would be available to continue to monitor Fay.

The Gulf Islands National Seashore closed a campground area and four barrier islands to the public.

The head of the Federal Emergency Management Agency, R. David Paulison, visited the National Hurricane Center in Miami on Saturday to discuss concerns of flooding on the Gulf Coast if the storm continues to creep on its path, a FEMA spokeswoman said.

The 11 people killed in Florida and one in Georgia bring the death toll from Fay to at least 35.

A total of 23 died in Haiti and the Dominican Republic from flooding.

Fay's wake caused widespread flooding along Florida's east coast, especially in Jacksonville near the storm's third landfall.

The Office of Insurance Regulation reported Saturday that roughly 6,700 homeowners filed claims, although only some were because of flooding.

Gov. Charlie Crist has asked the federal government to declare the worst-hit areas major disaster areas.

Fay had been an unusual storm since it was named Aug. 15.

After hitting the Keys Monday, it crossed open water again before hitting a second time near Naples on the southwest coast.

It limped across the state, popped back out into the Atlantic Ocean and struck again near Flagler Beach on the central eastern coast.

It was the first storm in almost 50 years to make three landfalls in the state as a tropical storm.

Its fourth landfall as such was the first in recorded history.

"This is unprecedented in terms of the slow nature of this storm, the large circulation and the fact that it's impacted probably about 90 percent of the state with heavy rains and severe weather," state meteorologist Ben Nelson said.
___

Associated Press writers Brent Kallestad in Tallahassee, Melissa Nelson in Pensacola, Sarah Larimer in Miami, Russ Bynum in Savannah, Ga., and Alan Sayre in New Orleans contributed to this story.

"Iraqi Arabs seek vacation escape in Kurdistan"

By YAHYA BARZANJI and KARIN LAUB, Associated Press Writers

24 AUGUST 2008

SULAIMANIYAH, Iraq - Iraqi Arabs looking for a break from five years of war and sectarian strife — or just the heartland's heat and dust — are finding one in the green, tranquil mountains of Kurdistan.

More than 23,000 Iraqis headed north to the autonomous Kurdistan region this summer, up from just 3,700 last year, tourism officials say.

A week in a modest hotel, with bus fare, costs about $160 per person, or one-third an average monthly salary.

The organized tours are made possible by improved security in recent months, though roads remain treacherous and visitors are stopped at a string of roadblocks for ID checks before reaching their vacation getaways.

The budding tourist trade is helping to soften some of the hard feelings between Iraq's Kurdish minority and Arab majority.

The two share a bloody history, particularly Saddam Hussein's brutal repression of the Kurds and establishment of their U.S.-protected self-ruled region in 1991.

Iraq's Kurdistan, about the size of Switzerland and home to nearly 3.8 million people, is perhaps the only destination for Iraqis thirsting for a little normalcy.

Arab countries, trying to keep out Iraq's troubles, grant few visas, while Europe and the U.S. are too expensive for most.

Iran is more welcoming, but largely attracts Shiite pilgrims.

Now, with large numbers of Iraqi Arabs trekking north for vacation, more and more ordinary people are getting to know each other in a peaceful setting.

"I have no resentment against Arabs who come to Kurdistan as workers or tourists," said Hama Rashid, 47, who translates political books into Arabic, Turkish and Persian and as a young man fought Saddam's soldiers as a member of the Kurdish Peshmerga forces.

"We want Kurdistan to be the tourist destination for Arabs who will pump money into our economy," Rashid said.

Mazin Zidan, visiting Sulaimaniyah from chaotic Baghdad, about 160 miles away, said he was impressed by Kurdistan's orderly traffic and friendly police.

"All my bad impressions about the Kurds have been wiped out," said Zidan, 28, strolling in the city's Freedom Park, once site of an Iraqi army base where Kurds were imprisoned.

Zidan said he was reluctant at first to make the trip, not sure how he would be received.

Since the fall of Saddam in 2003, Kurds have held key positions in the national government, including the presidency.

The Kurdish region has also absorbed thousands of displaced Arab families and workers, Kurdish officials say.

But there are tensions between the Kurds and the central government, particularly over the fate of Kirkuk, an ethnically mixed city just south of Kurdistan claimed by the Kurds.

Nevertheless, the Iraqi government and the authorities in Kurdistan, comprising three of Iraq's 18 provinces, have encouraged the bus convoys.

The Iraqi and Kurdish tourism ministers met in March and licensed 38 travel agents to arrange the Kurdistan tours, said Abdul-Zahra Talakani, spokesman for the ministry in Baghdad.

For the Kurds, it's mainly business.

For the central government, it may also be politics.

"Kurdistan is part of Iraq, and we encourage Iraqis living in the south and center to visit the Kurdish region," Tourism Minister Kahtan Abbas said in an interview.

Talakani's small office, stuffed with clunky computers and files stacked against a wall, displays a lone tourism poster — showing a lush landscape in the Kurdish city of Irbil, referred to by its Kurdish name, Hawler.

In Saddam's days, most Iraqis were barred from travel abroad and even Kurdistan was largely off limits.

The Kurds separated from the rest of Iraq after rising up against Saddam in 1991, aided by a U.S.-British no-fly zone that helped keep the dictator at bay.

After his 2003 ouster, Kurds eased border controls, leading to a first surge of Arab tourism that year, but closed the gates again in February 2004 when suicide bombers killed 109 people in an attack on Kurdish party offices.

Arab visitors are still carefully screened.

Kurdish troops board buses carrying Iraqi Arabs at checkpoints, and compare names with lists sent ahead by the travel agents, travelers say.

"We have very tight security."

"We don't want Sulaimainiyah to be like Fallujah," said Mohammed Ihsan, Kurdish minister of extra-regional affairs, referring to what was once Iraq's most violent city.

"But the visitors are welcomed everywhere in Kurdistan."

The Kurdish Tourism Ministry says it hopes to double the number of Arab visitors next year.

The influx has been good for Sulaimaniyah.

Shamal Hama Ali, who owns the 25-room Mawlai hotel in the city, said more than half his guests are Arabs.

Souvenir shop owner Saman Karim said his Arab customers favor items not easily available at home, such as crystal glasses and copies of classic paintings.

The visitors fill local restaurants, take their children to amusement parks or head out to small mountain resorts.

The Kurds and the central government also try to attract foreigners.

Several foreign airlines fly to Irbil and Sulaimaniyah, and the Kurdish government's Web site boasts that not a single foreigner has been killed or kidnapped in its territory since 2003.

Iranian pilgrims make up the bulk of the visitors to the rest of Iraq.

But tourism remains a high-risk business, and the Kurds could close their borders if sectarian violence flares again.

"Tourism like a flower," said Talakani, the ministry spokesman.

"It needs a good environment to flourish."

____

Karin Laub reported from Baghdad. Additional reporting by Sameer N. Yacoub and Bushra Juhi.