Why would you want one of these rich CEO losers who bankrupted their companies to continue working

fire all of them

a monkey would do at least the same

They give Americans car that are useless.
If the economy weren't so bad, they should put a new added 7buck tax on every gallon of gas then maybe they will convince people to stop wasting
precious gas or finding an alternative

last thing we need is under a buck gas again.

don't we ever learn?

graham ....

There are apples ...

And there are oranges ....

And the twain are not the same ....

Regardless of how or what I might think about the auto executives or any other executives, OUR Constitution DOES NOT give Obama dictatorial powers to start hiring and firing executives in private industry to replace them with POLITICALLY CORRECT PARTY CADRES, HACKS and HANGERS-ON as if this were COMMUNIST CHINA and the MESSIAH was CHAIRMAN MAO ....

OR DOES IT?

Maybe it really does ....

DO YOU WANT IT TO?

And so ...

[b]U.S. Economy Disintegrating as Government Supports Zombie Banks [/b]
By: Jim_Willie_CB

The USGovt and financial system is growing deep commitments to support dead entities. Their business models have failed. They are bankrupt. Although with faulty business model, often l aced with fraud, they have been fully adopted by the USGovt and US Federal Reserve. They are considered too big to fail. Or one should say, they are too connected to the power structure, or they are too intertwined with explosive financial devices, or one from their own tribe is running the Dept of Treasury. Capitalism embraces the Darwinian principles bound by survival of the fittest. The United States bears absolutely no resemblance to such principles anymore, at least at the upper corporate echelons.The system is giving colossal support to zombie banks and soon zombie corporations. The Wall Street banks continue to receive money without any restrictions whatsoever, even grants after meetings held before dawn, but Detroit car makers must produce a plan for reform. Under what conditions did Citigroup receive untold billion$? Did they make concessions, or just pull a string? Hidden motives abound, even for the Citigroup last minute bailout.

The climax of this charade in ass-backward policy will be the nationalization of the mortgage system . It is a fully neglected problem, soon to need powerful aid in the nation's largest program in its history. Its prelude was the adoption of the Fannie Mae & Freddie Mac couple, despite its well-known fraud, perhaps directly due to the desire to cover its fraud. Foreigners like China demanded the USGovt backstop of the fat failed duo, which gave the fraud kings political cover. The many foreign funds would have continued to dump the F&F label bonds en masse without the official takeover. Instead, they have shifted from US Agency Mortgage Bonds to USTreasury Bonds.

The US financial structure deeply invests in failure, and is fully committed to the ruling elite, to the exclusion of the mainstream public. Ever since Clinton appointed Robert Rubin of Goldman Sachs to the post of Secy Treasury in 1992, the US Economy and US financial structure has suffered mortally wounds. That decade of prosperity was stolen from Fort Knox, a major piece to the Strong Dollar Policy having been the gold carry trade enacted by Rubin. These insiders borrowed gold at a lease rate pushed down by Rubin, and bought USTreasury Bonds. Since borrowing costs were the biggest component to business profitability, economic growth ensued. Time revealed the gaping wounds, however. Their actions over eight years resulted in a stock boom and bust, a clear and loud signal at the end of their reign, of a failure soon evident in a wrecked national financial foundation.

In the last year, clearly the new business model is governed by reaction to failure that the Strong Dollar Policy produced. The manufacturing base left town for Asia, starting in 2001. Again, thanks to Clinton for pushing the Chinese Most Favored Nation status. In the first few years since its passage, $23 billion in US corporate investment was put in place inside China. At its peak, Wal-Mart owned 160 manufacturing plants, in direct opposition to founder Sam Walton's ‘Made in America' slogan. The corporate titans sidestepped higher US labor costs and strict US labor unions by leaving the country in a grand movement.

The moron US economists hailed the move as a ‘Low Cost Solution' in typical wrong-footed fashion. They somehow overlooked that much less employment in the United States would have consequences rooted in debt growth and foreign debt dependence. By year 2006, fully 60% of Chinese trade surplus was derived from US corporate subsidiaries located in China, exporting products to the West. Here we are, stuck in the present, as the great US consumer economy has virtually collapsed. The stewards of the US money wellspring have decided to backstop or acquire numerous failures. The preservation of jobs and the system itself is their stated motive. Instead, they have guaranteed the failure and collapse of the system, all in time. Viable enterprise is being denied capital, which has been re-directed to failed enterprise. This fact has escaped the US economists, clearly the worst in the world.


http://www.marketoracle.co.uk/Article7619.html

[b][b]America's Second Great Depression Has Started [/b][/b]


Martin Wiess writes: On this first weekday after Thanksgiving, it's time to take a moment, look at the changes swirling all around us and think about the tasks we must achieve together in the weeks ahead. After more than six decades of growth, America is sinking into its Second Great Depression of modern times. The place is every home, business, and community.

The time is now.

America's Second Great Depression is not a typical 20th century recession that happens to strike a bit harder or linger somewhat longer. Nor is it merely a fictional scenario conjured up by economists with a murky crystal ball.

America's Second Great Depression is the probable consequence of a great housing bust, a massive mortgage meltdown and the biggest financial crisis in history.

It promises to bring the worst wave of bankruptcies, job losses and wealth destruction any citizen under 90 has ever experienced.

It challenges the smartest minds in Washington, defies the deepest pockets on Wall Street and threatens to rip through our life with the force of a Cat-5 hurricane. And yet, among all those making the decisions that could forever change our future, no one has personal experience with a similar episode.

I don't either. I was born in 1946, just as we were leaving the final vestiges of America's First Great Depression behind. I've studied that historic period with books, charts and numbers, but that's not the same thing. I've lived in Brazil and Japan during tough times, but that, too, was different.

What brings me closer to a visceral understanding of this crisis is the half century I shared with my father, J. Irving Weiss, one of the few economists who not only advised investors during the First Great Depression, but actually predicted it.

Dad was so proud of that unusual feat, he began telling me stories about it when I was just five years old. Vicariously, I lived through the Roaring Twenties, the Crash of ‘29, the massive bank failures of the 1930s, and the many years of human suffering that ensued. Through Dad's teachings, I felt as though I was there with him when investors lost fortunes, when we hit rock bottom in 1933, when we eventually recovered and brand new fortunes were made. Dad was not only a loving father, but also my mentor, partner and best friend.

I wish he could be here today to write to you directly and help you get through these tough times personally. But as soon as I was old enough, I helped him write his investment reports; and in 1971, soon after I founded Weiss Research, he helped me write mine. Although he's gone, I can feel his vibrant energy and calming spirit beside me; and from time to time, I will let him speak to you posthumously here in Money and Markets.

Think of this message you get from me each Monday as co-authored by the two of us. He will tell you about his experiences and analysis during America's First Great Depression; I will tell you what it means for America's Second Great Depression and what you can do about it . A lot has changed since then. What hasn't changed is my family's passionate desire to help you through it.

This entire effort is the culmination of eighty-four years of research, beginning when Dad first went to Wall Street in 1924 to learn everything he could about money.

Five years later, when the great crash struck, he did not own any stocks. His parents were recent immigrants from Eastern Europe with barely enough to keep food on the table. He had to save everything he earned, bring it home and give it to his mother. He knew how real estate had collapsed in Florida, and he saw how America's farms were in disarray. He didn't want to gamble his hard-earned savings on another bubble.

After the crash, the stock market rallied for almost six months, and nearly everyone on Wall Street thought the crisis was over. But Dad persuaded his clients and friends to sell everything, get the heck out of the market, and pile up as much cash as they could. He was so convinced the market would fall again, he even borrowed $500 from his mother to sell short — to take a crack at profiting from the market's decline.

Sure enough, the Crash of ‘29 was just the opening act of the great bear market. All told, from its peak in 1929, the Dow Jones Industrials Average fell 89%. Compared to the Dow's peak in 2007, that would be tantamount to a plunge of more than 12,600 points — to a low of approximately 1500. Dad explains it this way:

“In the 1930s, at each step down the slippery slope of the market's decline, Washington would periodically announce some new initiative to turn things around. President Hoover would give a new pep talk promising ‘prosperity around the corner.' And often, the Dow staged dramatic rallies — up 30% on the first round, 48% on the second, 23% on the third, and more. Each time, I sought to use the rallies as selling opportunities. I persuaded more of my clients to get rid of their stocks and pile up cash. I even told them to take their money out of shaky banks.

“On the surface, it might have appeared that just sitting out the crisis got you nowhere. Actually, though, it was a great strategy for building wealth. Prices were falling — on homes, on automobiles, on almost everything. So the more prices fell, the more your money was worth. Just by saving money, stashing the cash, keeping your job and going about your daily life, you were building wealth. You didn't have to know about investing. All you needed to figure out was how to protect yourself from the bad times. Then, when we hit rock bottom — that was the time to start buying real estate, stocks or bonds.

“The end of the entire decline came with two events: The inauguration of our new president, Franklin D. Roosevelt, and the national banking holiday he declared on his third day in office. But after three years of panics and crashes, most people greeted those events with dread. They thought it would be the beginning of another, even steeper slide. Some people even said it was the final chapter of capitalism itself. As it turned out, that was precisely the right time to pick up some of the greatest bargains of the century and make a lot of money.”

Helping people make money was Dad's profession, but his passion in life went far beyond money; he was a man of deep empathy and feeling for his fellow man. When others suffered, he suffered along side them. He gave them jobs, bought them meals and offered an abundance of free advice

Most of all, he did not want to see America go through another depression ever again. His vision for accomplishing that goal, however, was different from that of most economists in the post-Depression era. Their strategy was to yank the economy out of nearly every slump and slumber, forever seeking to keep the economy growing, always bailing out major institutions that failed. His philosophy was moderation in both directions. “The only way to avoid the pain of a great bust,” he wrote, “is to refrain from the excesses of a great boom.”

I agree, and in the coming weeks, I'll explain why. Plus, I'll show you how you can use a similarly moderate approach to secure your own future.

A better future was also something Dad sought to secure for the country as a whole, in his own personal way. In 1955, for example, a Florida junk dealer sought to take over one of America's largest cash-rich companies to force it to borrow money and grow more quickly. In response, Dad mobilized like-minded executives from all over the country and, in one of the greatest corporate battles of that era, successfully blocked the takeover. Similarly, in 1959, when the U.S. federal deficit seemed to be growing out of control, he formed the Sound Dollar Committee, organized a grassroots movement of an estimated 11 million citizens, and helped President Eisenhower give America its last truly balanced budget.

Today, I am Chairman of the Sound Dollar Committee; and separately, I am the cofounder of the Financial Publishers Association, representing over 14 million investors. My primary goal, like Dad's, is to do my small part to help head off the avoidable consequences of another depression.

Right now, our country's finances have deteriorated too far to balance the federal budget anytime soon. But it's not too late to avoid some major financial blunders that could seriously weaken our country for the rest of the century. Even in the worst-case scenario, it is certainly not too late for you to protect your savings, boost your income and grow your wealth.

How long could the depression last? How much further can home prices fall? How far down will the stock market go? Will it be as bad as the 1930s? At this juncture, you can count on your fingers the number of serious analysts who believe that's even a remote possibility. And yet, stranger things have already happened, including the largest bank and insurance company collapses of all time. Before he passed away, Dad expressed it this way:

“Most Americans — especially the youngsters who manage billions of dollars on Wall Street — have no concept of the power and speed of a great stock market crash. They've never lived through one. So it's hard for them to visualize it. In 1929, people were jumping out of windows and one-time wealthy people were selling apples on street corners. The shock waves reached into almost every office and every home in the country and in the world. Next time, it could be just as bad, or even worse.”

Trouble is, there are no historical precedents for what's happening in this era. Any forecasts I make today , no matter how well researched, are not nearly as valuable as the awareness you will have of current events as they unfold in real time. So rather than pick a number for the bottom in the Dow or guess the low price of an average home, my primary purpose is to help give you the understanding you need to make some major decisions right now and then adjust them as the crisis unfolds.

Your immediate task, which may seem hard, is actually very simple — get your money to safety.

Your second task, which may seem easy, could actually be more difficult — wait patiently.

But it's the last step that will be the most rewarding — when real estate, stocks and bonds are near a true bottom, reinvest in America and greatly improve your life for years to come.

Over the next few weeks, I will show you how. I will give you the warning signs to watch out for while things are still falling; I will describe the kinds of conditions that are likely to prevail when we're near a bottom; and I will provide step-by-step instructions on precisely what to do.

Surviving the crisis on Wall Street and Main Street is not rocket science. You don't have to forecast the future. You don't even need investing experience. All you need is the courage to get out of its way and the patience to stay out of its way for the duration.

The simple secret is to throw out your prejudices, start with a clean slate and then follow your own common sense. Right now, that means taking a cold, hard look at the events swirling around you and recognizing that your money could be in grave danger.

It means accepting the reality that the value of your home, your 401k, and even some of your supposedly “safe” investments CAN fall a lot further. And most important, it requires the realization that you have the power to stop the bloodletting.

There's no law, rule or ethic that requires you to sit quietly and accept financial punishment passively. You have every right — and every mechanism — to get your money to safety without remorse.

I have warned about this crisis repeatedly. I have nagged, cajoled and shouted this message from the rooftops. But it gives me no pleasure to see my dire warnings come true. I have dreaded this day as often as I have predicted it. I prayed it would not come to pass. But now that it's here, I have a new prayer:

That you are, or soon will be, out of danger and ready for the worst …

That the worst will strike swiftly and end swiftly …

That, once we hit bottom, no matter how ugly the future may appear, you, me and many others will have the fortitude to reinvest, help get our country back on its feet, and move on to better times.

Just promise me one thing: No matter how dark this tunnel may seem, never forget it is not the end of the world. Our country has been through worse before, and we survived. We will survive this crisis too.

You hold your future in your hands. At this landmark turning point in our history, it's the choices you make today that will determine your fate — and the destiny of everyone that depends on you — for decades to come. Your decisions now could make the difference between a successful career or a lifetime of struggle … retiring in dignity or becoming a ward of the state … enjoying wealth and health or risking poverty-stricken illness.

Whatever your choices may be, do not procrastinate. And whenever you take action, don't do so in haste. Your response to the current crisis — or any new crisis that may ensue — should be both prompt and planned; both bold and prudent. I write to you each week to help you make that possible.

Here are your tasks in a nutshell:

Your first and most urgent priority is to survive the depression, while building the biggest pile of CASH you can. Whether it's a molehill of pennies that you pinch from daily sacrifices or a mountain of dollars you squeeze out of asset sales, the more cash you can accumulate now, the better.

Your second priority is to make sure your cash is in the safest place possible. That may not be the nearest bank or the biggest insurance company. Short-term Treasury securities, despite their low yield, must be the primary vehicle.

Third, for the duration of this crisis, plus any new ones that may strike, your best friend and companion will be patience.

Don't yield to the temptation of so-called “bargains” and “big discounts” from peak prices. Many of those peak prices were a fiction from a bygone era that may never be seen again in my lifetime or yours.

Don't jump in too soon. You can afford to wait. Indeed, just by waiting patiently, you can build wealth tremendously.

Fourth, I recognize that not everyone is able to follow all my instructions to the letter.

You may have real estate you cannot sell or a pension fund beyond you cannot control.

You may have bonds that have no market or a business that continues to provide income.

All could be assets that you must keep; and yet, at the same time, all are assets that could be vulnerable to big losses in a continuing decline.

To untie that knotty dilemma, you may need a hedge — a protective shield that can help offset your losses. Alternatively, if you are a risk-taker, those same hedges can be turned into pure profit opportunities during a market decline. I hope you have already read and acted on the guide to hedging I sent you a while ago. If not, the latest rally in the market gives you a great time to start. ( Click here to download the pdf file.)

Last, the big pay-off will come when we hit rock bottom and it's time to buy the greatest bargains of the century. So recognizing the bottom can unlock the opportunity to boost your income, allowing you to buy some of the best assets in the world for a pittance and stake out the high ground for yourself, your children and generations to come. I will do my utmost to alert you when the time comes.

Just remember that nothing is predetermined. Right now, the tsunami of crisis seems unstoppable. But in the foreseeable future, there will also come a singular moment in time when the worst of the storm has passed and the tides of history have ebbed, opening a window for you, me and our leaders to choose our own destiny. Before then, let's have a serious discussion about what the best — and worst — choices may be.

Good luck and God bless!

Martin

The above chart demonstrates some striking differences between the westernized countries and those of Asia and the Middle East. Norway is a notable example due largely from years of surplus resulting from their North Sea oil industry.

Japan is seen to be second in the analysis after the United States despite holding the largest foreign reserves in the world after China. These foreign reserves are debt-financed and not the result of an absolute surplus. They are a result of the government's strategy of issuing yen-denominated debt in order to fund the purchase of more US Treasuries with the purpose of suppressing the yen relative to that of the dollar. This has the effect of maintaining Japan's trade surplus when denominated in yen. The continual process of deliberately devaluating the yen reduces the purchasing power of those citizens who save.

By Mike Hewitt
http://www.dollardaze.org

"US: Blackwater used grenades on unarmed Iraqis"

By LARA JAKES JORDAN and MATT APUZZO, Associated Press Writers

8 DECEMBER 2008

WASHINGTON – Blackwater Worldwide security guards opened machine gun fire on innocent, surrendering Iraqis and launched a grenade into a girls' school during a gruesome Baghdad shooting last year, prosecutors said Monday in announcing manslaughter charges against five guards.

A sixth guard involved in the attack cut a plea deal with prosecutors, turned on his former colleagues, and admitting killing at least one Iraqi in the 2007 shooting in Baghdad's Nisoor Square.

Seventeen Iraqis were killed in the assault, which roiled U.S. diplomacy with Iraq and fueled anti-American sentiment abroad.

The five guards surrendered Monday and were due to ask a federal judge in Utah for bail.

"None of the victims of this shooting was armed."

"None of them was an insurgent," U.S. Attorney Jeffrey Taylor said.

"Many were shot while inside civilian vehicles that were attempting the flee from the convoy."

"One victim was shot in the chest while standing in the street with his hands up."

"Another was injured from a grenade fired into a nearby girls' school."

The guards were charged with 14 counts of manslaughter and 20 counts of attempted manslaughter.

They are also charged with using a machine gun to commit a crime of violence, a charge that carries a 30-year minimum prison sentence.

The shootings happened in a crowded square where prosecutors say civilians were going about their lives, running errands.

Following a car bombing elsewhere in the city, the heavily armed Blackwater convoy sought to shut down the intersection.

Prosecutors said the convoy, known by the call sign Raven 23, violated an order not to leave the U.S.-controlled Green Zone.

"The tragic events in Nisoor Square on Sept. 16 of last year were shocking and a violation of basic human rights," FBI Assistant Director Joseph Persichini said.

Witnesses said the contractors opened fire unprovoked.

Women and children were among the victims and the shooting left the square littered with blown-out cars.

Blackwater, the largest security contractor in Iraq, says its guards were ambushed and believed a slowly moving white Kia sedan might have been a car bomb.

"We think it's pure and simple a case of self-defense," defense attorney Paul Cassell said Monday as the guards were being booked.

"Tragically people did die."

Prosecutors said the Blackwater guards never even ordered the car to stop before opening fire.

In his plea agreement with prosecutors, former guard Jeremy Ridgeway, of California, admitted there was no indication the Kia was a car bomb.

Though the case has already been assigned to U.S. District Judge Ricardo M. Urbina in Washington, the guards surrendered in Utah.

They want the case moved there, where they would presumably find a more conservative jury pool and one more likely to support the Iraq war.

The indicted guards are Donald Ball, a former Marine from West Valley City, Utah; Dustin Heard, a former Marine from Knoxville, Tenn.; Evan Liberty, a former Marine from Rochester, N.H.; Nick Slatten, a former Army sergeant from Sparta, Tenn.; and Paul Slough, an Army veteran from Keller, Texas.

Ridgeway's sentencing on manslaughter, attempted manslaughter and aiding and abetting has not yet been scheduled.

An afternoon court hearing was scheduled on whether to release the guards.

Defense attorneys were filing court documents challenging the Justice Department's authority to prosecute the case.

The law is murky on whether contractors can be charged in U.S. courts for crimes committed overseas.

The shootings caused an uproar, and the fledgling Iraqi government in Baghdad wanted Blackwater, which protects U.S. State Department personnel, expelled from the country.

It also sought the right to prosecute the men in Iraqi courts.

"The killers must pay for their crime against innocent civilians."

"Justice must be achieved so that we can have rest from the agony we are living in," said Khalid Ibrahim, a 40-year-old electrician who said his 78-year-old father, Ibrahim Abid, died in the shooting.

"We know that the conviction of the people behind the shooting will not bring my father to life, but we will have peace in our minds and hearts."

Defense attorneys accused the Justice Department of bowing to Iraqi pressure.

"We are confident that any jury will see this for what it is: a politically motivated prosecution to appease the Iraqi government," said defense attorney Steven McCool, who represents Ball.

Based in Moyock, N.C., Blackwater is the largest security contractor in Iraq and provides heavily armed guards for diplomats.

Since last year's shooting, the company has been a flash point in the debate over how heavily the U.S. relies on contractors in war zones

The company itself was not charged in the case.

In a lengthy statement, Blackwater stood behind the guards and said it was "extremely disappointed and surprised" that one of the guards had pleaded guilty.
__

Associated Press writers Jennifer Dobner and Paul Foy in Salt Lake City and Sameer N. Yacoub in Baghdad contributed to this report.

"US spells out Iraq mission under new pact"

By ROBERT H. REID, Associated Press Writer

5 DECEMBER 2008

BAGHDAD – The top U.S. commander in Iraq warned his troops Friday to expect subtle changes in combat operations — including obtaining warrants before searching homes and detaining people — when the newly approved U.S.-Iraq security agreement takes effect on Jan. 1.

American troops have already begun implementing some of the changes, such as conducting more joint operations with Iraqi soldiers and getting warrants before raids against suspected insurgents.

Iraq's three-member presidential council signed off on the agreement Thursday, the final legal hurdle to enable the pact to go into effect next month — even though voters will have the final say in a referendum by the end of July.

It replaces a U.N. mandate that gives the U.S.-led coalition sweeping powers to conduct military operations and detain people without charge if they were believed to pose a security threat.

The new pact requires U.S. troops withdraw from Baghdad and other cities by the end of June and leave the country entirely by January 1, 2012.

In a letter to the nearly 150,000 troops, Gen. Ray Odierno sought to reassure members of his command that the new agreement would not diminish their ability to defend themselves, even though new rules spelling out when, where and how soldiers can open fire will be published.

"The new environment, though, will require a subtle shift in how we plan, coordinate and execute combat missions throughout Iraq," Odierno said.

Under the agreement, the U.S. troops must get Iraqi approval for combat operations and carry them out "by, with and through the Iraqi security forces," he added.

Nevertheless, Odierno stressed that the coalition must "maintain our effectiveness in accomplishing our objectives," including combating al-Qaida and other insurgent groups.

But he said "we must do so with respect for the Iraqi Constitution and laws, and we must continue to treat all Iraqi citizens with the utmost dignity and honor."

Odierno said the new rules of engagement — which among other things spell out when soldiers can open fire — will not diminish "our fundamental ability to protect ourselves and the force."

He said senior officers were in talks with the Iraqi government to work out procedures and that detailed orders, including new tactics, would be issued later.

"We will implement the agreement through phased, deliberate steps that preserve security gains, and we will complete our mission with honor and success," he said.

Nonetheless, the agreement will bring fundamental changes in the way U.S. forces operate here as the nearly six-year-long American mission winds down.

Among other things, the agreement states that after Jan. 1, U.S. troops may not search homes or businesses without warrants "except in the case of active combat operations."

The U.S. military must transfer the more than 15,000 detainees in its custody to the Iraqis or release them if there is not enough evidence to hold them.

In preparation for the change, U.S. officers have been quietly implementing some new procedures.

Already, most combat operations are conducted jointly with Iraqi soldiers and police, and more and more raids are carried out with warrants issued by Iraqi judges.

It is unclear, however, whether the changes will be as seamless as senior officers insist.

In the past, Prime Minister Nouri al-Maliki had been openly critical of some U.S. operations, including attacks against Shiite militias in Baghdad's Sadr City neighborhood until he broke this year with radical cleric Muqtada al-Sadr.

During a news conference Wednesday, the second-ranking commander in Iraq, Lt. Gen. Lloyd Austin, acknowledged there could be friction between U.S. and Iraqi officers on when and where to launch attacks.

"It's combat and you know there will be friction from day to day and we hope that these friction points will be minor," Austin said.

The level of fighting in Iraq has dropped significantly since a cease-fire last spring between the Iraqi government and Shiite militias in Basra and Baghdad — a move that enabled the Iraqi army to take control of flashpoint neighborhoods.

Last month, only eight U.S. soldiers were killed in action, a fraction of the monthly toll earlier in the war.

At least 4,209 members of the U.S. military have died in the Iraq war since it began in March 2003, according to an Associated Press count.

Most of the fighting is taking place in the north against al-Qaida and other Sunni extremists who have suffered major setbacks but have not been defeated.

On Thursday, two U.S. soldiers were killed by a suicide car bomber in Mosul, the main city in the north.

Attacks still occur in Baghdad and other areas, although at lower frequency.

Two truck bombers killed at least 17 people Thursday in Fallujah, a former Sunni insurgent stronghold 40 miles west of Baghdad.

Police said two bodies — a policeman and a child — were found Friday in the rubble of nearby buildings destroyed by the blasts.

On Friday, a roadside bomb exploded near an Iraqi security patrol in southern Baghdad, killing one policeman and a Sunni volunteer, police said.

Two other members of the patrol were wounded.

To the north, three women were killed in Balad Ruz when a bomb planted in a radio exploded, Iraqi officials said.

One of the women picked up the radio off the street and brought it home.

It detonated when one of the women tried to turn it on, officials said.
___

Associated Press writer Sameer N. Yacoub contributed to this report.

"Employers cut 533K jobs in Nov., most in 34 years - Employers ax 533,000 jobs in Nov., most in 34 years; unemployment rate rises to 6.7 percent"

By JEANNINE AVERSA, Associated Press

Last updated: 3:25 p.m., Friday, December 5, 2008

WASHINGTON -- Skittish employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 percent, dramatic proof the country is careening deeper into recession.

The new figures, released by the Labor Department Friday, showed the crucial employment market deteriorating at an alarmingly rapid clip, and handed Americans some more grim news right before the holidays.

The net loss of more than a half-million jobs was far worse than analysts expected.

As companies throttled back hiring, the unemployment rate bolted from 6.5 percent in October to 6.7 percent last month, a 15-year high.

"These numbers are shocking," said economist Joel Naroff, president of Naroff Economics Advisors.

"Companies are sharply reacting to the economy's problems and slashing costs."

"They are not trying to ride it out."

The unemployment rate would have moved even higher if not for the exodus of 422,000 people from the work force.

Economists said many of those people probably abandoned their job searches out of sheer frustration.

In November 2007, the jobless rate was at 4.7 percent.

The U.S. tipped into recession last December, a panel of experts declared earlier this week, confirming what many Americans already thought.

Since the start of the recession, the economy has lost 1.9 million jobs, the number of unemployed people increased by 2.7 million and the jobless rate rose by 1.7 percentage points.

More evidence that the labor pain is far from over came Friday when General Motors Corp. said it will lay off another 2,000 workers as it cuts shifts at three car factories starting in February due to slowing demand for their products.

President George W. Bush, who used the word "recession" for the first time to describe the economy's state, pledged Friday to explore more efforts to ease housing, credit and financial stresses.

"There is still more work to do," Bush said.

"My administration is committed to ensuring that our economy succeeds."

President-elect Barack Obama said the dismal job news underscored the need for forceful action, even as he warned that the pain could not be quickly relieved.

"There are no quick or easy fixes to this crisis ... and it's likely to get worse before it gets better," Obama said.

"At the same time, this ... provides us with an opportunity to transform our economy to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children, investing in clean energy solutions to break our dependence on imported oil, and making an early down payment on the long-term reforms that will grow and strengthen our economy for all Americans for years to come."

To provide relief, the Bush administration will continue to concentrate on ways to bust through a credit jam that is feeding prominently into the economy's problems, Commerce Secretary Carlos Gutierrez told The Associated Press in an interview.

"We're going to stay focused on that like a laser," he said.

Elsewhere Friday, the Mortgage Bankers Association said a record one in 10 American homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September.

The percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and from 7.3 percent a year earlier.

On Wall Street, stocks slid.

The Dow Jones industrials were down 130 points in afternoon trading.

Job losses last month were widespread, hitting factories, construction companies, financial firms, retailers, leisure and hospitality, and others industries.

The few places where gains were logged included the government, education and health services.

The loss of 533,000 payroll jobs was much deeper than the 320,000 job cuts economists were forecasting.

The rise in the unemployment rate, however, wasn't as steep as the 6.8 percent rate they were expecting.

Taken together, though, the employment picture clearly darkening.

The job reductions were the most since a whopping 602,000 positions were slashed in December 1974, when the country was in a severe recession.

All told, 10.3 million people were left unemployed as of November, while the number of employed was 144.3 million.

Gary Cope, 33, this week lost his communications job at Roanoke, Va.-based high-tech research and development company Luna Innovations Inc.

Cope was called into a meeting first thing Thursday morning with two administrators and a human resources representative.

Their message: He was being laid off, for financial reasons, effective immediately.

He left with a box of his belongings and about two months' severance.

As Cope walked out the door, all he could think was, "I have a 3-year-old son and I'm a single dad."

"I came home and did my initial pity party, then I got myself together, talked to my family and went right to work" rewriting his resume and sending it out, Cope said.

"My family has been very supportive, they've let me know I'll get through this and they won't let me drown."

Job losses in September and October also turned out to be much worse.

Employers cut 403,000 jobs in September, versus 284,000 previously estimated.

Another 320,000 were chopped in October, compared with an initial estimate of 240,000.

Employers are slashing costs as they cope with sagging appetites from customers in the U.S. and in other countries, which are struggling with their own economic troubles.

The carnage -- including the worst financial crisis since the 1930s -- is hitting a wide range of companies.

In recent days, AT&T Inc., DuPont, JPMorgan Chase & Co., as well as jet engine maker Pratt & Whitney, a subsidiary of United Technologies Corp., and mining company Freeport-McMoRan Copper & Gold Inc. announced layoffs.

Fighting for their survival, the chiefs of Chrysler LLC, General Motors and Ford Motor Co. returned to Capitol Hill Friday to again ask lawmakers for as much as $34 billion in emergency aid.

Workers with jobs saw modest wage gains.

Average hourly earnings rose to $18.30 in November, a 0.4 percent increase from the previous month.

Over the year, wages have grown 3.7 percent, but paychecks haven't stretched that far because of high prices for energy, food and other items.

Worn-out consumers battered by the job losses, shrinking nest eggs and tanking home values have retrenched, throwing the economy into a tailspin.

As the unemployment rate continues to move higher, consumers will burrow further, dragging the economy down even more, a vicious cycle that Washington policymakers are trying to break.

Federal Reserve Chairman Ben Bernanke is expected ratchet down a key interest rate -- now near a historic low of 1 percent -- by as much as a half-percentage point on Dec. 16 in a bid to breathe life into the moribund economy.

Bernanke is exploring other economic revival options and wants the government to step up efforts to curb home foreclosures.

Treasury Secretary Henry Paulson, whose department oversees the $700 billion financial bailout program, also is weighing new initiatives such as tapping the second half of that rescue money to ease the economic crisis.

Obama, who takes office on Jan. 20, has called for a massive economic recovery bill to generate 2.5 million jobs over his first two years in office.

House Speaker Nancy Pelosi, D-Calif., has vowed to have a package ready on Inauguration Day for Obama's signature.

The measure, which could total $500 billion, would bankroll big public works projects to create jobs, provide aid to states to help with Medicaid costs, and provide money toward renewable energy development.

At 12 months and counting, the recession is longer than the 10-month average length of recessions since World War II.

The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.

The current recession might end up matching that or setting a record in terms of duration, analysts say.

The 1981-82 recession was the worst in terms of unemployment since the Great Depression.

The jobless rate rose as high as 10.8 percent in late 1982, just as the recession ended, before inching down.

Given the current woes, the jobless rate could rise as high as 8.5 percent by the end of next year, some analysts predict.

Still, the unemployment rate often peaks after a recession has ended.

That's because companies are reluctant to ramp up hiring until they feel certain the recovery has staying power.

"Ill. Gov. arrested in Obama successor probe"

By MIKE ROBINSON, Associated Press Writer

9 DECEMBER 2008

CHICAGO – Illinois Gov. Rod Blagojevich was arrested on Tuesday on charges that he brazenly conspired to sell or trade the U.S. Senate seat left vacant by President-elect Barack Obama to the highest bidder.

Blagojevich also was charged with illegally threatening to withhold state assistance to Tribune Co., the owner of the Chicago Tribune, in the sale of Wrigley Field, according to a federal criminal complaint.

In return for state assistance, Blagojevich allegedly wanted members of the paper's editorial board who had been critical of him fired.

A 76-page FBI affidavit said the 51-year-old Democratic governor was intercepted on court-authorized wiretaps over the last month conspiring to sell or trade the vacant Senate seat for personal benefits for himself and his wife, Patti.

Otherwise, Blagojevich considered appointing himself.

The affidavit said that as late as Nov. 3, he told his deputy governor that if "they're not going to offer me anything of value I might as well take it."

"I'm going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain," Blagojevich allegedly said later that day, according to the affidavit, which also quoted him as saying in a remark punctuated by profanity that the seat was "a valuable thing — you just don't give it away for nothing."

The affidavit said Blagojevich also discussed getting a substantial salary for himself at a nonprofit foundation or an organization affiliated with labor unions.

It said Blagojevich also talked about getting his wife placed on corporate boards where she might get $150,000 a year in director's fees.

He also allegedly discussed getting campaign funds for himself or possibly a post in the president's cabinet or an ambassadorship once he left the governor's office.

He noted becoming a U.S. senator might remake his image for a possible presidential run in 2016, according to the affidavit.

And he allegedly said a Senate seat would also provide him with corporate contacts if he needed a job and present an opportunity for his wife to work as a lobbyist.

"I want to make money," the affidavit quotes him as saying in one conversation.

The affidavit said Blagojevich expressed frustration at being "stuck" as governor and that he would have access to greater resources if he were indicted while in the U.S. Senate than while sitting as governor.

U.S. Attorney Patrick J. Fitzgerald said in a statement that "the breadth of corruption laid out in these charges is staggering."

"They allege that Blagojevich put a for sale sign on the naming of a United States senator," Fitzgerald said.

Messages left for Blagojevich spokesman Lucio Guerrero and at the governor's press office were not immediately returned Tuesday morning.

Among those being considered for the Senate post include U.S. Reps. Danny Davis and Jesse Jackson Jr.

The affidavit outlined a Nov. 10 call between Blagojevich, his wife, his chief of staff — John Harris, who also was arrested Tuesday — and a group of advisers in which Harris allegedly suggested working out an agreement with the Service Employees International Union.

Under the plan, Blagojevich would appoint a new senator who would be helpful to the president-elect and in turn get a job as head of Change to Win, a group formed by the union.

The union would get an unspecified favor from Obama later.

Nothing in the court papers suggested Obama had any part in the discussion.

In fact, Blagojevich allegedly said in the same conversation that Obama most likely would not appoint him as secretary of health and human services or to an ambassadorship because of the negative publicity that has surrounded the governor for three years.

One day later, according to the affidavit, Blagojevich allegedly told an associate he knew Obama wanted a specific Senate candidate but "they're not going to give me anything except appreciation."

He finished the remark with an expletive.

Blagojevich also was charged with using his authority as governor in an attempt to squeeze out campaign contributions.

Corruption in the Blagojevich administration has been the focus of a federal investigation involving an alleged $7 million scheme aimed at squeezing kickbacks out of companies seeking business from the state.

Federal prosecutors have acknowledged they're also investigating "serious allegations of endemic hiring fraud" under Blagojevich, who has a $177,412 salary, though it's unclear whether he accepts the total.

Political fundraiser Antoin "Tony" Rezko who raised money for the campaigns of both Blagojevich and Obama is awaiting sentencing after being convicted of fraud and other charges.

Blagojevich's chief fundraiser, Christopher G. Kelly, is due to stand trial early next year on charges of obstructing the Internal Revenue Service.

According to Tuesday's complaint, Blagojevich schemed with Rezko, millionaire-fundraiser turned federal witness Stuart Levine and others to get financial benefits for himself and his campaign committee.

Federal prosecutors said Blagojevich and the chairman of his campaign committee have been speeding up corrupt fundraising activities in the last month to get as much money as possible before the end of the year when a new law would curtail his ability to raise contributions from companies with state contracts worth more than $50,000.

According to the affidavit, agents learned Blagojevich was seeking $2.5 million in campaign contributions by the end of the year, with a large part allegedly to come from companies and individuals who have gotten state contracts or appointments.

The affidavit also outlines Blagojevich conversations related to Tribune Co., which has been hoping to sell Wrigley Field, the home of the Chicago Cubs which the publishing giant also owns.

Blagojevich was quoted in court papers as telling Harris in a profanity laced Nov. 4 conversation that his recommendation to Tribune executives was to fire the editorial writers "and get us some editorial support."

Harris is quoted as telling the governor Nov. 11 that an unnamed Tribune Owner, presumably CEO Sam Zell, "got the message and is very sensitive to the issue."

The affidavit said Harris quoted a Tribune financial adviser as saying cuts were coming at the newspaper and "reading between the lines he's going after that section," apparently meaning editorial writers.

Blagojevich is quoted as saying: "Oh, that's fantastic."

"Wow," Blagojevich allegedly replied.

"Keep our fingers crossed."

"You're the man."

"Good job, John."

Harris allegedly told Blagojevich in his conversation with the financial adviser he had singled out deputy editorial page editor John McCormick as "somebody who was the most biased and unfair."

After hearing that, Blagojevich allegedly stressed to the head of a Chicago sports consulting firm that it was important to provide state aid for a Wrigley Field sale.

Blagojevich took the chief executive's office in 2003 as a reformer promising to clean up former Gov. George Ryan's mess.

Ryan, a Republican, is serving a 6-year prison sentence after being convicted on racketeering and fraud charges.

A decade-long investigation began with the sale of driver's licenses for bribes and led to the conviction of dozens of people who worked for Ryan when he was secretary of state and governor.

FBI spokesman Frank Bochte said federal agents arrested the governor and Harris simultaneously at their homes at 6:15 a.m. and took them to the Chicago FBI headquarters.

He did not have any details about Blagojevich's arrest, only that he was cooperative with federal agents.

"It was a very calm setting," he said.

The governor was to appear later Tuesday before U.S. Magistrate Judge Nan Nolan to answer the charges.

The time was not immediately set.
___

Associated Press Writer Don Babwin contributed to this report.

"Point of no return: Interest on T-bills hits zero - `Down slightly is the new up': To skittish investors, zero interest, even negative, looks good"

By MADLEN READ and MARTIN CRUTSINGER, Associated Press

Last updated: 6:55 p.m., Tuesday, December 9, 2008

NEW YORK -- Investors are so nervous they're willing to accept the same return from government debt that they'd get from burying money in a coffee can -- zero.

The Treasury Department said Tuesday it had sold $30 billion in four-week bills at an interest rate of zero percent, the first time that's happened since the government began issuing the notes in 2001.

And when investors traded their T-bills with each other, the yield sometimes went negative.

That's how extreme the market anxiety is: Some are willing to give up a little of their money just to park it in a relatively safe place.

"No one wants to run the risk of any accidents," said Lou Crandall, chief economist at Wrightson ICAP, a research company that specializes in government finance.

At last week's government auction of the four-week bills, the interest rate was a slightly higher but still paltry 0.04 percent.

Three-month T-bills auctioned by the government on Monday paid poorly, too -- 0.005 percent.

While everyday people can keep their cash in an interest-earning CD or savings account at the bank, institutional investors with hundreds of millions of dollars on their hands often use government debt as part of their investment strategy.

In the Treasury market, the U.S. government, considered the most creditworthy of borrowers, issues IOUs of varying durations to raise money.

The zero percent interest rate is no reason to panic.

As recently as Monday, investors were plowing cash into stocks, and averages like the Dow industrials are off their lows.

And long-term government bonds, while near record lows, are still paying decent money considering the tumultuous climate.

The yield on a 30-year bond on Tuesday was a little higher than 3 percent.

There's good news in all this for taxpayers: Low interest rates on government debt mean the United States is financing its $700 billion bailout of the financial system very cheaply.

The Treasury has sold mountains of debt to pay for it.

But the trend also underlines stubborn anxiety in the financial market that could keep the economy sluggish for years to come, and it translates into stagnant returns for people who have their money in places like money market funds.

"There's a price for safety," said Peter Crane, president of money market mutual fund information company Crane Data LLC.

"Down slightly is the new up."

As the stock market has taken its alarming plunge, people have been moving money from riskier assets to safer ones.

According to Crane Data, funds invested purely in Treasurys have surged more than 150 percent over the past year, to $726 billion.

Earning zero percent on an investment for a short while may not seem that dire for the average person.

But a zero percent rate has serious consequences for the complex credit markets.

Those markets have been dysfunctional since Lehman Brothers Holdings Inc. went bankrupt in September, scaring away investors who normally buy bonds from seemingly creditworthy borrowers.

Lending, the lifeblood of the economy, has frozen up.

One corner of the credit markets is the repurchase markets, known as "repo," where banks and securities firms make and receive short-term loans backed by collateral, usually Treasury bills.

When those T-bills are yielding nothing, there's little incentive to deliver them on time.

If the holder loses the interest, it's no big deal.

"This is a particular problem in a time like this, because people are buying Treasury securities for their security, for their safety."

"It's important that they're delivered," Crandall said.

And high demand for government debt rather than corporate debt could stifle economic growth.

Corporate bond rates have been surging to record levels compared with Treasurys, which makes it more expensive for companies to raise money.

And when companies can't raise money, they often have to cut costs, sometimes through layoffs.

Only a few corporate bond deals have been going through lately, and most have been through the government, which has agreed to guarantee financial institutions' bond sales.

American Express Co., for one, said Tuesday it has issued $5.5 billion through the government program.

Many worry that the government will become the most attractive lender and borrower in the market -- crowding out others in the private sector.

"Because they have a printing press, they can borrow ever greater quantities," said Howard Simons, strategist with Bianco Research in Chicago.

The 2-year note rose 6/32 to 100 25/32 and its yield fell to 0.85 percent from 0.94 percent late Monday.

The 10-year note rose 25/32 to 109 17/32 and its yield fell to 2.65 percent from 2.75 percent.

The 30-year bond rose 2 21/32 to 128 5/32 and its yield fell to 3.04 percent from 3.16 percent.

The three-month Treasury bill by late trading yielded 0.03 percent, up marginally from 0.02 percent late Monday.

The discount rate was 0.02 percent.

And bank-to-bank lending rates slipped.

The London Interbank Offered Rate, or Libor, for three-month loans in dollars fell nearly 0.03 percentage points to just over 2.16 percent, according to the British Bankers' Association.

------

AP Economics Writer Martin Crutsinger reported from Washington.

Congress has given the Sec of the Treasury money and authurity to buy anything he chooses. Why
not buy the big three (their market value is less than the bailout they are asking for), make whatever changes are needed and resell them to domestic buyers?

I personally do not know who would want them, rla ....

OR WHY?

It is an industry in decline ....

Its days are numbered ....

It is a dinosaur out in a tar pit, bellowing away as it sinks ....

And so ....

Is there anybody sane and rational down your way, rla, who thinks or believes for an instant that CONGRESS has a clue as to what it is doing here, other than EMPTYING OUT OUR TREASURY as rapidly as it possibly can?

Would you be willing to declare Congress sane and rational, rla?

NO.

Thank God!

"Lawmakers blast former Fannie, Freddie execs - Lawmakers blast former Fannie, Freddie execs for fueling market turmoil that led to recession"

By ALAN ZIBEL, Associated Press

Last updated: 6:35 p.m., Tuesday, December 9, 2008

WASHINGTON -- Three months after the government seized control of Fannie Mae and Freddie Mac, lawmakers on Tuesday blamed former top executives at the mortgage giants for fueling the financial market turmoil that has dragged the country into a recession.

And the housing fallout continues.

The National Association of Realtors' index of pending U.S. home sales beat expectations in October -- but deeply discounted foreclosures and distressed sales accounted for nearly half the deals.

On Wall Street, stocks fell after a two-day rally as downbeat corporate news reminded investors that the economy's troubles won't soon ease.

The Dow Jones industrials fell nearly 243 points, while broader indexes showed more moderate declines.

Seeking the safety of government securities, investors drove demand for ultra-safe Treasury bills so high Tuesday that they were willing to earn no interest on their investments at a Treasury Department auction.

Interest rates on four-week Treasury bills slid to zero from 0.04 percent a week earlier.

At the same time, Congress and the White House pushed to clear the final obstacles to a $15 billion bailout of the auto industry.

Internal e-mails and other documents released by the House Oversight and Government Reform Committee show that former Fannie Mae CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they avoid riskier types of loans.

"Their irresponsible decisions are now costing the taxpayers billions of dollars," said Rep. Henry Waxman, D-Calif., chairman of the committee, which reviewed nearly 400,000 internal documents from Fannie and Freddie.

Republicans argued that the primary causes of the financial meltdown were weak government regulation of Fannie and Freddie and Clinton administration policies to promote homeownership.

"We knew a long time ago that this train was going to crash," said Rep. Christopher Shays, R-Conn.

Democrats acknowledged that the two government-sponsored companies contributed to the financial crisis.

But they stressed that Wall Street banks -- not Fannie and Freddie -- led the dramatic decline in lending standards that caused mortgages to start defaulting in huge numbers two years ago.

Two months after federal regulators seized the two companies in September, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a huge quarterly loss.

Fannie Mae has yet to request any government aid but has warned it may need to do so soon.

Fannie and Freddie own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt.

The two companies are the engines behind a complex process of buying, bundling and selling mortgages as investments.

They traditionally backed the safest loans -- 30-year fixed rate mortgages that required a down payment of at least 20 percent.

But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Rep. Carolyn Maloney, D.-N.Y., grilled Syron about the Freddie Mac's decision to fire David Andrukonis, its former chief risk officer.

Andrukonis had sounded warnings as far back as 2004 about the risks posed by loans in which borrowers didn't provide proof of their incomes or detail their assets, according to e-mails released by the committee.

"Do you regret firing him?" Maloney said.

"Do you regret buying these risky loans?"

"Do you regret the way you led -- and I would say mismanaged -- this company?"

Syron said Andrukonis "was fired for a variety of reasons."

"It was not primarily for his having a view on credit."

Likewise, lawmakers pressed Mudd about an internal Fannie Mae presentation from June 2005.

It showed the company at a key juncture.

Its competitors on Wall Street were starting to reap lucrative fees on investments backed by risky loans.

Fannie Mae had to decide whether to compete in that market or take the less risky, but also less profitable, path.

Fannie Mae executives worried at the time about "becoming a niche player" and "becoming less of a market leader" at the time, according to the confidential internal presentation, which noted that mortgage securities sold by Wall Street investors exceeded those sold by Fannie Mae for the first time in 2004.

With competitors entering the market, Mudd said, "we couldn't afford to make the bet that the changes were not going to be permanent."

Lawmakers, in questioning that lasted more than four hours, were frustrated by what they called a lack of willingness among Syron and Mudd, plus former Fannie Mae CEO Franklin Raines and former Freddie Mac CEO Leland Brendsel, to share any of the blame for the companies' fortunes.

"All four of you seem to be in complete denial that Freddie and Fannie are in any way responsible for this," said Rep. Darrell Issa, R-Calif.

"Your whole excuse for going to risky and unreasonable loans that are defaulting at an incredibly high rate is that everyone is doing it."

Repeated attempts to impose tighter regulation of the two companies were thwarted by the companies' powerful lobbyists.

The companies, which are now banned from lobbying, spent nearly $177 million on lobbying over the past 20 years, according to the Center for Responsive Politics.

Raines defended his company's lobbying, saying "Fannie Mae, like any other corporation owned by shareholders, came to Congress and expressed its views."

The two companies, with their goal of promoting affordable housing, have traditionally been allied with Democrats.

But internal Freddie Mac budget records obtained by The Associated Press show $11.7 million was paid to 52 outside lobbyists and consultants in 2006 as part of a campaign to preserve weak regulatory oversight, with particular pressure exerted on the Republicans who led Congress at the time.

The more difficult questions, however, will come next year, when lawmakers will weigh what role, if any, the two companies should play in the mortgage market.

Options include taking the companies private, morphing them into a public utility or a federal agency, or leaving them as government-sponsored entities that have private shareholders and profits, with tougher regulations.

"Gov't supplies $3.84B to 35 banks from bailout pot - Government supplies $3.84 billion to 35 banks in third round of payments from bailout fund"

By MARTIN CRUTSINGER, Associated Press

Last updated: 5:25 p.m., Tuesday, December 9, 2008

WASHINGTON -- The government on Tuesday said it has supplied $3.84 billion to 35 banks in a third round of payments from the $700 billion financial system rescue program.

The Treasury Department said it authorized the payments on Friday, bringing the total supplied to banks to $165.3 billion.

That leaves less than $85 billion to be spent out of the $250 billion that has been earmarked to make direct purchases of stock in banks as a way of bolstering their balance sheets and encouraging them to resume more normal lending.

The announcement of the new payments came the Bush administration's handling of the $700 billion rescue fund is facing new scrutiny from lawmakers.

Neel Kaskhari, the assistant Treasury secretary heading up the rescue program, was scheduled to testify Wednesday before the House Financial Services Committee, which is holding a hearing on a report on the bailout efforts issued last week by the Government Accountability Office.

Committee Chairman Barney Frank said the GAO report showed that Treasury had no way of knowing whether the taxpayer money being paid to the banks is being used to increase lending -- the goal of the effort.

Frank said the administration was refusing to enforce requirements that the rescue funds be used by the banks to increase lending, which he called a "blatant refusal" to follow the intent of Congress in approving the bailout program.

The Treasury announcement on Tuesday said that the largest stock purchase in the third round of the program was $935 million paid to purchase stock in Popular Inc., a bank in San Juan, Puerto Rico.

Many of the banks already had announced that the government was purchasing stock after they reached preliminary agreements with the Treasury Department.

The government does not officially confirm those actions until the final agreements are signed and the stock purchases are authorized.

The Treasury Department announced on Nov. 17 that a category of privately held banks had until this past Monday, to apply to sell stock to the government.

These 3,800 banks are so-called C-Corps institutions, named for the part of the tax code that applies to them.

Another 2,500 S-Corps banks also will be able to apply for money from Treasury.

Treasury Secretary Henry Paulson last month announced the government was abandoning the original centerpiece of the rescue program, the purchase of distressed mortgage-backed securities from banks as a way of boosting their resources.

Instead, the program was shifted to direct government purchases of bank stock because officials decided the financial crisis had worsened and there was not enough time to get the troubled-asset program up and running.

The $700 billion rescue package was approved by Congress on Oct. 3.

Ten days later, Paulson pressured nine of the country's largest banks to participate in the initial stock purchase of $125 billion.

Critics contend that banks can simply hoard the fresh capital or use it to pay dividends to their shareholders or acquire other institutions, rather than using it to increase lending as a way of helping the country to emerge from a recession that began in December 2007.

"Pay raise for judges tucked into bailout plan"

By ANDREW TAYLOR, Associated Press Writer

Wed Dec 10, 5:13 pm ET

WASHINGTON – If the $14 billion bailout plan for U.S. automakers passes, it will help more than just Ford, Chrysler and General Motors.

Federal judges would get a pay raise, as well.

The raise — an annual cost of living adjustment, or COLA — would bring U.S. District court judges up to par with members of Congress, who will receive an almost $5,000 boost on Jan. 1.

District judges and lawmakers now earn $169,300 a year but are expected to be awarded a 2.8 percent raise next year, said Dick Carelli, a spokesman for the Administrative Office of the United States Courts.

Senate Majority Leader Harry Reid, D-Nev., insisted that the judicial pay raise go into the automaker loan measure, which is the only item of business on Congress' lame-duck agenda.

Under ethics legislation enacted almost two decades ago, members of Congress get a cost of living raise automatically, but they have to vote to give judges an identical raise.

Because the spending bill covering U.S. courts has not passed, the step is necessary if judges are going to get their COLA.

The Senate passed the judicial pay measure as a separate bill in November, but the House never acted.

A House Democratic leadership aide said that while House Speaker Nancy Pelosi, D-Calif., supports the pay raise, it was difficult for the House to hold a stand-alone vote in the midst of a recession to increase the pay for people making far more than most workers.

As a result, Reid has taken the unusual step of linking the obscure but important judicial pay issue to the unpopular auto bailout.

There is concern among many policymakers that judges are not paid enough relative to the importance of their offices, and in six of the past 13 years, judges have been denied their pay raise as lawmakers opted not to take their own COLA.

Even with the raise, judges earn far less than lawyers at big firms, just as members of Congress make less than many lobbyists.

If the pay measure fails to go through this year, judges are likely to get the increase as one of the first pieces of business next year.

"Mortgage fraud is booming business for prosecutors - Federal prosecutors turn their attention to fraud cases that contributed to mortgage meltdown"

By DON THOMPSON, Associated Press

Last updated: 5:35 p.m., Wednesday, December 10, 2008

SACRAMENTO, Calif. -- Investigations into the collapse of financial titans such as Lehman Brothers, Bear Stearns and Washington Mutual have attracted most of the attention in the ongoing unraveling of the nation's mortgage-backed security mess.

Lost in the headlines are prosecutions proceeding quietly on the local level against smaller players.

In dozens of jurisdictions around the country, federal prosecutors are charging hundreds of people with originating the bad loans that helped derail the world's financial markets.

Prosecutors are finding buyers who created fake identities to take out home loans, brokers who paid kickbacks to ensure fraudulent mortgages were approved and lenders who took bribes and forged documents.

They are the ones who fraudulently overstated property values and borrowers' incomes, who used illegal means to secure loans that homeowners ultimately couldn't afford, though they had plenty of encouragement from Wall Street.

That fraud helped artificially inflate home values that have since come crashing to earth.

Foreclosures are dragging down property values in neighborhoods across the nation.

Lenders, in response, have shut the door on almost anyone without platinum credit, and raised a variety of fees to make up for huge losses.

And the fraud is continuing in new ways as desperate homeowners try to unload mortgages they can't afford and builders shed surplus properties.

"Let's not lose sight of the fact that there is immense criminal fraud involved in this financial crisis," said U.S. Attorney McGregor Scott, whose district spans California's vast Central Valley and is among those most affected by the housing bust.

"It's a profound ripple effect that affects everyone."

The U.S. Justice Department has formed more than 40 mortgage fraud task forces nationwide as prosecutors and investigators struggle with a flood of mortgage-related criminal cases.

The FBI reports that its mortgage-fraud caseload has more than doubled in three years to about 1,600 investigations that have cost lenders at least $4 billion.

About 200 FBI agents are assigned to the cases, up from 120 a year ago.

Nationally, federal prosecutors charged 226 people with mortgage fraud between July and the end of October, the latest figures available, said U.S. Department of Justice spokeswoman Laura Sweeney.

Another 406 were charged as part of a national mortgage-fraud crackdown between March and June.

In Scott's California district, prosecutors have filed charges related to housing scams against 53 people in 15 ongoing prosecutions.

They have another 15 active investigations against 68 individuals.

They estimate hundreds of millions of dollars have been paid out by banks and other lenders because of mortgage fraud in the Central California district, which stretches from just north of Los Angeles to the Oregon border.

"We're running out of bodies to handle these cases," said Scott, calling on Congress to approve more money for investigators and prosecutors.

"We're just being overwhelmed."

Spokesmen for the FBI and Justice Department said there are no plans to ask Congress for more money.

They could not say how much the hundreds of agents and prosecutors are spending to investigate mortgage fraud nationwide.

"We continue to re-prioritize as necessary," Justice spokesman Ian McCaleb said in an e-mail.

"Currently, we have shifted significant resources toward investigating mortgage fraud."

Paul Leonard, director of the California office of the Center for Responsible Lending, welcomed investigators' attempts to keep up with newer forms of foreclosure and builder fraud.

However, wrongdoing remains so widespread that "I think those agencies have to pick their spots," he said.

"I wish they had engaged in this earlier," Leonard said.

"I think it's constructive to sort of root out these evil and malicious scams when they occur ..."

"Given the state of the economy, it's too little too late."

In addition to California, large numbers of investigations are under way in Nevada, Florida, Illinois, Arizona, Atlanta and Rust Belt states such as Ohio and Michigan, the areas that have experienced the highest rates of home foreclosure.

South Florida has been a particular hotbed of activity for federal prosecutors, who have charged 112 people there with an estimated $176 million in mortgage fraud this year.

"It really is an incredible amount," said Alicia Valle, spokeswoman for the U.S. Attorney's office in Miami.

"You name it and we've got it."

Florida, California and Illinois combined to provide nearly half the nation's fraud reports in the second quarter, according to a Dec. 2 report from the Mortgage Asset Research Institute.

Nationwide, mortgage fraud reports increased 42 percent from January to March and 45 percent from April to June, compared with their year-ago periods.

"We have a duty to put these people in prison," said Scott, the U.S. attorney in California.

Michael Cardoza, a San Francisco-area attorney representing one of those charged in central California, said prosecutors should be setting their sights higher.

"It's amazing to me that the people on Wall Street walk away with millions and millions if not billions of dollars," said Cardoza.

"Now they're just picking off little people ..."

"They're doing scapegoats is what they're doing."

The FBI says about 80 percent of mortgage fraud losses under investigation involve industry insiders who inflated property values or made loans based on fictional information.

The remaining 20 percent is by individual borrowers who lied about their income or job history to qualify for loans.

So-called "liar loans," which require little or no documentation about the buyer's income or employment.

The larger group is where law enforcement is focused.

"We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district," said William Edwards, the acting U.S. attorney for northern Ohio.

U.S. Attorney Joseph Russoniello is setting the bar at $400,000 or more in his San Francisco-based district, where home values are among the nation's highest.

"We could be looking at thousands of potential cases," Russoniello said.

"We've been looking at a number of cases that run the gamut from simple mortgage fraud to collusion involving brokers, appraisers ... bait and switch, predatory rescue operations."

His mortgage-fraud task force contracted with a financial analyst in October to help sort through the transactions.

Russoniello expects to soon announce "a significant number" of indictments.

Nevada has the nation's highest foreclosure rate, and now a corresponding amount of mortgage fraud complaints are flooding law enforcement agencies, said U.S. Attorney Gregory Brower.

A special telephone hot line has fielded more than 1,100 calls since it was set up in April, said Nevada FBI spokesman David Staretz.

Brower has had to shuffle attorneys to handle cases like the one Nevada prosecutors say involved 432 fake buyers for 227 properties worth more than $107 million.

At least 143 of the homes are now in default, costing lenders more than $17 million.

Five Las Vegas brokers, mortgage agents and loan officers have pleaded guilty and six are awaiting trial.

"It's certainly a contributor, if not the contributor, to some of the economic downturn we're seeing," Brower said.

"It will be a while before the dust settles."

"AIG working to settle $10B of investment losses - Insurer AIG says working to unwind $10B of investment losses not covered by government bailout"

By IEVA M. AUGSTUMS, Associated Press

Last updated: 5:45 p.m., Wednesday, December 10, 2008

CHARLOTTE, N.C. -- American International Group Inc. said Wednesday it is working on resolving nearly $10 billion in soured investments -- without asking taxpayers for more money.

The exposure stems from investments in mortgage and corporate debt assets, and may make it more difficult for the battered insurer to repay the federal government for its bailout package.

AIG spokesman Nick Ashooh confirmed the company's exposure Wednesday, after The Wall Street Journal reported the trades may be the first sign that the New York-based insurer has been gambling with its own capital.

The company also said the Journal incorrectly reported on Wednesday that the $10 billion in trades was a previously undisclosed obligation to AIG counterparties.

Ashooh said the trades in question were not speculative bets but "credit protection instruments," designed to hedge against losses.

The swaps on these synthetic securities are also referred to as "cash settlement" or "Pay As You Go" swaps because they are settled in cash as and when losses are taken, the company said.

"These are not debts that we owe, but yes, they are an exposure for us," Ashooh said.

He said the exposure has been fully disclosed in regulatory filings and comprises about $9.8 billion of AIG's $71.6 billion exposure to derivative contracts on collateralized debt obligations.

CDOs are securities backed by pools of mortgages or other assets.

They have plummeted in value since the credit crisis erupted a year ago.

Credit default swaps are essentially contracts that insure against the default of bonds and corporate debt such as CDOs.

Sellers of swaps are on the hook to repay customers if the value of the underlying bonds or debt declines.

"The majority of the multi-sector CDS swaps were written as 'physical settlement' swaps, where AIG is required to physically buy the underlying CDO bond in the event of a CDO credit event," AIG said in a statement.

The $9.8 billion notional amount does not represent a loss to AIG or a debt it owes to counterparties, the company said, because there are no underlying assets the company is obligated to buy.

Instead "Pay As You Go" swaps mean AIG must pay losses on that tranche as and when they occur, the company said.

"It sounds like AIG is saying this is yesterday's news and they are acknowledging they have various problems in derivatives and these are among the problems they've had," Donald Light, a senior analyst at Celent, a Boston-based financial research and consulting firm.

"How they are going to fix that problem, we'll have to see."

Last month, the government said it would provide a $150 billion rescue package to AIG to help it remain in business amid the worsening credit crisis.

That rescue package came just two months after AIG was extended an $85 billion loan from the Federal Reserve.

The original loan was replaced by the $150 billion package as it became apparent the insurer needed more funds, and AIG must repay the loan.

The government rescue of the insurer also left taxpayers holding about 80 percent of the company's shares.

Like other insurers, AIG has been slammed by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default.

Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default.

"We are working on resolving the trades, as we are with the rest of the CDS portfolio, but these will require a different approach because there is no CDO to buy," said Joseph Norton, another AIG spokesman.

Under the $150 billion government rescue package, many of AIG's derivatives can be unwound or settled, because a government fund is buying the debt that AIG had guaranteed for banks and other parties.

But the $9.8 billion in additional exposure in question is not eligible to be covered by the government bailout funds.

And that raises questions about how AIG will cover its exposure.

"They took a bet and they lost," said Russell Walker, a risk management professor at the Kellogg School of Management at Northwestern University.

"If the government isn't responsible, then the shareholders of AIG are."

In October, AIG said it would sell off a number of business units to pay off its initial $85 billion loan from the government.

The company has not disclosed the assets it would sell or the expected transaction values.

As of Dec. 5, AIG had already sold interests in three businesses.

Shares of AIG fell 18 cents, or 9.3 percent, to $1.75 in regular trading Wednesday, and in after hours rose 2 cents.

"GOP hopes rise, Dems hit rough patch"

Alexander Burns

Thu Dec 11, 4:36 am ET

After three nearly uninterrupted years of favorable political news, Democrats have finally hit a rough patch.

Over a period of fewer than 10 days, Democrats have seen their nominee go down in defeat in the Georgia Senate runoff — eliminating the prospect of a filibuster-proof majority — lost two winnable House races in Louisiana and witnessed House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) sink deeper into ethics trouble.

Then there’s the still-unfolding Illinois Senate debacle, which exposed Democratic Gov. Rod Blagojevich’s tawdry attempts to auction off President-elect Barack Obama’s Senate seat and forced Rep. Jesse Jackson Jr. (D-Ill.) to hold a press conference Wednesday denying any inappropriate discussions with the governor.

Democrats aren’t exactly disheartened by these developments – they’re still set to control the entire federal government in January – but the streak of bad news has tempered the party’s post-election euphoria.

And the string of post-Election Day congressional wins has given the GOP some of its first good news in a long time.

“I think Republicans are approaching these wins with cautious enthusiasm,” Republican consultant Ron Bonjean said, referring to the GOP’s victories in Georgia and Louisiana, “that the party isn’t completely down and out, that the American people are willing to give them a chance.”

Democratic missteps alone won’t be enough to spur a GOP recovery, Republicans said, but they give the party some time to fortify its political position.

“It’s obviously better to win than lose, so these victories have been heartening, but we still have a lot of work to do,” said Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio).

“Everyone knows this is a marathon, not a sprint.”

“[Americans] still want to hear want to hear what positive agenda they will bring to the table,” Bonjean agreed.

“And we’ll have to take the next several months to put one together and communicate it more effectively.”

If Republicans are sounding a cautious note now, they were positively ecstatic over the weekend, when Republican Anh “Joseph” Cao’s victory over indicted New Orleans Rep. William Jefferson (D-La.) spurred Boehner’s office to release a statement declaring: “The Future is Cao.”

“The Cao victory is a symbol of what can be achieved when we think big, present a positive alternative, and work aggressively to earn the trust of the American people,” Boehner said.

Republicans on the ground in the contested districts were, if possible, even more thrilled.

Aaron Baer, the communications director for the Louisiana Republican Party, pointed out that Democratic victories in three 2008 special elections presaged their big wins in November.

“Now we’ve kind of seen our three as well, so hopefully ours is the beginning of a trend,” he said.

“The model of what worked in Georgia and what worked in Louisiana, other states gotta look at that.”

For now, Democrats seem relatively unruffled by their recent defeats in Georgia, where Republican Sen. Saxby Chambliss defeated former state legislator Jim Martin by double digits, and Louisiana, where Republicans successfully knocked off Jefferson and defended the seat of retiring Rep. Jim McCrery.

Former Texas Rep. Martin Frost, who ran the Democratic Congressional Campaign Committee in the 1990s, dismissed those losses as isolated incidents.

“Two of these were Republican seats,” Frost said, referring to Chambliss and McCrery’s seats.

“The Jefferson seat was just an unusual situation where you had this member who was under this enormous ethical cloud.”

According to Frost, those results show little more than that Republicans can win in the South, “the one part of the country where the Republicans are still dominant.”

DCCC spokesman Doug Thornell was even more dismissive in swatting down the suggestion that Republicans have picked up steam.

“Republicans are bankrupt of ideas and lurching for anything to exploit,” Thornell said.

He pointed out that Republicans have had some bad news of their own lately: a slow tally of provisional ballots recently propelled Democrat Mary Jo Kilroy into retiring Rep. Deborah Pryce’s (R-Ohio) seat, and retiring Rep. Vito Fossella (R-N.Y.) was sentenced on Monday to five days in jail for drunk driving.

“The reality is that in the last few days they lost yet another House seat in a district they have held since 1966, had one of their members sentenced to jail time and barely held onto an overwhelming Republican district in the Deep South,” he said.

“Clearly, the GOP propaganda machine is working overtime to spin this as a good week for them.”

But even if Democrats are shrugging off disappointing election returns, the Blagojevich scandal and Rangel’s persistent ethics issues threaten to be an ongoing distraction, at least in the near-term.

The allegations against Rangel, which involve multiple allegations of corruption and tax fraud, will be addressed by a House ethics committee report in January.

Blagojevich’s problems have a less specific timetable for resolution, and the governor has given no indication, so far, that he intends to resign his office.

“The Illinois thing has the potential for being a problem for Democrats, if we can’t contain it just to Blagojevich and Illinois,” Frost conceded, suggesting that a special election for Obama’s Senate seat could provide an opening for a Republican challenger, particularly if the Illinois legislature doesn’t provide for a runoff election and numerous Democrats file for the seat.

On Tuesday, when news leaked out of Blagojevich’s arrest, Republicans — including several of the candidates running for Republican National Committee chair — jumped on the scandal as an opportunity to link President-elect Obama to crooked Chicago politics.

“Rep. [Eric] Cantor and I both put out statements yesterday and called on Barack Obama to be a different kind of president,” RNC Chairman Mike Duncan told Politico Wednesday.

“He lost a day yesterday."

"He did not perform very well.”

Obama initially avoided calling on Blagojevich to resign, before his press secretary made a statement Wednesday echoing other Illinois politicians’ demands that the embattled governor step down.

All 50 Democratic senators signed a letter Wednesday calling on Blagojevich to resign.

If the Blagojevich affair has the potential to damage Obama’s image, it hasn’t registered just yet.

The Gallup tracking poll that measures Obama’s favorability and public confidence ratings showed Wednesday that 71 percent of the public had a positive impression of the President-elect, compared with just 19 percent that had a negative impression.

Sixty-five percent of Americans said they had confidence in him.

Just 24 percent disagreed.

President Elect Obama gets an A+ for taking time to check IT out before publicly condeming a person elected by the People to Govern them...

AND YET ANOTHER BIG BAIL-OUT NEED COMES ROLLING ALONG ...

AND THE EXCUSES ....

AND THE COVER-UP ATTEMPTS ...

And so ...

"SEC chairman says agency failed to probe Madoff"

17 DECEMBER 2008

WASHINGTON – In a stunning rebuke, the Securities and Exchange Commission chairman blames his career regulators for a decade-long failure to investigate Wall Street money manager Bernard L. Madoff, now accused of running one of the largest Ponzi schemes ever.

On Tuesday night, SEC Chairman Christopher Cox ordered an internal investigation of what went wrong and offered a scathing critique of the conduct of his staff attorneys.

He said they never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena.

Instead, the staff relied on information voluntarily produced by Madoff and his firm.

Credible and specific allegations regarding Madoff's financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, said Cox.

Madoff remains free on $10 million bail.

A hearing is scheduled in federal court in New York on Wednesday afternoon to iron out the terms of his bail package.

Shock waves from the Madoff affair have radiated around the globe as a growing number of prestigious charitable foundations, big international banks and individual investors acknowledge falling victim to an unprecedented fraud.

Madoff remains free on $10 million bail.

"I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them," Cox said in a written statement.

The SEC chairman said Madoff kept several sets of books and false documents, and provided false information involving his investment advisory activities to investors and to regulators.

Separately, Stephen Harbeck, chief executive of the Securities Investor Protection Corporation, said one set of Madoff's books kept track of the losses at his investment advisory arm, while the other is what investors were shown.

SIPC, created by Congress and funded by the securities industry, can give customers up to $500,000 if it is determined their money was stolen.

SIPC has about $1.6 billion to make payouts, which means that amount could quickly be depleted in the Madoff case where losses could reach $50 billion.

That figure comes from the SEC's court complaint, which quotes Madoff admitting to losses in that amount to two senior employees of his firm before his arrest last Thursday.

Cox's harsh assessment may have the effect of shifting questions away from the politically appointed five-member commission and placing blame squarely — if not solely — on the agency's staff for failing to aggressively pursue a massive fraud.

Cox's statement is sure to fuel a new criticism of the SEC, an agency increasingly seen in Congress and elsewhere as incapable of carrying out its basic mission: to ensure a basic level of honesty on Wall Street.

Cox spelled out the taint produced by the previous failure to aggressively pursue Madoff: The SEC commission chairman ordered removal from the Madoff criminal investigation of any SEC staff members who have had contact with the prominent Wall Street figure or his family.

Cox's strong statement came as at least two senators signaled they have lost patience with the SEC.

"They were asleep at the switch," Sen. Charles Grassley, R-Iowa, said of the SEC's failure to uncover Madoff's alleged fraud.

As Grassley had urged, Cox ordered the SEC's inspector general to conduct the internal probe of his agency's inaction.

Sen. Jack Reed, D-R.I., said the problems go much deeper.

The Madoff affair "illustrates the lack of credible enforcement over several years by the SEC," said Reed, who chairs the Senate banking panel that oversees the SEC.

He criticized the agency's "lack of a strong commitment to be vigilant."

Shortly before Cox denounced his own staff, a widely respected former SEC chief accountant, Lynn Turner, aired her own skepticism.

"I can't comprehend how a well-run investigation would have missed a fraud of this magnitude," Turner said.

The Madoff scandal is just the latest instance in which SEC regulators have overlooked clear warning signs of possible fraud.

An earlier review by the SEC inspector general determined that the agency's monitoring of the five biggest Wall Street firms, which included Bear Stearns, was lacking.

Cox himself has come in for strong criticism.

In March, a few days before Bear Stearns nearly collapsed into bankruptcy, Cox told reporters the agency was closely monitoring the five investment firms and had "a good deal of comfort" in their capital levels.

Then, as federal officials orchestrated the rescue, Bear Stearns was bought by rival JPMorgan Chase with a $29 billion government backstop.

As for Madoff, the SEC's enforcement division looked into Madoff's business last year.

Until Tuesday night, the SEC had refused to criticize the inaction that followed last year's probe.

Damaging the SEC's credibility in the Madoff case was the fact that a securities executive, Harry Markopolos, complained to the SEC's Boston office in May 1999.

Markopolos told the SEC staff they should investigate Madoff because Markopolos felt it was impossible for the kind of profit he was reporting to have been gained legally.

But the SEC's Boston office has itself been accused in the past of brushing off a whistle-blower's legitimate complaints, in a case that led the head of that office to resign in 2003.

The whistle-blower, Peter Scannell, eventually persuaded state regulators and the SEC to act against mutual fund giant Putnam Investments, where Scannell worked.

"It's flabbergasting that nobody can nail the bums in the SEC who turn their back on and/or aid and abet people who defraud investors," Scannell said in a telephone interview Monday.

THE WITLESS IDIOT AND REPUBLICAN GEORGE W. BUSH HAS BROUGHT THIS NATION TO ITS KNEES, AND NOW, HE HAS THE UNMITIGATED GALL TO TELL US THAT HE HAS KEPT US SAFE ....

THAT'S WHAT THE ARMED ROBBER TELLS YOU AS HE IS ROBBING YOU AT GUNPOINT ...

AFTER HE IS DONE ROBBING YOU, YOU WILL BE SAFE FROM ALL THE OTHER ROBBERS, BECAUSE YOU ARE TOO POOR TO BOTHER WITH ...

And so ...

"Bush says 'no debate' about his keeping US safe"

By BEN FELLER, Associated Press Writer

17 DECEMBER 2008

CARLISLE, Pa. – President George W. Bush, ever focused on his legacy, said Wednesday "there can be no debate" about his record of preventing another terrorist attack.

Evoking harrowing memories of Sept. 11, 2001, Bush said virtually no one could have predicted back then that the country would not be hit again for the rest of his presidency.

"It's not a matter of luck," Bush said, defending his security policies.

Addressing a supportive military audience at the U.S. Army War College, Bush sought to shape how he will remembered after Barack Obama succeeds him on Jan. 20.

Bush held little back in depicting his two terms as a time of transformational change, saying the world has "more people live in liberty than at any other time in human history."

He credited his administration terrorism fighting strategy: reorganizing the government's intelligence and military communities to confront the threat; pre-emptively targeting potential threats and making no distinction between terrorists and their supporters; and nurturing democracies.

"While there's room for an honest and healthy debate about the decisions I made — and there's plenty of debate — there can be no debate about the results in keeping America safe," Bush said.

There is debate about how to accomplish that.

The planning, execution and purpose of the war in Iraq have been deeply divisive.

So have the methods the administration has used to track, interrogate and detain those tied to terrorist activities.

Bush defended the war in Iraq in the context of Sept. 11.

He said the U.S. could not tolerate a Saddam Hussein-led Iraq, a "dangerous force in the heart of the Middle East."

The president even made a rare mention of Osama bin Laden, the al-Qaida leader whose has escaped capture.

Crediting the work of the U.S. military and the Iraqi people, Bush said, "We have delivered a devastating blow to al-Qaida in the land Osama bin Laden once called the central battleground in the war on terror."

Looking back on Sept. 11, Bush said he rejected a strategy of retreat that would have had Americans hunkering down or seeking quick revenge by attacking nations that supported terrorism, but without a broad plan to address the root cause of the threat.

He also reminded the nation of the plots he said have been disrupted since Sept. 11.

He named an attempt to bomb fuel tanks at New York's John F. Kennedy International Airport, a plot to blow up jets bound for the East Coast and a plan to attack a shopping mall in the Chicago area.

"We'll never know how many lives have been saved," Bush said.

"Obama looking at $850 billion jolt to the economy - Obama proposed economic jolt could reach $850 billion over two years, dwarfing earlier action"

By JIM KUHNHENN, Associated Press

Last updated: 7:05 p.m., Wednesday, December 17, 2008

WASHINGTON -- Anxious to jolt the economy back to life, President-elect Barack Obama appears to be zeroing in on a stimulus package of about $850 billion, dwarfing last spring's tax rebates and rivaling drastic government actions to fight the Great Depression.

Obama has not settled on a grand total, but after consulting with outside economists of all political stripes, his advisers have begun telling Congress the stimulus should be bigger than the $600 billion initially envisioned, congressional officials said Wednesday.

Obama is promoting a recovery plan that would feature spending on roads and other infrastructure projects, energy-efficient government buildings, new and renovated schools and environmentally friendly technologies.

There would also be some form of tax relief, according to the Obama team, which is well aware of the political difficulty of pushing such a large package through Congress, even in a time of recession.

Any tax cuts would be aimed at middle- and lower-income taxpayers, and aides have said there would be no tax increases for wealthy Americans.

While some economists consulted by Obama's team recommended spending of up to $1 trillion over two years, a more likely figure seems to be $850 billion.

There is concern that a package that looks too large could worry financial markets, and the incoming economic team also wants to signal fiscal restraint.

In addition to spending on roads, bridges and similar construction projects, Obama is expected to seek additional funds for numerous programs that experience increased demand when joblessness rises, one Democratic official said.

Among those programs are food stamps and other nutrition programs, health insurance, unemployment insurance and job training programs.

Obama advisers, including Christina Romer and Lawrence Summers, have been contacting economists from across the political spectrum in search of advice as they assemble a spending plan that would meet Obama's goal of preserving or creating 2.5 million jobs over two years.

Among those whose opinions Obama sought were Lawrence B. Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal John McCain adviser and the chairman of the Council of Economic Advisers under President Ronald Reagan.

Feldstein recommended a $400 billion investment in one year, Obama aides said, and Lindsey said the package should be in the range of $800 billion to $1 trillion.

The aides revealed the discussions on condition of anonymity because no decisions had been reached.

"I do recommend $400 billion in year one and expect a similar amount in year two," Feldstein said in an e-mail message.

"The right amount depends on how it is used."

Lindsey could not be reached.

Obama aides also pointed to recommendations by Mark Zandi, the lead economist at Moody's Economy.com and an informal McCain adviser who has been proposing a $600 billion plan.

"I would err on the side of making it larger than making it smaller," Zandi said in an interview.

"The size of the plan depends on the forecast -- the economic outlook -- and that is darkening by the day."

"Even a trillion is not inconceivable," he said.

Only one outside economist contacted by Obama aides, Harvard's Greg Mankiw, who served on President Bush's Council of Economic Advisers, voiced skepticism about the need for an economic stimulus, transition officials said.

The advisers say they agree with economic forecasts that predict that without a government infusion unemployment will rise above 9 percent and not begin to come down until 2011.

Senate Majority Leader Harry Reid, D-Nev., said Wednesday that Obama has indicated that Congress will get his recovery recommendations by the first of the year.

"He's going to get that to us very quickly and so we would hope within the first 10 days to two weeks that he's in office, that is after Jan. 20, that we could pass the stimulus plan," Reid said.

"We want to do it very quickly."

In a letter to Peter Orszag, Obama's choice to be White House budget chief, Reid asked, among other things, that the stimulus package include tax relief for middle-class families, including a reduction in rates and an extension of the child tax credit.

Obama's aides have said they hope to work with Republicans in writing the bill, particularly in the Senate, where the GOP could slow action if it chooses.

This week, House Speaker Nancy Pelosi said Democrats were preparing their own recovery bill in the range of $600 billion, blending immediate steps to counter the slumping economy with longer-term federal spending that encompasses Obama's plan.

A stimulus package that approaches $1 trillion could run into significant Republican opposition in Congress.

It also could cause heartburn for moderate and conservative Democratic lawmakers, known as Blue Dogs, who oppose large budget deficits.

"Republicans want to work with the president-elect to help get our economy on the path to recovery, but we have grave reservations about taking $1 trillion from struggling taxpayers and spending it on government programs in the name of economic 'stimulus,'" House Republican leader John Boehner said in a statement.

In February, Congress passed an economic stimulus bill costing $168 billion and featuring $600 tax rebates for most individual taxpayers and tax breaks for businesses.

Pelosi largely bowed to President Bush's insistence to keep the measure free of spending on federal projects.

The upcoming effort would dwarf that earlier measure as well as a $61 billion stimulus bill the House passed just before adjourning for the elections.

That measure died after a Bush veto threat and GOP opposition in the Senate.

------

Associated Press writers David Espo and Erica Werner contributed to this story.

"Keep your cash: SC governor rails against bailouts - South Carolina governor builds reputation for opposing federal bailouts"

By SEANNA ADCOX, Associated Press

Last updated: 4:35 p.m., Wednesday, December 17, 2008

COLUMBIA, S.C. -- At a time when other states are clamoring for cash, South Carolina Gov. Mark Sanford is saying no thanks.

The newly minted head of the Republican Governors Association is carving out an identity as the anti-bailout governor, speaking against calls for more money from Washington for new state public works spending, lifesaving dollars for the auto industry and even stimulus checks.

At a time when the nation sinks deeper into a recession, state budgets everywhere are growing greater holes and unemployment rates are soaring, Sanford knows he doesn't have many people rallying around him.

But he doesn't care.

"I find myself in a lonely position," he said in an op-ed column in The Wall Street Journal last month.

"While many states and local governments are lining up for a bailout from Congress, I went to Washington recently to oppose such bailouts."

"I may be the only governor to do so."

Sanford, a trim, 48-year-old former real estate investor who requires his sons to memorize a family constitution, clashes often with the Republicans who control both chambers of his state Legislature, once famously carrying two piglets to the door of the House chamber in opposition to what he said was pork-barrel spending.

He fought lawmakers' spending increase proposals long before the housing crisis hit, warning of a looming recession.

He's loudly decried the $700 billion bailout of the financial services industry and the proposed bailout of the auto industry.

He spoke against a proposed $150 billion economic stimulus proposal this fall and against one by fellow governors to provide billions for state infrastructure projects.

His rationale has been consistent:

More debt is not the answer, and the nation is already sinking in it.

"(W)e must be wary of the moral hazard present in the idea of bailing out the private or public sector," he wrote to President-elect Barack Obama during a meeting of the nation's governors earlier this month.

Sanford said Wednesday that bailouts sap people of their initiative, "which is the ultimate economic stimulus."

"If it turns out that no matter what you spend as a state or what you spend as a business or a municipality, it doesn't matter, we'll bail you out, then why should anyone at a personal or buiness level be circumspect?" he told The Associated Press.

"It's a total gut check of where we are as a civilization."

"It's frightening what the federal government is doing."

It's not that South Carolina is doing better than most states.

The state's unemployment rate hit 8 percent in October, a 25-year-high and the fourth-highest in the nation.

Economists project it will worsen substantially next year.

Currently, South Carolina is paying out more than $14 million a week in benefits.

But Sanford is even balking, at least for now, at asking for a federal loan for his state's unemployment benefits, which otherwise will run out of money at the end of the year.

While the dispute is the latest chapter of a long-running fight with the state's unemployment department -- Sanford doesn't believe its statistics on unemployment are accurate and wants another financial audit of the agency -- the standoff threatens to halt weekly payments of up to $326 for about 77,000 people.

South Carolina did tap a $15 million line of credit from the federal government, but the governor has yet to ask for the $147 million needed to get the state through the end of March.

Michigan and Indiana already have borrowed federal money, the U.S. Labor Department said, and the National Association for State Workforce Agencies expects 30 states will see their benefit funds evaporate in the next 12 months because of the high numbers of people seeking help.

The governor says he wants the agency to collect more information on how and why people are unemployed so the state does better creating jobs.

"Before we proceed with any loan request, we want assurances from the agency that it will move forward on these issues," Sanford spokesman Joel Sawyer said.

Federal Labor Department spokespeople said it would be unprecedented for a state to fail to arrange for money to pay the benefits.

The state has no emergency funding mechanism for the benefits.

"I'm out of money at the end of the year," said Ted Halley, executive director of the South Carolina Employment Security Commission.

"I can't write the checks if I don't have the money to write the checks."

Workers don't understand why the state isn't jumping to take the money.

Altray Reed, 41, of Columbia, said her job as a cafeteria worker is taking a three-week leave for the holidays, and she needs the unemployment to pay the bills.

"I don't feel he should wait."

"We're depending on that unemployment," she said.

Sgt. Michael Jones, 61, of Columbia, said he was discharged from the Army about eight months ago and is running out of savings.

Unable to find work, he was applying for unemployment benefits.

"I think it is a game."

"They're the ones not hurting," he said.

"The little people are suffering."

Even before the financial crisis, Sanford was no stranger to going it alone.

If there is an ideological thread that runs through his actions, it seems libertarian.

His two favorite movies -- "Gladiator" and "Braveheart" -- feature protagonists who die fighting for their causes.

And it was his worry about federal spending that helped launch his career.

The eldest of four siblings, Sanford says he never intended to go into politics.

After working for a couple of years in the finacial world in New York, he returned to South Carolina, where he said he was shaped by his summers working on the family plantation.

That's when, over a business lunch, his complaints about the federal deficit and government spending led to a challenge that he do something about it.

"It may seem out of character for a governor of a state with a struggling economy to turn down an offer of help," said Scott Huffmon, political science professor at Winthrop University who has watched Sanford's career.

"However, there is an absolute ideological consistency to Mark Sanford."

"And to understand anything he does, you need to understand that."

------

Associated Press writers Page Ivey and Meg Kinnard contributed to this report.

"Obama chooses 3 more to take on financial reforms"

By NEDRA PICKLER, Associated Press Writer

18 DECEMBER 2008

CHICAGO – President-elect Barack Obama on Thursday named three veteran regulators to help clean up financial debacles that he said occurred because government overseers "dropped the ball."

Obama wouldn't weigh in on whether he would support a decision by Treasury Secretary Henry Paulson to tap the second $350 billion installment of the $700 billion financial bailout program.

Major auto companies are pleading for emergency aid, which could come from that pot.

"I think it's important that the Treasury, the Fed and all of us do whatever's required to make sure that our financial system is stable and secure," Obama said.

But he added:

"We cannot afford a collapse of our financial system."

"Main Street can't afford it."

He said he would evaluate any Paulson signals about what is necessary.

As Obama spoke at a Chicago news conference rounding out his economic team, the White House said it is considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.

President George W. Bush, asked about an auto rescue plan during an appearance before a private group, said he hadn't decided what he would do but also spoke of the idea of bankruptcies organized by the federal government as a possible way to go.

Obama did not immediately comment on the idea.

More broadly, Obama blamed regulators for the financial debacle, saying they "dropped the ball" and that, along with congressional committees, "have been asleep at the switch."

Americans, as they watch their investments tank, are frustrated that "there's not a lot of adult supervision out there," Obama added.

As part of his plan to prevent future crises, Obama said he was naming Securities and Exchange Commission veteran Mary Schapiro as chairwoman of that agency, former Treasury official Gary Gensler to head the Commodity Futures Trading Commission, and law professor Daniel Tarullo to fill an empty Federal Reserve seat.

All three will need to be confirmed by the Senate next year.

In making the announcements, Obama pointed to Wall Street money manager Bernard Madoff, under investigation in an alleged $50 billion fraud, and said the scandal underscored the need for tougher regulators.

The scandal "has reminded us yet again of how badly reform is needed," he said.

The president-elect said his new team will help put in place new rules that will help "crack down on the culture of greed and scheming."

"There needs to be a shift in ethics on Wall Street," he said.

Schapiro, who would be Obama's top Wall Street regulator and investor protector, said that investor trust "is the lifeblood of financial markets."

She called for tough enforcement action by incoming regulators.

If confirmed by the Senate:

_Schapiro, who served as an SEC commissioner in Republican and Democratic administrations and is currently the head of the Financial Industry Regulatory Authority, would take over an agency that faces growing criticism for its failure to protect investors and detect trouble brewing on Wall Street.

The SEC stands at what could be one of the most difficult times in its history, buffeted by criticism for failing to detect signs that major Wall Street banks were in trouble before the financial crisis erupted and for lax oversight and enforcement in other areas.

As the scandal involving Madoff continues to stun the financial world, revelations have surfaced that staff at the SEC repeatedly failed over the course of a decade to fully investigate credible allegations against him.

SEC Chairman Christopher Cox on Tuesday ordered the agency's inspector general to investigate what went wrong.

_Gensler, a former Treasury official in the Clinton administration, would lead the Commodity Futures Trading Commission, which is an independent agency created by Congress to regulate trading in the commodity futures and option markets.

_Tarullo, a Georgetown law professor who also worked for President Bill Clinton, would fill an open seat on the Federal Reserve board in Washington.

His selection would allow Obama to begin to put his imprint on the Federal Reserve.

All the present board members, including chairman Ben Bernanke, were hand picked by Bush.

Tarullo would fill one of two vacant seats on the seven-member board.

A third seat — now held by Fed governor Randall Kroszner — also will become available.

As a member of the Fed board, Tarullo would have an important voice in deciding policy to help jolt the economy back to life.

He would vote on decisions about interest rates as well as ways to help break through the credit clog.

He would also have a hand in shaping new regulations.

Obama's moves come amid incredible economic strife.

The unemployment rate is at 6.7 percent, a 15-year high.

The economy has lost nearly 2 million jobs since the recession started last December, and the recession is on track to be the longest since the Great Depression.

Stock markets are sinking, the housing market is in disarray, and credit is hard to get.

The announcements came on Obama's fourth straight day of appearances to unveil top nominations.

Transition officials say they expect more nominations this week before Obama leaves on a holiday vacation to his native Hawaii.

Obama also intends to name Republican Rep. Ray LaHood of Illinois as transportation secretary, Democratic officials said.

Obama has yet to announce choices for the Labor Department, senior intelligence positions or the Office of U.S. Trade Representative.

Rep. Xavier Becerra, D-Calif., had been penciled in as trade representative, but he announced Tuesday that he intends to remain in the House.

In addition, numerous sub-Cabinet posts remain unfilled.

Dr. Gail Russeau, a Chicago neurosurgeon, is a leading contender to become surgeon general, officials said.
___

On the Net:

Obama transition: http://www.change.gov

"Saudis, Blackwater among Clinton foundation donors"

By BETH FOUHY and SHARON THEIMER, Associated Press Writers

Thu Dec 18, 1:15 pm ET

WASHINGTON – Former President Bill Clinton laid out a list of big-ticket donors to his foundation Thursday that is heavy with foreign governments and business interests sure to have a stake in the policies that Hillary Rodham Clinton carries out as secretary of state.

Saudi Arabia and other foreign governments gave at least $46 million, while corporate donors included the Blackwater security firm that protects U.S. diplomats in Iraq.

The contributions went to the William J. Clinton Foundation, a nonprofit created by the former president to finance his library in Little Rock, Ark., and charitable efforts to reduce poverty and treat AIDS.

President-elect Barack Obama made Hillary Clinton's nomination as secretary of state contingent on her husband revealing the foundation's contributors, to avoid questions about potential conflicts of interest.

The Kingdom of Saudi Arabia gave $10 million to $25 million to the foundation, and other government donors included Norway, Kuwait, Qatar, Brunei, Oman, Italy and Jamaica.

The Dutch national lottery gave $5 million to $10 million.

The Blackwater Training Center donated $10,001 to $25,000.

The State Department will have to decide next year whether to renew Blackwater Worldwide's contract to protect U.S. diplomats in Iraq.

Five Blackwater guards have been indicted by a U.S. grand jury on manslaughter and weapons charges stemming from a September 2007 firefight in Baghdad's Nisoor Square in which 17 Iraqis died.

The foundation disclosed the names of its 205,000 donors on a Web site Thursday, ending a decade of resistance to identifying the sources of its money.

While the list is loaded with international business leaders and billionaires, some 12,000 donors gave $10 or less.

Clinton agreed to release the information after concerns emerged that his extensive international fundraising and business deals could conflict with America's interests if his wife became the nation's top diplomat.

The foundation has insisted for years that it was under no legal obligation to identify its contributors, contending that many expected confidentiality when they donated.

The list also underscores ties between the Clintons and India, a connection that could complicate diplomatic perceptions of whether Hillary Clinton can be a neutral broker between India and neighboring Pakistan in a region where Obama will face an early test of his foreign policy leadership.

The former president did not release specific totals for each donor, providing only ranges of giving.

Nor did he identify individual contributors' occupations or countries of residence.

Donors gave Clinton's foundation at least $492 million from its inception in 1997 through last year, according to the most recent figures available.

After negotiations with Obama's transition team, Clinton promised to reveal the contributors, submit future foundation activities and paid speeches to an ethics review, step away from the day-to-day operation of his annual charitable conference and inform the State Department about new sources of income and speeches.

Representatives of the foundation, including CEO Bruce Lindsay and attorney Cheryl Mills, and aides to Hillary Clinton met privately Wednesday with staff of incoming Foreign Relations Committee Chairman John Kerry of Massachusetts and ranking Republican Dick Lugar of Indiana to discuss the foundation's activities and review a memorandum of understanding drawn up by the Clinton and Obama teams.

The Foreign Relations Committee will hold hearings and vote on Hillary Clinton's nomination before sending it to the full Senate.

Shortly after Obama tapped Clinton, Lugar said he would support her, though he said there would still be "legitimate questions" raised about the former president's extensive international involvement.

"I don't know how, given all of our ethics standards now, anyone quite measures up to this — who has such cosmic ties," Lugar said.

Some of the donors have extensive ties to Indian interests that could prove troubling to Pakistan.

Tensions between the two nuclear nations are high since last month's deadly terrorist attacks in Mumbai.

Amar Singh, a donor in the $1 million to $5 million category, is an Indian politician who played host to Bill Clinton on a visit to India in 2005 and met Hillary Clinton in New York in September to discuss an India-U.S. civil nuclear agreement.

Also in that giving category was Suzlon Energy Ltd. of Amsterdam, a leading supplier of wind turbines.

Its chairman is Tulsi R. Tanti, one of India's wealthiest executives.

Tanti announced plans at Clinton's Global Initiative meeting earlier this year for a $5 billion project to develop environmentally friendly power generation in India and China.

Two other Indian interests gave between $500,000 and $1 million each:

_The Confederation of Indian Industry, an industrial trade association.

_Dave Katragadda, an Indian capital manager with holdings in media and entertainment, technology, health care and financial services.

Other foreign governments also contributed heavily to the foundation.

_AUSAID, the Australian government's overseas aid program, and COPRESIDA-Secretariado Tecnico, a Dominican Republic government agency formed to fight AIDS, each gave $10 million to $25 million.

_Norway gave $5 million to $10 million.

_Kuwait, Qatar, Brunei and Oman gave $1 million to $5 million each.

_The government of Jamaica and Italy's Ministry for Environment and Territory each gave $50,000 to $100,000.

_The biggest donations — more than $25 million each — came from two donors.

They are the Children's Investment Fund Foundation, a London-based philanthropic organization founded by hedge fund manager Chris Hohn and his wife Jamie Cooper-Hohn and dedicated to helping children, primarily in Africa and India; and UNITAID, an international drug purchasing organization formed by Brazil, France, Chile, Norway and Britain to help provide care for HIV-AIDS, malaria and tuberculosis patients in countries with high disease rates.

The foundation's donor list includes numerous overseas business interests.

_Saudi businessman Nasser Al-Rashid gave $1 million to $5 million.

_Friends of Saudi Arabia and the Dubai Foundation each gave $1 million to $5 million, as did the Taiwan Economic and Cultural Office.

_The Swedish Postcode Lottery gave $500,000 to $1 million.

_China Overseas Real Estate Development and the U.S. Islamic World Conference each gave $250,000 to $500,000.

_The No. 4 person on the Forbes billionaire list, Lakshmi Mittal, the chief executive of international steel company ArcelorMittal, gave $1 million to $5 million.

Mittal is a member of the Foreign Investment Council in Kazakhstan, Goldman Sachs' board of directors and the World Economic Forum's International Business Council, according to the biography on his corporate Web site.

Among other $1 million to $5 million donors:

_Harold Snyder, director for Teva Pharmaceutical Industries, the largest drug company in Israel.

His son, Jay T. Snyder, serves on the U.S. Advisory Commission on Public Diplomacy, which oversees State Department activities, and served as a senior U.S. adviser to the United Nations, where he worked on international trade and poverty.

Jay Snyder donated between $100,000 and $250,000 to the foundation.

_No. 97 on the Forbes billionaire list, Ethiopian-Saudi business tycoon Sheikh Mohammed H. Al-Amoudi.

_Issam Fares, a former deputy prime minister of Lebanon.

_Mala Gaonkar Haarman, a partner and managing director at the private investment partnership Lone Pine Capital.

_Lukas Lundin, chairman of oil, gas and mining businesses including Tanganyika Oil Company Ltd., an international oil and gas exploration and production company with interests in Syria, and Vostok Nafta Investment Ltd., an investment company that focuses on Russia and other former Soviet republics.

_Victor Pinchuk, son-in-law of the former president of Ukraine.

Clinton spoke in 2007 at an annual meeting of Yalta European Strategy, a group Pinchuk founded to promote Ukraine joining the European Union.

The top ranks of Clinton's donor list include lots of longtime Democratic givers, including some notable for their staunch support of Israel.

_TV producer Haim Saban and his family foundation, who donated between $5 million and $10 million, splits his time between homes in Israel and California.

"I'm a one-issue guy and my issue is Israel," he told The New York Times in 2004.

_Slim-Fast diet foods tycoon S. Daniel Abraham, a donor of between $1 million and $5 million, has been a board member of the American Israel Public Affairs Committee, which promotes Israel's interests before the U.S. government.

_The American Jewish Committee and the United Nations Foundation donated $100,000 to $250,000.

Clinton thanked his donors in a statement for being "steadfast partners in our work to impact the lives of so many around the world in measurable and meaningful ways."

According to the memorandum negotiated by the foundation and top Obama advisers, Bill Clinton agreed to publish the names of all past and future contributors to his foundation during Hillary Clinton's tenure as secretary of state.

The former president also agreed to step away from direct involvement in the Clinton Global Initiative, an annual charitable conference where businesses and many foreign governments pledge donations to help ameliorate AIDS, poverty and other social ills.

He will continue serving as CGI's founding chairman but will not solicit money or sponsorships.

The CGI will cease accepting foreign contributions and will not host events outside the United States.

Clinton started raising money for his library before leaving the White House.

Over the years, the Clintons repeatedly refused to identify all the foundation donors, and continued to do so during Hillary Clinton's 2007-08 presidential campaign.

Names surfaced nonetheless.

Several news organizations unearthed foreign-government donors, and in 2001, Bill Clinton gave a list of 150 top foundation donors to a House committee investigating his pardon of fugitive businessman Marc Rich, whose ex-wife, Denise Rich, gave the library foundation at least $450,000.
___

On the Net:

Clinton Foundation contributors:

http://www.clintonfoundation.org/contributors
___

Beth Fouhy reported from New York. Associated Press writers Ted Bridis, Jim Drinkard and David Pace in Washington contributed to this story.

"Did Bernard Madoff act alone? Investors doubt it, investigators look for accomplices"

By DAVID B. CARUSO, Associated Press

Last updated: 7:15 p.m., Thursday, December 18, 2008

NEW YORK -- Bernard Madoff's contention that he pulled off one of the biggest financial frauds in history without any help is being met with disbelief by his investors and experts in the securities industry.

It normally takes a team of accountants, stock brokers, lawyers and more to operate the kind of multibillion-dollar investment fund that Madoff ran from the 17th floor of his Park Avenue headquarters.

The firm had clients around the globe.

Simply generating the detailed financial statements investors got in the mail every month would have been a monumental effort for just one person, observers said, even if those reports were pure fantasy.

"Someone had to create them."

"Someone had to create the appearance that there were returns," said attorney Harry Susman, who represents several Madoff investors.

"The guy was 70 years old."

"Could he have done it himself?"

"The computer systems would have needed to be extensive."

"Supposedly, he's selling puts, buying puts, selling calls, buying stocks."

"Somebody had to sit there and buy stocks."

"Where are these people?"

Federal investigators are still in the early stages of trying to answer those same questions as they decipher Madoff's operation.

Already, they have discovered multiple sets of books and what appear to be fraudulent documents in his Manhattan offices, raising the question of who prepared them.

It may take time before they can say whether he had accomplices.

Investigators have started serving grand jury subpoenas requiring witnesses to testify and seeking documents, according to an official familiar with the case.

The official, who spoke on condition of anonymity because the investigation is ongoing, declined to identify who was served or specify what documents were wanted.

The investigation has been unfolding in a Manhattan office that was once Madoff's sanctuary but is now the site of a nonstop hunt for incriminating documents, with boxes of confiscated records stacked in the hallway.

"Every time I go out my office door to go to the ladies' room I've been tripping over FBI agents," said Muriel "Mickie" Siebert, whose namesake brokerage firm shares the 17th floor of the office building.

The investigation is being led by the FBI and Securities and Exchange Commission -- agencies already challenged with unearthing other financial scandals since the Wall Street meltdown.

One potential subject of the inquiry is the role played by Frank DiPascali, a top financial officer at Madoff's investment advisory business.

Several investors, their lawyers and a former Madoff employee who spoke to The Associated Press described DiPascali, of Bridgewater, N.J., as the man who appeared to be most responsible for the day-to-day operations of the business.

When clients had questions about the firm's investment strategy or its performance, DiPascali was the one who got on the phone.

If they wanted to add or subtract money from their accounts, DiPascali made the arrangements and distributed the checks.

Authorities haven't publicly accused DiPascali of any wrongdoing.

His attorney, Marc Mukasey, on Thursday declined to discuss his client's role or say whether he became aware of the fraud prior to Madoff's arrest.

"We are sitting with our client and reviewing his career at Madoff and his duties and responsibilities," said Mukasey, the son of the attorney general.

"I understand that people are extremely frustrated and upset ..."

"We would love to see people get as much of their money back as possible."

Questions also loom about Madoff's auditor, Friehling & Horowitz, a relatively unknown accountant in the city's northern suburbs who appeared to operate from a one-room office with irregular business hours and a bare-bones staff.

Those audits apparently failed to detect the fraud, which Madoff told investigators was a Ponzi scheme that lost an estimated $50 billion.

The firm's principal, David G. Friehling, has not answered his telephone in days.

His attorney, Andrew Lankler, declined to comment Thursday.

Investigators were also expected to look at the potential involvement of several Madoff relatives who worked for his firm, including his brother, two sons and others who worked for his various business entities.

His wife has also come under scrutiny.

To date, however, they also have not been formally accused of any wrongdoing.

The law firm representing Madoff's sons, Andrew and Marc, released a statement saying they first learned of the fraud just days ago, when their father tearfully confessed, and immediately turned him in.

The two are said to have worked predominantly in another division of their father's company, not in the secretive unit that handled investor money.

By some accounts, Bernard Madoff appeared to take unusual steps to limit the number of people and outside companies that had a hand in running the business.

Much of the recruiting of new investors to his funds was done informally, by friends, or through a group of large, independently managed feeder funds, who also took most of the management fees for handling the investments.

They included the Fairfield Greenwich Group, which put all $7.3 billion of its Fairfield Sentry Fund in Madoff's hands.

It was unclear whether authorities were looking to see whether any of those funds, whose investors have emerged as some of Madoff's largest victims, may have been complicit in the scheme.

Each has claimed no knowledge that anything was amiss.

Usually, a fund like Madoff's would use an outside brokerage firm to complete its stock trades.

In his case, those duties -- if they actually occurred -- were apparently handled in-house.

He appeared not to have hired outside professional services firms to help calculate his performance or to produce electronic data for investors.

"He was still doing it the way you did it in the 1960s, with a paper ticket," said Suzanne Murphy, a hedge fund consultant who had examined Madoff's business two years ago before deciding not to invest in it.

"In most hedge funds, you have many partners in deals, but he was doing everything in a self-contained way," said Jake Walthour, head of advisory services for the due diligence firm Aksia LLC, which also examined Madoff's operation and decided something was wrong.

That lack of partners made it tough to verify that Madoff's business was really achieving good returns.

It may also reflect an effort to limit the number of possible accomplices.

------

Associated Press writer Tom Hays contributed to this report.

WELL OF COURSE THEY DO ....

EVERYBODY IN AMERICA WANTS A BAIL-OUT BY NOW ...

AND WHY NOT?

THE GUMMINT IS JUST ROLLING IN MONEY ....

THEY ARE GIVING IT AWAY BY THE TRILLIONS, ALREADY ...

SO WHY NOT A FEW TRILLION MORE ...

And so ...

"Madoff investors hope for bailout - Wiped out Madoff investors pray for bailout as SIPC money seen too small, too long to process"

By JOE BEL BRUNO, Associated Press

Last updated: 7:15 p.m., Thursday, December 18, 2008

NEW YORK -- One week ago, Ronnie Ambrosino was a millionaire.

Now, Ambrosino is among the long list of investors whose fortunes were allegedly wiped out by Bernard Madoff.

Like them, she's left hoping for a bailout that might never come.

She plans to sue Madoff but that could take years to work through the courts and yield little in the end.

Her best hope to recoup some of her money is from the Securities Investor Protection Corp., an industry-funded organization set up by the government to protect investors from fraud.

But, here's the problem: SIPC does not have enough money to pay out all the claims that are sure to come from one of the biggest fraud cases to ever hit Wall Street.

Securities attorneys say the organization has a reputation of being tough to squeeze money from, and each investor is only entitled to a maximum payout of $500,000 if a claim is approved.

SIPC officials say the books of Bernard L. Madoff Investment Securities LLC are in complete disarray and could take six months or more to piece them together.

With bills piling up and her bank account vanishing, the one thing Ambrosino and others caught in the alleged $50 billion fraud don't have is time.

"It feels like I'm drowning, and someone is saying 'we're going to save you, but we have to build the boat first,'" said Ambrosino, 55, who had $1.6 million invested with Madoff.

"We can't wait for SIPC to go through all the papers."

The government created SIPC in 1970 to reimburse investors duped by brokerages in areas such as unauthorized trading or theft.

SIPC is set up to cover losses of up to $500,000, and $100,000 of that amount can be claims for cash holdings that were lost.

The scope of what SIPC covers, however, can be limited.

SIPC, for example, typically won't cover claims for cases involving stock manipulation or investments made into hedge funds.

Since its inception, SIPC has paid out $508 million to reimburse some 625,000 investors who lost money.

The Madoff case will be SIPC's biggest test, and experts are raising questions about whether the organization can handle the massive amount of claims that are expected.

Some experts suggest the government might have to assist.

"There's no doubt that hearings will be held on this, and some government aid is a very logical request," said Robert Schachter, an attorney with New York-based Zwerling, Schachter & Zwerling, which is representing several Madoff victims.

"If we're bailing out Wall Street and the auto industry, maybe these individuals should be bailed out too."

Madoff was arrested last week and charged with securities fraud.

On Wednesday he appeared at the federal courthouse in Manhattan, where a judge imposed a curfew and a monitoring bracelet.

When the government established SIPC a generation ago, nation's brokerages were ordered to fund it by kicking in a percentage of their revenue.

Once the amount hit $1 billion in 1996, those brokerages were allowed to reduce their contribution to $150 a year.

Any changes now much be approved by Congress, SIPC said.

SIPC currently has $1.6 billion on hand to make payouts -- a small amount compared with the more than $17 billion that Madoff managed at the start of the year.

However, SIPC said it can tap a $1 billion line of credit and a $1 billion injection from the Treasury Department to gain access to more money.

This theoretically means that about 7,000 customers who entrusted their money to Madoff can receive the maximum amount.

It is still not known how many customers Madoff's investment arm had, and investigators have not speculated.

While brokerages often highlight the fact that they are covered by SIPC, securities attorneys say the process of recouping money can be daunting and time consuming.

"This is not going to be a full recovery, even if your claim is valid and proved," said J. Boyd Page, senior partner of Page Perry LLC, an Atlanta-based law firm that represents investors in securities fraud.

"They have taken a miserly approach to evaluating claims in the past."

"The process can be long and painful."

Investigators are poring over paperwork at Madoff's Manhattan office trying to identify exactly how many customers his brokerage operation had.

That could prove to be an arduous task, with SIPC President and Chief Executive Steve Harbeck describing Madoff's books as being "totally unreliable and in complete disarray."

Once the names are collected, SIPC and the court-appointed trustee in charge of liquidating the brokerage will send investors claim forms.

SIPC typically mails out generic claim forms to investors, but this will be the first time the organization sends paperwork that is specific to just one case.

Investors then have up to six months to return the claim forms, along with monthly statements and other documents that prove how much money they thought were in the accounts.

Approval of these documents gives the investors a preferred status when it comes time to split up assets left in Madoff's firm.

"It can take years," said Leo Asaro, partner in the St. Louis office of law firm Bryan Cave LLP.

"People need to think of other options, not waiting on these matters to wind their ways through the courts."

"It is not going to happen fast enough to get the relief that they need."

SIPC's Harbeck does not dispute filing a claim and getting reimbursed can be a long process.

In this case, investigators are being delayed because it is difficult to determine how much of Madoff's assets will be available, and what the size of the claims are.

He has received calls from many investors caught in the alleged scam who question why they can't recoup higher amounts.

Harbeck also deflected recent criticism that SIPC might not even have enough money to cover the amount of claims that might come in.

"It is way too early to speculate about the claims," he said.

"We don't know the number of customers, how much each is owed, and I don't want to be prematurely alarmist."

That's not exactly what angry investors like Ambrosino want to hear.

She used the money she thought was secure with Madoff to retire early, buy a luxury motor home, and travel around the country.

The only assets she has now are the pieces of furniture inside the motor home she's been making payments on for the past four years.

Now living in Surprise, Ariz., she felt helpless watching Madoff enter the court house Wednesday for a bail hearing.

Ambrosino, who invested in Madoff's firm some three decades ago, knows that others are in the same position.

"We need to get out there and get names and get unified so that we can go to the government and make our case," she said.

"Everybody has a horror story, everybody has bills, and everybody is devastated."

Whatever happened to the concept 'there is no such thing as a free lunch.'?

It must not be universally applicable, is my thought, Snuf ....

That is a part of what makes this all so fascinating to me, following this along in here, as we are doing on a daily basis ....

Talk about the MONKEY TRAP, alright .....

Somewhere along the line between then and now, I happened on a bunch of studies that were multi-disciplinary in the sense of bringing psychology over into anthropological studies of primitive peoples here and there on the earth, and this is the difference that was found to exist between more primitive peoples and modern people specifically in America ....

If you placed something desirable to a primitive person in their path, they would not approach it ....

They would see it as somehow out of place or out of synch ....

Because they themselves use such techniques to hunt their prey, they would associate that as bait to a trap, and it would be the trap they were looking for ....

Modern people, by contrast, would leap right onto the bait ....

The more desirable, the faster the leap ....

I am paraphrasing, but not by much ....

And so ....

"Madoff scandal could lead to tax losses nationwide - Bernard Madoff scandal could burn Uncle Sam if spurned investors seek tax break on losses"

By RACHEL BECK, Associated Press

Last updated: 6:16 p.m., Thursday, December 18, 2008

NEW YORK -- Even Uncle Sam may get burned by Bernard Madoff.

Investors who lost their fortunes in Madoff's alleged Ponzi scheme will end up paying far less in taxes and may even be eligible for refunds, according to accounting experts.

By some estimates, the Internal Revenue Service could be out as much as $17 billion in lost tax revenue.

"This is one more thing federal, state and local officials will have to deal with," said John Berrie, a tax partner at the law firm Bryan Cave in New York City.

"It's another heavy box on their back."

In addition, investors may be counting on a federally mandated insurance fund to bail them out, but that program lacks the money to pay for all the claims that are likely to come.

The timing couldn't be worse.

Unemployment has surged, meaning fewer workers are paying payroll taxes.

And housing prices have dropped, reducing property taxes.

The recession so far has cost the federal government $200 billion in tax revenues for the 12 months that ended in November, according to estimates by Moody's Economy.com.

The Madoff case, which reportedly involves $50 billion, adds another layer to the fiscal crisis gripping the nation.

In New York, for instance, where thousands of workers have lost jobs on Wall Street and big-name investment firms have tallied massive losses, State Comptroller Thomas P. DiNapoli has estimated tax revenues will be down at least $3.5 billion by March 2010.

In wealthy enclaves nationwide, Madoff's investors are desperately seeking ways to get some of their money back.

Some refunds might come from the Securities Investor Protection Corp., an industry-funded organization set up by the government to protect investors from fraud.

Investors who qualify could get as much as $500,000 from the SIPC.

But that will not replace the millions of dollars than many lost, and such payments, if they come, will not happen fast.

SIPC officials this week said the books of Bernard L. Madoff Investment Securities LLC are in complete disarray.

It could take six months or more to untangle them.

In addition, there are concerns that SIPC does not have enough money to pay out claims.

It currently has $1.6 billion to make payouts, though the agency can tap a $1 billion line of credit and a $1 billion injection from the Treasury Department to get more money.

That's why some investors are considering the option of reporting "theft losses" under the IRS rules.

Taxpayers who are defrauded by investment advisers or brokers can claim a deduction, as well as offset tax liabilities from the past.

Under the rules, an investor who lost $20 million with Madoff and whose adjusted gross income was $10 million can claim a theft loss of about $19 million.

To calculate the theft loss, investors must reduce the amount of the loss by 10 percent of their adjusted gross income plus $100, according to Robert Willens, an expert on tax and accounting issues for Wall Street clients.

That theft loss would wipe out the $3.5 million in taxes that would otherwise be payable on the $10 million in income.

The losses can be carried back for three years or carried forward for 20 years.

If the losses wipe out current, past or future taxes, the end result is the same: The government loses money.

"I think the $50 billion of Madoff's losses, if they really are that big and we're not sure, could cost the government $15 to $17 billion in lost tax revenues," Willens said.

Investors are not automatically eligible for such deductions.

They must prove to the IRS that they cannot recover their Madoff investments.

The IRS also has not indicated yet whether Madoff's investors can apply the theft provision.

"The IRS is aware of the situation, but beyond that, we have no comment," the federal agency said in a statement Thursday.

Another potential recourse for investors would be to claim that the past taxes they paid on "fictitious income" from Madoff should be recouped, said Stephen Brietstone of the law firm Meltzer Lippe Goldstein & Breitstone who is representing Madoff investors on taxation issues.

The hurdle there is the three-year statute of limitations on amending a tax return, so that would limit investors to only the recent past even if the Madoff fraud existed long before that.

"A lot of investors put all their eggs in one basket, and they have been wiped out, so going back and getting a tax refund might be a remedy for them," Brietstone said.

"Obama calls for attitude adjustment - President-elect urges focus on common ground, common good"

By CHRISTI PARSONS AND JAMES JANEGA, Chicago Tribune

First published in print: Friday, December 19, 2008

CHICAGO — Decrying a lack of "adult supervision" in American society, President-elect Barack Obama on Thursday vowed to try and clean up the worlds of politics and finance and called on others to take seriously their own responsibility to "operate honorably."

Part of the solution is looking for common ground, he said, as when he asked the evangelical conservative Rick Warren — with whom he differs on some key social issues — to give the invocation at his inauguration.

"We're not going to agree on every single issue," Obama said in a news conference.

"What we have to do is create an atmosphere where we can disagree without being disagreeable, and focus on those things we hold in common."

Obama defended his choice of Warren, whose inclusion angered supporters of Obama who see the minister as intolerant to gays.

Warren upset the gay community by endorsing California's successful Proposition 8, which amends the state constitution to declare that marriage is only between a man and a woman.

"There are going to be a wide range of viewpoints that are presented, because that's what America is about," Obama said.

He noted that the Rev. Joseph Lowery, a veteran civil rights leader and co-founder of the Southern Christian Leadership Conference, would also speak at the inauguration.

The president-elect said that he had been invited to speak at Warren's church in recent years despite the pastor's "awareness that I have views that were entirely contrary to his when it came to gay and lesbian rights, when it came to issues about abortion."

"That dialogue is what my campaign was all about," Obama said.

"The magic of this country is that we are diverse and noisy and opinionated."

"And so that's the spirit in which we have put together what I think will be a terrific inauguration."

People are feeling frustrated by a mentality governed by the principle that, as Obama put it, "Whatever is good for me, I do."

The homily came at the end of the formal announcement of three key members of his economic team, a panel he says he is charging with the mission of overhauling the financial regulatory system.

Obama named Mary Schapiro, current head of the Financial Industry Regulatory Authority, to serve as chairwoman of the Securities and Exchange Commission.

He appointed former Treasury official Gary Gensler to be chairman of the Commodity Futures Trading Commission and Georgetown law professor Dan Tarullo to serve as a governor on the Federal Reserve Board.

Obama blamed regulatory agencies and congressional committees who failed to head off or minimize the current financial crisis, and pointed to the track records of his newest appointees as signs of the crackdown to come.

In response to questions from reporters, he also broadened his message to apply to a range of social institutions — and to individuals across the board.

"I think the American people right now are feeling frustrated."

"There's not a lot of adult supervision out there, whether it's in the political world or the financial world," Obama said.

He called for "a restoration of a sense of responsibility, that all of us have responsibilities to operate honorably," and the notions of "advocating not just for ourselves, but what's good for the country ... operating not just out of greed, but operating out of a sense for the common good."

With the appointments unveiled Thursday, Obama has almost finished laying out his Cabinet and key advisory slate.

He plans to have the task substantially complete before leaving for his Christmas holiday in Hawaii on Saturday.

"Medicaid applicants grow as recession widens"

By KEVIN FREKING, Associated Press Writer

21 DECEMBER 2008

WASHINGTON – That day in July was one that Tammy Morse won't soon forget.

Five months earlier, her husband lost his job as a recruiter for the financial services industry.

Once the family savings were gone, the mother of two from Stratford, Conn., saw no way to get health insurance coverage for her family other than to apply for Medicaid.

"It was humbling," she said of her visit to the state's Department of Social Services office.

"For lack of a better way to put it, that was for other people."

"It wasn't for me."

Around the country, similar stories are playing out for thousands of families.

Since the recession began a year ago, many states have seen increases in the Medicaid rolls just as tax revenues are falling below projections.

Governors have lobbied President-elect Barack Obama and Congress to help them weather the downturn by increasing the federal government's share of Medicaid spending for at least two years.

The governors said the extra $40 billion would ease the service cuts or tax increases that legislatures need to balance state budgets.

The unemployment rate has jumped from about 4.7 percent last December, when the recession began, to 6.7 percent today.

Economists estimated in a Kaiser Family Foundation report that each 1 percent gain in the unemployment rate adds 1 million people to the Medicaid and State Children's Health Insurance Program.

In Connecticut, a state faring better than many, enrollment in the Medicaid program has climbed from about 312,000 last December to about 329,500 in November — a 6 percent increase.

Many who lost their jobs were eligible to continue group health insurance.

But that is not an option in most cases because they no longer have an employer picking up a large share of their premiums.

Medicaid insures nearly one in six low-income people in the U.S.

The program typically covers the very poor and about half of enrollees are children.

Spending came to $333 billion in the budget year ending Sept. 30, 2007.

Washington picks up about 57 percent of that; the states cover the remainder.
___

On the Net:

Kaiser Family Foundation: http://www.kff.org

Centers for Medicare and Medicaid Services: http://www.cms.hhs.gov

Families USA: http://www.familiesusa.org

"AP study finds $1.6B went to bailed-out bank execs"

By FRANK BASS and RITA BEAMISH, Associated Press Writers

21 DECEMBER 2008

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue.

Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe "to get them to do the jobs for which they are well paid in the first place."

"Most of us sign on to do jobs and we do them best we can," said Frank, a Massachusetts Democrat.

"We're told that some of the most highly paid people in executive positions are different."

"They need extra money to be motivated!"

The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission.

The 116 banks have so far received $188 billion in taxpayer help.

Among the findings:

_The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

_Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year.

The company's top five executives received a total of $242 million.

This year, Goldman will forgo cash and stock bonuses for its seven top-paid executives.

They will work for their base salaries of $600,000, the company said.

Facing increasing concern by its own shareholders on executive payments, the company described its pay plan last spring as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels."

Goldman spokesman Ed Canaday declined to comment beyond that written report.

The New York-based company on Dec. 16 reported its first quarterly loss since it went public in 1999.

It received $10 billion in taxpayer money on Oct. 28.

_Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about.

Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options.

The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.

_John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year.

Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion.

Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.

Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.

The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets.

Last month, the Bush administration changed the program's goals, instructing the Treasury Department to pump tax dollars directly into banks in a bid to prevent wholesale economic collapse.

The program set restrictions on some executive compensation for participating banks, but did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution.

Banks were barred from giving golden parachutes to departing executives and deducting some executive pay for tax purposes.

Banks that got bailout funds also paid out millions for home security systems, private chauffeured cars, and club dues.

Some banks even paid for financial advisers.

Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners.

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus.

His car and driver cost $178,879.

Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.

Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive.

The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs.

JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York.

The company got $25 billion in bailout funds.

Banks cite security to justify personal use of company aircraft for some executives.

But Rep. Brad Sherman, D-Calif., questioned that rationale, saying executives visit many locations more vulnerable than the nation's security-conscious commercial air terminals.

Sherman, a member of the House Financial Services Committee, said pay excesses undermine development of good bank economic policies and promote an escalating pay spiral among competing financial institutions — something particularly hard to take when banks then ask for rescue money.

He wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.
___

On the Net:

SEC Filings & Forms: http://www.sec.gov

Emergency Economic Stabilization Act: http://www.treas.gov/initiatives/eesa/

"WH on Times: 'Gross negligence'"

Mike Allen

Sun Dec 21, 2:02 pm ET

The White House on Sunday issued a blistering 500-word response to a scathing 5,000-word article on the front page of Sunday's New York Times that says President Bush and his style and philosophy of governing played a direct role in the mortgage meltdown that's crippling the nation's economy.

The response accused the nation's largest Sunday paper of "gross negligence."

"The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view," White House Press Secretary Dana Perino said in an e-mailed statement.

In an unusual double-header, The White House later issued a document headlined, "Setting the Record Straight: The Three Most Egregious Claims In The New York Times Article On The Housing Crisis."

The article was part of the newspaper's "The Reckoning Series" about the nation's market implosion, and was headlined, "‘Ownership society’: White House Philosophy Stoked Mortgage Bonfire."

"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, 'faced with the prospect of a global meltdown' with roots in the housing sector he so ardently championed," says the article by Jo Becker, Sheryl Gay Stolberg and Stephen Labaton.

"There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk."

"But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials."

"From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone. ..."

"Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. ..."

"As early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming."

"And when the economy deteriorated, Mr. Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Mr. Bush was still calling it a 'rough patch.'"

"The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis."

In response, the White House today released the following "Statement by Press Secretary Dana Perino":

"Most people can accept that a news story recounting recent events will be reliant on '20-20 hindsight'."

"Today's front-page New York Times story relies on hindsight with blinders on and one eye closed."

"The Times' 'reporting' in this story amounted to finding selected quotes to support a story the reporters fully intended to write from the onset, while disregarding anything that didn't fit their point of view."

"To prove the point, when they filed their story, NYT reporters were completely unfamiliar with the president's prime time address to the nation where he laid out in detail all of the causes of the housing and financial crises."

"For example, the president highlighted a factor that economists agree on: that the most significant factor leading to the housing crisis was cheap money flowing into the U.S. from rest of the world, so that there was no natural restraint on flush lenders to push loans on Americans in risky ways."

"This flow of funds into the U.S. was unprecedented."

"And because it was unprecedented, the conditions it created presented unprecedented questions for policymakers."

"In his address the president also explained in detail the failure of financial institutions to perform normal and necessary due diligence in creating, buying and selling new financial products -- a problem that almost no one saw as it was happening."

"That the NYT ignored such an important economic speech to the American people and the complex causes of the crises is gross negligence."

"The Times story frequently repeats a charge by the Administration's critics: a 'laissez faire' attitude toward regulation."

"We make no apology for understanding the concept of regulatory balance."

"That is, regulation should be stringent enough to protect the greater public good and safety but not overly strong so that it unnecessarily inhibits innovation, creativity and productivity gains that are the sole source of increasing Americans' standards of living."

"But while repeating this charge, the reporters gave glancing attention to the fact that it was this Administration that pushed for strengthened regulation and oversight, greater transparency, and housing reform."

"The story also gives kid glove treatment to Congress."

"While the administration was pushing for more transparent lending rules and strengthening oversight and supervision of Fannie and Freddie, Congress for years blocked attempts at stronger regulation and blocked reform of the Federal Housing Administration."

"Democratic leaders brazenly encouraged Fannie and Freddie to loosen lending standards and instead encouraged the housing GSEs to play a larger and larger role in the housing market -- even while explicitly acknowledging the rising risks."

"And while the story notes the political contributions of some banks to Republicans, it neglects that political contributions from Fannie Mae and Freddie Mac overwhelmingly supported Democratic officials — in particular the chairmen of the Banking committees."

"In fact, even in the midst of what by then was a housing crisis, it took Congress nearly a full year to pass specific legislation called for by the president in the summer of 2007, especially legislation to reform oversight of Fannie Mae and Freddie Mac.

"There are many more reporting failures in this story — failure to consider the impact of monetary policy; ignoring the regional nature of housing markets; and ignoring the Bush administration's historic proposal to overhaul the nation's regulatory system, for example."

"But then a review of these issues would wave complicated the reporters' myopic point of view that only Bush administration policies could possibly be responsible for the housing and finance crises."

"Key Democrat wants second $350B released earlier - Key Democrat pushes for second $350 billion from bailout funds before Obama takes office"

By CHRISTOPHER S. RUGABER, Associated Press

Last updated: 6:35 p.m., Monday, December 22, 2008

WASHINGTON -- A key House Democrat is pushing to get the second half of the $700 billion rescue fund released next month, before President-elect Barack Obama is inaugurated, in part to help stimulate the economy.

Barney Frank, chairman of the House Financial Services Committee, said Monday he is preparing legislation to require that some of the money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates.

At the same time, commercial real estate developers and other companies are seeking their own share of the bailout pot.

Frank's bill would impose tighter restrictions on the second $350 billion of the bailout funds, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation.

Many U.S. banks have received federal capital in an effort to stimulate lending.

"I don't want to wait until Obama," the Massachusetts Democrat said in a phone interview.

"I think we can do it now."

The bailout funds, along with a stimulus package the Obama administration is expected to push early next year, would have "the impact that you need to get this economy back out of the dumps," Frank said.

A spokeswoman for Obama did not return a call for comment Monday.

Last week, the Bush administration used the final piece of the initial $350 billion to provide loans to automakers General Motors Corp. and Chrysler LLC.

The Treasury Department has earmarked $250 billion to buy stock in banks, including Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., and provided $40 billion in capital to insurance giant American International Group Inc.

Lawmakers have criticized Treasury for not using any of the initial $350 billion to prevent additional home foreclosures.

Up to 2.25 million Americans could lose their homes to foreclosure this year, Federal Reserve chairman Ben Bernanke has warned.

Frank said his legislation would include a version of a plan, supported by Federal Deposit Insurance Corp. Chairman Sheila Bair, to spend $24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes.

Bair has estimated it could prevent 1.5 million foreclosures.

His proposal also would include a measure, under consideration by Treasury, to use government-controlled mortgage companies Fannie Mae and Freddie Mac to reduce mortgage rates to 4.5 percent or lower to stimulate more home buying.

Frank also wants to revamp the Hope for Homeowners program, which was launched Oct. 1.

It was intended to let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed-rate loans with lower rates.

The early results have been disappointing, with only 312 applications so far, and officials are looking at ways to expand the program's use.

Frank is "committed to fixing" low participation but blames the Bush administration for resisting the program when it was debated in Congress last summer and being slow to fix problems in its design, said his spokesman Steve Adamske.

Meanwhile, financial industry groups are pushing to use the bailout fund to help a wider array of companies, including automotive financing companies such as GMAC Financial Services.

GMAC is 51 percent owned by Cerberus Capital Management LP, a private equity firm; General Motors owns the rest.

GMAC, which provides financing for GM vehicle and dealer loans along with home mortgages, is having trouble finding adequate support from its bondholders for a debt transaction that would allow it to become a bank holding company and gain eligibility for bailout money.

"What good does it do to bail out the automakers if you can't get a loan to buy a car?" said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies.

Meanwhile, the Federal Reserve on Monday said it has approved CIT Group Inc. as a bank holding company, clearing a key hurdle for the firm to bolster its resources with loans and support from the government's financial rescue fund.

The decision means the New York-based commercial financial services firm will have permanent access to the Fed's emergency loan window and will be eligible for loans from the $700 billion rescue fund created by Congress on Oct. 3.

Commercial real estate developers said Monday they also are petitioning the government for support from the $700 billion rescue fund.

The Real Estate Roundtable said an estimated $400 billion of commercial real estate mortgages will come due by the end of 2009 without adequate refinancing options.

Industry officials said thousands of office buildings, hotels, shopping centers and other commercial buildings could be headed into foreclosure or bankruptcy unless the government provides support.

Jeffrey D. DeBoer, president of the Real Estate Roundtable, said the industry has written to federal officials asking to be included in a new $200 billion loan program being run by the Federal Reserve, with support from the financial bailout program, to bolster the market for credit card debt, auto loans and student loans.

DeBoer said the commercial real estate industry would like to see that program expanded to cover their properties or have a similar program begun to help their industry.

"We think it is critical that as soon as possible that policymakers announce their intentions to make sure that the credit markets function so this huge wave of debt coming due will be able to be refinanced in an orderly process," he told reporters Monday.

Treasury spokeswoman Brookly McLaughlin said no final decisions had been made yet on the request from commercial developers.

But she noted that Treasury Secretary Henry Paulson, when he announced the effort to help the credit card, auto and student-loan markets, said the new lending facility could be expanded and specifically mentioned providing assistance for "commercial mortgage-backed securities."

----------

AP Economics Writer Martin Crutsinger and Real Estate Writer Alan Zibel contributed to this report.

"Caterpillar scales back executive pay in 2009 - Caterpillar plans to cut 2009 compensation for executives by up to 50 percent amid downturn"

By DANIEL LOVERING, Associated Press

Last updated: 5:25 p.m., Monday, December 22, 2008

Caterpillar Inc., the world's largest maker of mining and construction equipment, said Monday it will cut executive compensation by up to 50 percent next year due to slower demand amid the global economic downturn.

The Peoria, Ill., company also said it was offering voluntary buyouts to about 25,000 U.S.-based managers and support employees and had instituted a global hiring freeze.

Caterpillar, which employs about 112,000 people worldwide, has expanded dramatically in recent years, driven partly by demand from infrastructure projects in developing countries.

Caterpillar is the latest of several large firms to slash compensation in recent weeks to lower costs.

Earlier this month, Memphis, Tenn.-based FedEx Corp. said it will cut pay for senior executives and freeze 401(k) contributions for a year.

AK Steel Holding Corp., based in West Chester, Ohio, plans to reduce pay for salaried employees by 5 percent starting in 2009.

Caterpillar said it also plans to reduce compensation for senior managers by 5 percent to 35 percent, as well as lower compensation by up to 15 percent and suspend merit pay increases for managers and support staff.

The cuts will come from incentive and equity-based compensation programs, according to the company, known for its yellow-and-black earth-moving machines.

Shares of Caterpillar dropped 91 cents, or 2.1 percent, to close at $41.78 on Monday.

The stock, a component of the Dow Jones industrial average, has shed more than 40 percent of its value since the beginning of the year.

Sales of Caterpillar's machines slipped 6 percent worldwide for the three months ending in November, compared with the same period last year, according to the company.

Europe, Africa, the Middle East and North America saw the steepest declines.

Caterpillar's engine sales, meanwhile, climbed 8 percent.

A month earlier, the company reported global machine sales had edged down 2 percent.

Eli Lustgarten, an analyst with Longbow Research, pointed to sagging construction markets in the U.S. and Europe and easing commodity prices that have hurt Caterpillar customers in the mining and energy sectors.

About the compensation cuts, Lustgarten said:

"They're making sure that everybody feels that it's a difficult year and participates in keeping the company as strong as possible as they go through this difficult period."

The move was the latest belt-tightening measure by Caterpillar, which recently laid off employees and cut contract workers as global economic turmoil hurt demand for its broad range of products, which include bulldozers, turbines and boat engines.

On Friday, the company said it will lay off 814 production workers at an engine assembly plant in Mossville, Ill.

It also announced an unspecified number of temporary layoffs at two factories in North Carolina.

Caterpillar said it will continue efforts to cut costs, including temporary factory shutdowns and more layoffs, as needed.

The cutbacks come after years of growth in which Caterpillar's sales soared to $45 billion in 2007 from about $22.7 billion in 2003.

Lawrence De Maria, an analyst with Sterne, Agee & Leach, noted the company had been readjusting its businesses to cope with dwindling demand.

"This is an ongoing process," he said.

"This is probably not the last bit of restructuring we're going to hear from them."

"... The next six to 12 months are likely to be as challenging as they've ever experienced."

In October, Caterpillar posted a 6 percent drop in third-quarter earnings and forecast essentially flat sales for 2009.

At the time, Jim Owens, Caterpillar's chief executive, said the economic outlook for next year was "extremely uncertain."

Owens, who received $14.8 million in compensation last year, had forecast pockets of strength in global mining, energy and infrastructure markets, but warned of a third consecutive year of sales declines in the U.S.

The credit crisis, he said, was likely to hamper markets in North America, Europe and Japan.

AND INTRODUCING QUEEN HILLARY OF THE EMPIRE OF AMERICA ....

OR IS IT CZARINA HILLARY?

And so ...

"Hillary Clinton plans a more powerful State Dept: NY Times"

Tue Dec 23, 5:01 am ET

WASHINGTON (AFP) – Hillary Rodham Clinton plans to build a more muscular US State Department, with a bigger budget, high-profile special envoys dispatched to trouble spots and an expanded role in dealing with the global economic crisis, the New York Times reported Tuesday.

The Times cited an unnamed Hillary Clinton adviser as saying her push for a more vigorous economic team stems from her belief that the State Department needs to play a part in the recovery from the global financial crisis, while economic issues also are at the heart of key diplomatic relationships, notably with China.

The former first lady also is reportedly likely to name several high-powered envoys to world hotspots.

The daily reported that Clinton and Obama have not yet settled on specific envoys or missions, although the name of veteran diplomat Dennis Ross has come up as a possible Middle East envoy, along with diplomatic trouble-shooter Richard Holbrooke and Martin Indyk, a former United States ambassador to Israel.

The Times wrote that the New York senator -- President-elect Barack Obama's pick for Secretary of State -- is recruiting Jacob Lew, the budget director under her husband former president Bill Clinton -- to be one of her two deputies.

Lew would be tasked with handling economic matters, the report said.

Another Bill Clinton aide, former deputy national security adviser James Steinberg is to be Hillary Clinton's other chief lieutenant, subject to Senate confirmation.

"Economy declined 0.5 percent in third quarter - Fourth-quarter economic decline likely to be worse than 0.5 percent drop in third quarter"

By MARTIN CRUTSINGER, Associated Press

Last updated: 3:16 p.m., Tuesday, December 23, 2008

WASHINGTON -- As the longest recession in a quarter century intensifies, analysts believe the small decline in economic activity in the third quarter has worsened significantly in the current fourth quarter.

The Commerce Department said Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter.

Corporate profits fell 1.2 percent.

Some economists believe the economy's decline in the October-December period could be as large as 6 percent.

If so, that would be the worst quarterly drop since 1982.

"It will get a lot worse before it gets better," said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington, Mass., forecasting firm.

"We are in the midst of the worst recession in the post-war period, even factoring in a massive stimulus program."

GDP is likely falling at a sharper pace in the current quarter because of widening fallout from the worst financial crisis to hit the country since the Great Depression.

If GDP did plunge as much as 6 percent in the fourth quarter, it would be the sharpest quarterly decline since a 6.4 percent drop in the first quarter of 1982.

Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, having started in December 2007.

Analysts are projecting that the huge plunge in GDP they expect in the current quarter will be followed by smaller declines in the first and second quarters of next year, before the economy starts growing again next summer.

If the recession ends in June 2009, as many economists are forecasting, it would have lasted 18 months, making it the longest recession since World War II.

The Bush administration said the country should be prepared for worse news to come.

"The fourth quarter, because of the credit crisis, the standstill in credit as markets froze up and the financial market turmoil, will be significantly weaker," presidential spokesman Tony Fratto told reporters at the White House on Tuesday.

Evidence of the current troubles came in two other reports Tuesday showing that sales of both existing and new homes fell by more than expected in November.

The Commerce Department said new home sales dropped 2.9 percent in November to an annual sales rate of 407,000 units, the slowest pace in nearly 18 years.

Meanwhile, the National Association of Realtors said sales of previously owned homes, the far bigger part of the market, fell by 8.6 percent to an annual rate of 4.49 million units.

The median sales price of an existing home plunged 13.2 percent in November to $181,300, the biggest year-over-year drop on records dating to 1968.

The median, or mid-point, price for a new home sold in November dropped by 12.7 percent to $220,400.

Sung Won Sohn, an economist at California State University, said that while the fourth quarter is likely to suffer the biggest dropoff in activity, future quarters could see sharp declines as well, given the shock the economy has been dealt from the financial crisis.

"People who think this may be a run-of-the-mill recession may be mistaken," he said.

"Everybody is counting on a massive economic stimulus from the Obama administration, and hopefully that will help, but as time goes on, I am seeing more and more downside risks."

Investors, who have likely priced in very low economic expectations, seemed relieved Tuesday that the reports weren't even worse than they were.

In midday trading, the Dow Jones industrial average fell 54.48, or 0.64 percent, to 8,465.29.

Broader indexes were also lower.

The Standard & Poor's 500 index shed 6.69, or 0.77 percent, to 864.94.

The Nasdaq composite index fell 9.11, or 0.59 percent, to 1,523.24.

The Russell 2000 index of smaller companies fell 4.56, or 0.96 percent, to 470.51.

The 0.5 percent drop in GDP in the third quarter followed a 2.8 percent increase in the spring, a period that was boosted by the distribution of millions of economic stimulus payments.

President-elect Barack Obama favors a massive second stimulus measure of around $850 billion, which Obama is pushing Congress to pass early next year to limit the severity of the downturn.

For the government's last look at third quarter GDP, there were only minor revisions.

Spending by consumers plunged at an annual rate of 3.8 percent, slightly larger than the 3.7 percent fall reported a month ago.

It was the biggest decline in consumer spending, which accounts for two-thirds of economic activity, in nearly three decades, since an 8.6 percent drop in the second quarter of 1980.

Residential construction, where the current economic troubles began, fell at an annual rate of 16 percent in the third quarter, while non-residential construction, which had been buffering the construction industry, faltered as well, dropping by 1.7 percent.

The 1.2 percent fall in corporate profits followed a 3.8 percent drop in the spring and represented the fifth straight quarter that corporate profits have fallen.

The National Bureau of Economic Research has said that the country slipped into a recession in December 2007.

In the October-December quarter of 2007, the GDP was falling at an annual rate of 0.2 percent.

GDP then grew by 0.9 percent in the first quarter and 2.8 percent in the second quarter before falling by 0.5 percent in the third quarter.

While a common rule of thumb for a recession is two consecutive quarters of falling GDP, the NBER uses other data to determine when recessions begin and end, including employment statistics.

The economy has lost jobs every month since January.

It's shed 1.9 million payroll jobs this year, including more than a half-million jobs lost just in November.

The unemployment rate now stands at a 15-year high of 6.7 percent.

Congress enacted a $700 billion rescue program in October, and the Federal Reserve has expanded its loan programs by hundreds of billions of dollars as the government has tried to combat the credit crisis.

But all those efforts have so far failed to prompt banks to resume more normal lending patterns.

As a consequence, many businesses are struggling to attract the financing they need.

The weakness is spreading around the world, which has been bad for U.S. exports.

Peoria, Ill.-based Caterpillar, the world's largest maker of mining and construction equipment, said Monday that it would cut executive compensation by up to 50 percent next year due to slower demand amid the global economic downturn, becoming the latest of several large firms to slash compensation in an effort to lower costs.

Earlier this month, Memphis, Tenn.-based FedEx Corp. said it would cut pay for senior executives and freeze 401(k) contributions for a year, while AK Steel Holding Corp. of West Chester, Ohio, said it planned to reduce pay for salaried employees by 5 percent in 2009.

The recession already is the longest since the 1981-82 slump, which lasted 16 months.

Rep. Barney Frank, chairman of the House Financial Services Committee, said Monday he is preparing legislation to require that some of the bailout money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates.

Frank is pushing to get the second half of the $700 billion rescue fund released next month, before President-elect Barack Obama is inaugurated.

Frank's bill would impose tighter restrictions on the second $350 billion, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation.

Many U.S. banks have received federal capital in an effort to stimulate lending.

"Treasury provides support for 92 more banks - Treasury provides an additional $4.7 billion to 92 banks as part of financial rescue"

By MARTIN CRUTSINGER, Associated Press

Last updated: 6:45 p.m., Tuesday, December 23, 2008

WASHINGTON -- The Treasury Department says it has provided an additional $4.7 billion to 92 banks as part of the government's $700 billion rescue of the financial system.

The department released a list of 49 banks that got final approval last Friday to receive $2.8 billion.

It said an additional 43 banks received final approval Tuesday, but those names will not be released until Monday.

Treasury also confirmed that it had given preliminary approval to American Express Co. and CIT Group to receive support from the $700 billion bailout fund.

The money is being disbursed as part of the government's effort to buy stock in banks, to bolster their balance sheets and spur them to step up lending to fight the worst financial crisis to hit the country in seven decades.

But critics contend that many banks are not using the government funds for the purpose Congress intended.

An Associated Press survey of 21 banks that received at least $1 billion each in government support found that none of them would provide specific answers on how the money was used.

Credit card giant American Express said it had received preliminary approval for $3.39 billion in government money.

And commercial finance company CIT Group said it had received approval to obtain $2.33 billion.

The Treasury confirmed that both companies had received preliminary approval for government support.

The final authorization comes after lawyers draw up the documents needed to transfer the funds.

Under the rescue legislation passed in October, Treasury has two business days after the final documents are signed to announce the actual release of the money.

In the list of banks released Tuesday were 14 banks that do not have publicly traded stock.

They were the first institutions in this category of banks to win government funds.

The Bush administration last Friday said it would lend $17.4 billion to General Motors and Chrysler LLC in an effort to buy them time to reorganize and avoid having to file for bankruptcy.

GM and Chrysler had said they would run out of cash within weeks if they didn't get help.

Under the White House plan, the two companies must extract enough financial concessions from workers, dealers and other stakeholders by the end of March to show their long-term viability.

But the biggest decisions about the industry's future have been left to President-elect Barack Obama.

Treasury Secretary Henry Paulson announced Friday that with the decision to provide loans to the auto companies, the first half of the $700 billion bailout fund has been committed.

He said Congress needed to approve the release of the final $350 billion.

House Financial Services Committee Chairman Barney Frank, D-Mass., said Monday he is preparing legislation to require that some of the bailout money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates.

Frank is pushing to get the second half of the $700 billion rescue fund released next month, before Obama is inaugurated.

Frank's bill would impose tighter restrictions on the second $350 billion, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation.

Frank said his legislation would also include a version of a plan, supported by Federal Deposit Insurance Corp. Chairman Sheila Bair, to spend $24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes.

Bair has estimated it could prevent 1.5 million foreclosures.

It was unclear whether Frank could gain enough support to win congressional approval to release the second $350 billion before Obama takes office, given opposition among Republicans.

Meanwhile, other financial industry groups are pushing to use the bailout fund to help a wider array of companies, including automotive financing companies such as GMAC Financial Services.

GMAC is 51 percent owned by Cerberus Capital Management LP, a private equity firm; General Motors owns the rest.

GMAC, which provides financing for GM vehicle and dealer loans along with home mortgages, is having trouble finding adequate support from its bondholders for a debt transaction that would allow it to become a bank holding company and gain eligibility for bailout money.

"Northeast posts 24 percent November sales decline - Northeast sales plunge in November, but prices nearly flat, the best showing in US"

By J.W. ELPHINSTONE, Associated Press

Last updated: 4:55 p.m., Tuesday, December 23, 2008

NEW YORK -- Existing home sales in the Northeast dropped nearly 24 percent in November from last year, while the median sales price in the region held steady at $257,700 the National Association of Realtors said Tuesday.

Sales in the Northeast were softer than the national numbers, but the price decline of 0.1 percent was significantly better.

Sales nationwide -- without adjusting for seasonal factors -- declined 17 percent in November from a year ago, while the median price fell 13 percent to $181,300.

Sales in nine major Northeast cities plunged more than 22 percent, according to the Associated Press-Re/Max Monthly Housing Report, also released Tuesday.

Three Northeast metro areas surveyed -- Philadelphia, Pittsburgh and Hartford, Conn. -- recorded a drop in sales of more than 35 percent from a year ago, but median prices in all three held up best.

The report analyzed sales transactions recorded in the metropolitan statistical areas by all real estate agents, regardless of company affiliation.

The future of the suburban housing markets surrounding New York City hinge on Wall Street job losses, said James Diffley, group managing director of Global Insight's regional services group.

Diffley said that many expect the big banks to wait until after the holiday season to begin major layoffs, which will hurt housing demand and values.

So far, the financial services industry has slashed between 16,000 and 17,000 jobs in the Manhattan area, he said, but that number is expected to go up to 60,000 or more over the next year.

And for those who survive the cuts, their wallets will be sharply thinner than last year.

Wall Street bonuses are forecast to drop by half from last year, a loss of about $15 billion to $20 billion, Diffley said.

"These folks will be finding out in December and January what their bonuses are and that will affect the high-end homes in New Jersey, Connecticut and Long Island," he said.

November sales didn't offer any hope for the area.

Sales in the suburban counties surrounding New York City -- Suffolk, Nassau and Westchester counties -- dropped nearly 23 percent, while the median home price fell almost 10 percent to $399,000, according to the AP-Re/Max report.

Across the Hudson River and home to many Manhattan commuters, Passaic, N.J., sales tumbled 29 percent, while prices dipped nearly 10 percent from a year ago to $340,000.

Meanwhile, prices in Pennsylvania held up better than most in November.

In Pittsburgh, prices actually inched up almost 2 percent to $119,950, while sales dropped nearly 37 percent from year-ago levels.

Philadelphia's median home price dipped less than 4 percent in November to $207,500, though sales in that city also plunged about 37 percent.

Harry Caparo, chief executive of Coldwell Banker Preferred in Philadelphia, expects December and January sales to be off between 25 percent to 30 percent based on sales contracts he's seen in the past two months.

"The sentiment of buyers now is let me wait and see what is going to happen with the economy," Caparo said.

He noted, however, that more buyers started looking when mortgage rates dropped to around 5 percent earlier this month.

Of the entire region, New England states are getting hammered the most.

The largest economy, Massachusetts, is officially in a recession and suffering from a staggering debt load.

Its troubles have seeped into Boston's housing market, which recorded a nearly 25 percent decline in sales for November.

Prices there fell more than 11 percent to $312,500.

"Buyers are too nervous right now about all the failures we're seeing in the economy," said Judy Moore, a local agent with Re/Max Landmark, who also remarked that December activity has been quiet.

Down the highway, Providence, R.I., posted the sharpest year-over-year decline in median home price, tumbling nearly 19 percent to $200,000 in November.

Sales there were off by 24 percent from a year ago.

Much of the pricing pressure comes from the high number of foreclosures in Providence, which are moving out of the lower income areas and into the more affluent bedroom communities as the state and national economies weaken.

Rhode Island, along with Michigan, have unemployment rates of 9.3 percent, the worst in the country.

"Foreclosures now are happening to professional, mid-to-upper income families," said real estate agent Julie Longtin of Re/Max Professionals in East Greenwich, R.I.

She noted one recent foreclosure occurred in a million-dollar neighborhood.

But Longtin said December has seen more buyer traffic after mortgage rates hit yearly lows.

She hopes the next administration will bring another round of economic stimulus, which is badly needed to jump-start the economy and the housing market.

"Will Obama's stimulus work fast enough? - Stimulus plan aims to deliver both short- and long-term economic relief"

By JEANNINE AVERSA and ANDREW TAYLOR, Associated Press

Last updated: 5:35 p.m., Tuesday, December 23, 2008

WASHINGTON -- President-elect Barack Obama's plan for economic revival puts a big emphasis on public works projects.

It also would rely on tax cuts.

But with the nation bruised by recession, with hundreds of thousands of jobs vanishing monthly, Obama's plan raises an urgent question: Will his remedies work fast enough?

The answer won't be clear for months or longer.

In the meantime, pressure on the Obama team to deliver help quickly is intensifying.

At least as designed, the Obama plan, like a calibrated drug regimen, aims to deliver both short- and long-term relief.

The short-term help would flow partly from tax cuts of $1,000 for couples and $500 for individuals, costing about $140 billion over 2009-2010.

The Obama team, said two congressional Democratic aides familiar with the discussions, will likely deliver those tax cuts by reducing the tax withheld from paychecks.

This would put more money in paychecks, unlike the lump-sum rebates issued earlier this year.

Many people used those rebates to pay down debt, rather than spending them as the administration had hoped.

In addition, states would get up to $200 billion over two years for Medicaid health coverage for the poor and to narrow state budget gaps, which are forcing layoffs and cuts in services.

The aides spoke on condition of anonymity to candidly discuss the evolving plan.

Also in the short term, the nation's governors are pushing a wish list of $136 billion in jobs-producing public works projects -- chiefly road and bridge repairs -- that they say are ready to go.

But even if they are, the Obama administration faces a much harder task, too: creating jobs that won't disappear once a bridge is fixed.

What's needed are millions of permanent jobs that would put legions of laid-off people back to work for years to come.

It's too soon to know whether many of the 2.5 million jobs the president-elect has said he intends to "save or create" within his first two years would become permanent.

For now, given the depth of the recession, the Obama plan focuses on the early months.

By embracing projects already in the pipeline and stressing infrastructure repairs, parts of the plan could roll out soon -- perhaps within weeks -- creating jobs and stirring economic activity.

That way, the new administration also buys time to allocate money for other projects that might take years to complete.

"Looking after the existing infrastructure is not as exciting as cutting ribbons on new projects, but it could generate jobs quickly," Martin Baily, who served as President Bill Clinton's top economist and is now at the Brookings Institution, told Congress.

Economists say the combination of tax cuts and infrastructure spending could deliver a quick one-two punch against the recession: the faster-acting tax breaks, plus the time-released benefits of infrastructure spending.

"You need a cocktail of drugs to go after this recession," said Sean Snaith, economics professor at the University of Central Florida.

"It needs to be a multipronged attack."

Obama is proposing a package priced at perhaps $675-$775 billion over two years, his advisers say, though they think add-ons by lawmakers could raise the price to $850 billion.

His advisers say an $850 billion plan could generate about 3.2 million jobs by the first quarter of 2011.

Some economists favor an even bigger spending stimulus: up to $1.3 trillion.

Vice President-elect Joe Biden said Tuesday, though, that anyone expecting a bounty of pet projects should think again.

"There will be no earmarks" in the stimulus plan, Biden said at the start of a meeting of Obama's economic staff, referring to the special-interest projects that lawmakers often attach to legislation.

Obama said his plan would "make the single-largest new investment in our national infrastructure since President Eisenhower established the Interstate Highway System in the 1950s."

For each $1 invested in infrastructure spending, around $1.60 in economic activity would be generated, according to estimates by some economists.

Put a different way: Peter Morici, economist at the University of Maryland, projects that $100 spent on a bridge or school boosts economic activity by about $200.

(That doesn't count the benefit of improving Americans' longer-term productivity. For instance, better roads could reduce commuting times or help get goods to customers more efficiently.)

Can tax cuts help rejuvenate the economy?

Some are skeptical.

"Most infrastructure spending will create more jobs by year-end 2010 than a tax cut, particularly a temporary tax cut," said Mark Zandi, chief economist at Moody's Economy.com.

"Some of any tax cut will be saved."

"And some of it will be spent on imported goods, reducing its jobs impact."

The rap on infrastructure projects as an economic boon has been that they can be too slow to work -- at least six or nine months to kick in.

But that's less of an issue now because the economy's weakness is expected to last for so long -- perhaps into 2010 and possibly beyond.

"I think in this case it is right," said Simon Johnson, former chief economist to the International Monetary Fund and a professor at the Massachusetts Institute of Technology's Sloan School of Management.

"A lot of U.S. infrastructure is run down."

"Compared to other rich countries, the U.S. is lagging behind."

Still, timing is tricky.

Public works projects need to roll out while the economy is still hurting.

If they launch after the economy has rebounded, they could drive up costs and wages and fan inflationary forces.

A more philosophical matter is how much the government should be involved in industrial policy -- in picking winners and losers.

Obama's vision of infrastructure goes beyond repairing or building roads and bridges.

It includes modernizing schools, boosting high-speed communications networks and installing technology at hospitals and doctors' offices to electronically access medical records.

URS Corp. and Fluor Corp., which provide engineering and construction services, are among companies that could benefit from an infrastructure initiative, said Heiko Ihle, an analyst at Gabelli & Co.

Other firms passed up would likely raise questions about the fairest and most efficient use of taxpayer money.

A more fundamental problem is today's work force is more skilled and specialized -- and in some ways less fluid -- than during the 1930s when President Franklin Roosevelt launched the New Deal during the Great Depression.

The jobs Obama's stimulus plan would create wouldn't likely help laid-off white-collar workers.

"I don't think it's realistic to think you'll see unemployed financial services people and retail clerks flocking to construction," says Brian Bethune, economist at IHS Global Insight.

"So you have to be careful about not overdoing it and thinking this is going to be the savior of our problems."

"There are only a certain number of big engineering firms that can do certain big projects and only a certain number of workers skilled in those trades."

Whatever its ultimate size, the stimulus package will dig the government budget hole ever deeper.

The U.S. is on track to hit a record budget deficit of $1 trillion or more for 2009 budget year, which began Oct. 1.

That would be more than twice the previous record-high deficit set last year.

Yet despite the swelling costs, economists agree that forceful action with staying power is desperately needed.

"With negative or low economic growth projected well into the future, the economy needs a long-term fix," said John Taylor, a Stanford economics professor who held a top Treasury Department post in the Bush administration.

"We need to worry about the next few years, not just the next few months."

"Existing home sales sink in South - Existing home sales in South sink nearly 24 pct in November, prices off 11 pct from last year"

By ADRIAN SAINZ, Associated Press

Last updated: 6:05 p.m., Tuesday, December 23, 2008

MIAMI -- Existing home sales in Southern states sank nearly 24 percent in November compared to the same month last year, while the median sales price fell nearly 11 percent to $154,500, the National Association of Realtors reported Tuesday.

The marked drop in sales in the South -- as in the rest of the country -- showed how job losses, Wall Street weakness and dwindling consumer confidence forced more people out of the housing market.

Without adjusting for seasonal factors, November sales dropped 17 percent nationwide from a year ago, while the median sales price slid 13 percent to $181,300.

In the South, 20 metro areas posted declining sales compared to the year-ago period, with 15 of those experiencing drops of more than 30 percent, according to the Associated Press-Re/Max Housing Report, also released Tuesday.

The report analyzed all home sales recorded by all real estate agents, regardless of company affiliation, in those metropolitan statistical areas.

Meanwhile, the median home price declined in all 22 metro areas covered by the AP-Re/Max report.

Once again, the Florida cities of Miami, Tampa and Orlando had the most dramatic drops in median sales prices, which have been forced down by price competition surrounding foreclosure sales.

November sales in Orlando fell 13 percent compared to last year, but prices plunged 27 percent to $167,000, the AP-Re/Max report showed.

"Foreclosures used to be the exception," said Randy Martin, a real estate agent with Coldwell Banker in Orlando.

"Now, foreclosures are becoming the baseline for pricing the property."

"That's the tough part."

He said property values in the Orlando area have come down an average of 1 percent to 2 percent a month all year.

"What $200,000 buys you today, you would have paid $325,000 18 months ago," Martin said.

"That's a pretty good snapshot of what's going on."

Meanwhile, two of the slowest markets in terms of sales were the North Carolina metro areas of Charlotte and Raleigh-Durham.

Charlotte, one of the South's most important banking and commerce centers, saw existing home sales drop a whopping 52 percent compared to last November, while the median sales price fell nearly 13 percent to $150,000, the AP-Re/Max report showed.

In Raleigh-Durham, November sales were down 46 percent compared to last year, though prices were down just 4 percent to $193,000, the AP-Re/Max report showed.

Raleigh-Durham, unlike Miami and Orlando, did not see dramatic price increases during the housing boom, and thus is not seeing a major fall in median sales prices.

John Wood, a real estate agent with Re/Max Partners in Cary, N.C., said waning consumer confidence among both buyers and sellers choked home sales in November, and the rest of the winter could see more of the same -- at least before the Obama administration takes over in January.

Wood did note that activity picked up in December as average 30-year-fixed mortgage rates fell to near 5 percent, giving buyers an added incentive.

"We are seeing more people stirring," Wood said.

"Even right here during Christmas week, we have people who have been sitting on the fence who say, `Hey, we want to take advantage of these rates.'"

Other large Southern metro areas also experienced slower sales, including Houston.

Existing home sales fell 35 percent year-over-year, while the median sales price dropped almost 8 percent to $138,580, the AP-Re/Max report showed.

"These are some of the toughest economic times our country has ever experienced, and Houston consumers are understandably cautious as they absorb news about layoffs, declining oil prices and other negative financial reports," said Michael Levitin, chairman for the Houston Association of Realtors.

Levitin also said many people are choosing to rent rather than buy.

In fact, single family home rentals increased 16 percent in November compared to the year before, and town house and condominium rentals were up nearly 3 percent from November of last year, the Realtors group reported.

To the north in Louisville, Ky., existing home sales in November plummeted 41 percent from the year before, while the median sales price fell 9 percent to $124,000, the AP-Re/Max report showed.

Jan Scholtz, president of the Greater Louisville Association of Realtors, said action by the federal government would be a good next step.

"If you don't improve the real estate market, the overall economy is not going to improve," Scholtz said.

"You've got to start looking at fixing the real estate market nationally."

"Congress moves to crack down on bailout recipients - Bipartisan Senate bill would force bailout recipients to report spending, restrict spending"

By LAURIE KELLMAN, Associated Press

Last updated: 6:25 p.m., Tuesday, December 23, 2008

WASHINGTON -- Lawmakers are turning up the heat on banks that have received money from the Treasury Department's $700 billion rescue fund after the Associated Press reported that they wouldn't say how they are using the money.

Sens. Dianne Feinstein, D-Calif., and Olympia Snowe, R-Maine, said Tuesday that they will propose legislation next month to force companies that receive money from the fund to report how they have spent it.

The legislation would also prohibit them from spending the taxpayer dollars on lobbying or political contributions.

It would also apply to some recipients of the Federal Reserve's emergency lending programs.

The legislation was introduced earlier this year, but the Senate did not take it up.

The sponsors have long said they plan to pursue it when the 111th Congress convenes Jan. 6.

"At present, we don't know whether these companies are using these funds to fly on private jets, attend lavish conferences or lobby Congress," Feinstein said in a statement.

Snowe said the bill would ensure that taxpayer money would be used only for the intended purposes: to shore up the nation's financial institutions and step up lending to consumers and businesses to help revive the economy.

The AP contacted 21 banks that received at least $1 billion in government money and asked four questions:

How much has been spent?

What was it spent on?

How much is being held in savings?

What's the plan for the rest?

None of the banks provided specific answers and most refused to explain why they are keeping the information secret.

Nearly every bank AP questioned -- including Citigroup Inc. and Bank of America Corp., two of the largest recipients of bailout money -- responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.

"It is outrageous that those institutions cannot -- or will not -- provide information on how they are spending billions of taxpayer dollars," House Speaker Nancy Pelosi said in a statement Monday.

Pelosi said she has asked House Financial Services Chairman Barney Frank, D-Mass., to draft legislation that would ensure government funds are used for more lending to consumers.

Congress will consider that legislation before it votes on whether to release the second $350 billion in bailout money, Pelosi said.

Treasury Secretary Henry Paulson has said the department is trying to step up its monitoring of bank spending.

In a letter sent Tuesday to Paulson, Sen. Susan Collins, R-Maine, said she joined those Americans who were "astonished and outraged" that banks were not explaining how the money was being spent.

"This lack of transparency and accountability is deeply troubling," Collins wrote.

"The current lack of reporting requirements is unacceptable and cannot be allowed to continue."

The bill is S. 3698.

----

AP Economics Writer Christopher S. Rugaber contributed to this story.

"SEC chief defends response to economic turmoil"

24 DECEMBER 2008

WASHINGTON (Reuters) – U.S. Securities and Exchange Commission chairman Christopher Cox, responding to heavy criticism, said in an interview published on Wednesday he takes pride in his response to the U.S. financial crisis.

"What we have done in this current turmoil is stay calm, which has been our greatest contribution -- not being impulsive, not changing the rules willy-nilly, but going through a very professional and orderly process that takes into account unintended consequences and gives ample notice to market participants," Cox told The Washington Post.

This caution "has really been a signal achievement for the SEC," said Cox.

"When these gale-force winds hit our markets, there were panicked cries to change any and every rule of the marketplace: 'Let's try this.'"

"'Let's try that.'"

What was needed was a steady hand," he said.

The SEC, created after the 1929 stock market crash to police markets and restore investor confidence, has come under heavy criticism after the Wall Street meltdown and financial scandals exposed lapses in its oversight.

Cox last week acknowledged that the SEC had failed to detect the alleged $50 billion fraud by disgraced Wall Street investment manager Bernard Madoff, despite many warnings.

Cox told The Washington Post the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks.

Cox told the newspaper he had been under intense pressure from Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to take this action and did so reluctantly.

They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.

Cox, a former California Republican congressman, argued that the SEC has carefully defined responsibilities and that it was unfair to blame it for every problem on Wall Street.

Cox became SEC chairman in mid-2005.

He plans to step down early next year before his five-year term expires.

President-elect Barack Obama has chosen Mary Schapiro, chief executive of the Financial Industry Regulatory Authority and a former SEC commissioner, to replace him.

(Reporting by Joanne Allen; Editing by Alan Elsner)

"Obama's five rules of scandal response"

Carrie Budoff Brown, Kenneth P. Vogel

Wed Dec 24, 6:52 am ET

Tuesday's report from the transition, detailing contacts between members of Obama's inner circle and embattled Illinois Gov. Rod Blagojevich and concluding that "nothing at all inappropriate" was discussed, won't be the final word on the subject—but it did provide some telling insight into the way the White House's new occupant will operate.

Here are five rules of Obama scandal-management based on his team's handling of its first post-election crisis.

1 - Be transparent, to an extent

Obama's internal review was entirely voluntary and intended to demonstrate that his team had nothing to hide, and was committed to its pledge to run "the most open and transparent transition in history."

But after announcing the review, his team declined to reveal who would conduct it, who would be interviewed or whether the resulting release would include any transition e-mails or records to support its conclusions.

The review itself answered just one of those questions — we now know that White House Counsel Greg Craig led the review, which didn't include any documentation of what materials it went over — but it raised others, among them:

Why did Obama confidante Valerie Jarrett communicate with Craig through her lawyer, whom the report does not name; how many conversations did incoming White House Chief of Staff Rahm Emanuel have with Blagojevich; and why was Obama himself interviewed by prosecutors?

The report says Emanuel urged Blagojevich to tap Jarrett for the Senate seat during "one or two telephone calls."

But in the next paragraph, it refers to "those early conversations with the governor," and in a conference call unveiling the report, Craig said Emanuel "had a couple of conversations with the governor."

Equally unclear is what exactly was reviewed in the report that concludes that nothing inappropriate occurs, and whether there were any transition e-mails or other records covering the Senate seat selection process.

"We asked each individual who we thought might have had some contact or some communication that would be meaningful" to reconstruct "any contacts or communications, and that would include checking cell phone records or e-mails, and we inquired about that," Craig said.

He added that "we've got the information that is required," and said he didn't know of any written communications.

Also, the report revealed that prosecutors interviewed Obama, and did so after he had publicly declared he had been unaware of Blagojevich’s alleged plot to sell off the Senate seat Obama had vacated after winning the presidency, raising questions about why they took the unusual step of interviewing the president-elect, what they asked him and whether he was under oath.

2 - Don't let the news cycle dictate response

Freed from the rapid fire back-and-forth of the campaign, Obama, a stickler for preparation, resorted to his methodical instincts in trying to create order amidst the swirling scandal.

But in taking his time, he's let the story linger into a third week.

After drawing criticism for a listless initial response the day Blagojevich was arrested and accused of trying to sell the Senate seat vacated by the president-elect, Obama went a step further the next day by calling on the governor to resign.

On the third day of the story, he announced the internal review.

By the next week he acknowledged frustration over not being able to clear up inaccuracies about the case.

Still, Obama resisted the temptation to spout off and stuck to the original plan: He would allow a written report to speak for him.

When the transition released the five-page review Tuesday, the day before Christmas Eve, Obama was far removed from the action as he relaxed in Hawaii with his family.

The physical distance served the same purpose as the report itself, separating Obama from the swirl of scandal

3 - No freelancing

The report suggested Obama wants his advisers to get his permission before even ostensibly private conservations with outsiders.

Longtime Obama family friend Eric Whitaker seemed to follow this rule when he was approached by Blagojevich deputy Louanner Peters asking who could speak for Obama's preferences for the Senate seat.

"Dr. Whitaker said he would find out," according to the report.

After Whitaker was told by Obama that "no one was authorized to speak for him on the matter," the report states Whitaker "relayed that information to Deputy Governor Peters" and "had no other contacts with anyone from the governor's office."

On the other side of that ledger was Emanuel, a much newer member of Obama's inner circle, who broke the rule by calling Blagojevich and recommending he tap Jarrett for the seat.

"He did so before learning -- in further conversations with the president-elect -- that the president-elect had ruled out communicating a preference for any one candidate," according to the report.

Later, when Emanuel chatted with Blagojevich's then-chief of staff, the report indicates it was "with the authorization of the president-elect."

4 - Aides take hits to protect the boss

Twice in handling the Blagojevich scandal, top Obama lieutenants were singled out for botching the message.

The report makes clear that Emanuel was the only person in Obama's transition who had any contact with Blagojevich about filling the Senate seat and that his contact wasn't authorized by Obama.

And Obama political guru David Axelrod made a public mea culpa after his boss contradicted a statement from an interview he gave last month, before the governor's arrest.

In it, Axelrod unambiguously described a conversation between Obama and Blagojevich about filling the seat, saying, "I know he's talked to the governor and there are a whole range of names, many of which have surfaced, and I think he has a fondness for a lot of them."

But after Obama declared he hadn't spoken to Blagojevich, Axelrod issued a statement saying, "I was mistaken when I told an interviewer last month that the president-elect has spoken directly to Governor Blagojevich about the Senate vacancy."

5 – Shy away from even justified fights

It seems only logical that Obama would want a say in picking his successor in the Senate, since the next junior senator from Illinois will represent the president-elect’s home and could be an important congressional ally.

But Obama, whose penchant for avoiding tough stands on controversial issues frustrated opponents trying to land a clear shot in the presidential race, also steered clear of the Senate-seat derby, according to the report and Craig’s teleconference.

Craig said Obama “was not engaging on this in any personal way and had no interest in dictating the result of the selection process.”

The report says Obama talked with his top aides about a range of prospective Senators, but never winnowed down the group, dispatching Emanuel to relay a list of acceptable candidates to Blagojevich’s office.

And according to the report, Obama was ambivalent about the Senate aspirations of Jarrett, contradicting the widely reported claim that she was his top choice for the Senate seat.

Rather, the report says, Obama’s “preference (was) that Valerie Jarrett work with him in the White House."

But it also states he made clear "he would neither stand in her way if she wanted to pursue the Senate seat nor actively seek to have her or any other particular candidate appointed to the vacancy."

To the extent that the report succeeds in its goal of establishing the distance between Obama and Blagojevich, it necessarily raises the question: Why was the president-elect and leader of the Democratic party playing no role in a key appointment to national office being made in his home state, and by a Democratic governor?

"Obama’s Afghan Troop-Surge Plan May Prove Too Much, Too Late"

Ken Fireman

Tue Dec 23, 5:44 pm ET

(Bloomberg) -- Sending more U.S. forces to Afghanistan is an idea whose time has come.

The question is whether the time when it could work has already gone.

President-elect Barack Obama, departing President George W. Bush and holdover Defense Secretary Robert Gates have backed a plan to send 20,000 or more troops next year.

Those forces must confront an increasingly entrenched Taliban enemy and a population grown hostile to foreign troops after seven years of U.S.-led warfare.

“We may have missed the golden moment there,” said Lawrence Korb, a former Pentagon official who has long advocated an increased U.S. focus on Afghanistan.

The tension between the short-run need for more muscle to thwart the Taliban and the long-term trap of becoming the latest in a long line of foreign intruders bogged down in Afghanistan forms the core of the dilemma confronting Obama.

The new U.S. troops will likely be used to strike hard at Taliban insurgents and attempt to halt their momentum, said retired Army General Jack Keane, who helped plan a similar U.S. buildup in Iraq two years ago.

In a parallel effort, the Afghan National Army will be rapidly expanded and trained to secure the areas cleared of insurgents, Keane said.

U.S. and Afghan forces will also seek to recruit local tribes to the anti-Taliban campaign, said Seth Jones, an analyst for the policy-research organization RAND Corp. and a Defense Department consultant.

Quick Results

Jones said the buildup must show results quickly, given declining Afghan support for foreign troops on their soil.

“The clock is ticking right now,” he said.

And some experts say sending more U.S. forces could prove counterproductive, making it harder for President Hamid Karzai’s wobbly government to defeat a resurgent Taliban by increasing the perception that the government is dependent on outsiders for survival.

In the end, insurgencies are not won or lost by foreign troops,

The Afghanistan surge eventually may almost double the U.S. military personnel in the country.

The reinforcements Bush sent to Iraq last year amounted to about a 20 percent boost in a force more than four times bigger.

Karzai, Casualties

Karzai has urged the U.S. to consult with Afghan officials on how the additional troops are used and to limit civilian casualties during operations.

He made those points in a Dec. 22 meeting in Kabul with Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff, the Associated Press reported.

Military officials and observers don’t dispute the limits of the planned U.S. buildup.

Keane said it “is enough to make a difference, but it’s not big enough to win."

"We will begin to change momentum, but we won’t win unless we grow the Afghan army.”

And Gates has raised a caution flag, even as he has approved adding one combat and one aviation brigade.

During a trip to the region earlier this month, Gates said no decision has been made about the duration of the buildup.

He said it would be unwise to exceed the planned U.S. reinforcements.

Gates’s Concern

“I would be very concerned about a substantially bigger U.S. presence than that,” he said on Dec. 14.

“The Soviets were there with 120,000 troops and lost because they didn’t have the support of the Afghan people."

"At a certain point, we get such a big footprint, we begin to look like an occupier.”

During the presidential campaign, Obama repeatedly called for sending more troops to cope with insurgent attacks that have risen to their highest level since the Taliban -- an Islamist militia known for its harsh treatment of women -- was ousted from power by the U.S.-led invasion in 2001.

The country’s farm economy also has shifted toward soaring production of opium.

There are currently about 31,000 U.S. troops and another 31,000 from other members of the North Atlantic Treaty Organization in Afghanistan, according to Pentagon and NATO data.

Vikram Singh, a former Defense Department official, said he found during a recent trip to Afghanistan a “profound sense of disappointment” among U.S. and NATO forces about the resurgence of the Taliban and the limited opportunities for countering it at current troop levels.

Rural Rule

In many rural areas of the country, the Taliban has begun acting as a de facto government thanks to “a combination of support, intimidation, fear and the belief that the government cannot win,” he said.

The planned U.S. buildup will add between 20,000 and 30,000 troops during the next year, according to Mullen.

The new forces will be divided between three southern provinces that form the heart of the current Taliban insurgency and two others near the capital of Kabul where attacks have increased in recent months.

Even with the planned buildup, U.S. and NATO forces won’t be large enough by themselves to fulfill the primary goal of any effective counter-insurgency campaign, which is protecting the population, military experts say.

Bigger Country

In Iraq, they note, the U.S. had more than 150,000 troops at the height of last year’s surge.

And Afghanistan has 16 percent more people than Iraq, 48 percent more territory and a far more challenging military environment because of its varied terrain and lack of roads.

“We don’t have enough troops to create security on the ground in Afghanistan, and the Afghan army is not big enough,” said retired Army Lieutenant Colonel John Nagl, one of the principal authors of the service’s counter-insurgency manual.

The Afghan government has endorsed a plan to double the size of its army to 134,000 over five years.

Even that will be too small to meet its needs, said Keane and other experts; he said a force of at least 250,000 should be the goal.

The good news, Keane said, is that recent experience in Iraq demonstrates that an indigenous army can be rapidly upgraded in both size and quality when sufficient resources are provided.

Another lesson from Iraq that may be transferable to Afghanistan, Jones said, is the utility of drawing in local tribal institutions to oppose the insurgents.

That is true even through Afghanistan’s tribal structure is more complex and ethnically varied, he said.

And doing this successfully offers a way to avoid the stigma of being perceived as a foreign intruder, he said.

“If American forces operate unilaterally, they will be viewed increasingly as foreign occupiers,” Jones said.

“If they’re able to leverage local institutions, local concerns will be lessened.”

To contact the reporter on this story: Ken Fireman in Washington at kfireman1@bloomberg.net