Sunday, March 30, 2008

The Energy Non-Crisis

Lindsey Williams talks about his first hand knowledge of Alaskan oil reserves larger than any on earth. And he talks about how the oil ... all » companies and U.S. government won't send it through the pipeline for U.S. citizens to use.

Barak authorizes nationwide emergency drill

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Defense establishment, government and cabinet all to participate in exercise simulating crisis situation as part of upcoming national emergency drill to be held in April. Drill part of implementation of lessons from Second Lebanon War
Defense Minister Ehud Barak authorized on Sunday evening the plans for a national emergency drill, which is scheduled to take place in two weeks time.

The exercise, which will be led by Barak's deputy Matan Vilnai, was conceived as part of the lessons learned following the Second Lebanon War in 2006 and will incorporate all government offices and public bodies.

The drill will simulate a series of emergency situations and require those participating – ranging from local municipalities, schools, firefighters and paramedics, the IDF Home Front Command and even the cabinet itself – to respond to the developing events.

The Sourasky Medical Center in Tel Aviv took part in a drill simulating a chemical missile attack several days ago.

Both Home Front Command and Health Ministry officials stressed the importance of preparing for any possible scenario.

Fed Eyes Nationalization Of US Banks

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By Ambrose Evans-Pritchard

The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis.

The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers

The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers.

A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region’s economy to its knees.

It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options.

Scandinavia’s bank rescue proved successful and is now a model for central bankers, unlike Japan’s drawn-out response, where ailing banks were propped up in a half-public limbo for years.

While the responses varied in each Nordic country, there a was major effort to avoid the sort of "moral hazard" that has bedevilled efforts by the Fed and the Bank of England in trying to stabilise their banking systems.

Norway ensured that shareholders of insolvent lenders received nothing and the senior management was entirely purged. Two of the country’s top four banks - Christiania Bank and Fokus - were seized by force majeure.

"We were determined not to get caught in the game we’ve seen with Bear Stearns where shareholders make money out of the rescue," said one Norwegian adviser.

"The law was amended so that we could take 100pc control of any bank where its equity had fallen below zero. Shareholders were left with nothing. It was very controversial," he said.

Stefan Ingves, governor of Sweden’s Riksbank, said his country passed an act so it could seize banks where the capital adequacy ratio had fallen below 2pc. Efforts were also made to protect against "blackmail" by shareholders.

Mr Ingves said there were parallels with the US crisis, citing the use of off-balance sheet vehicles to speculate on property. All the Nordic banks were nursed back to health and refloated or merged.

The tough policies contrast with the Fed’s bail-out of Bear Stearns, where shareholders forced JP Morgan to increase its Fed-led rescue offer from $2 to $10 a share. Christopher Wood, chief strategist at brokers CLSA, says the Fed’s piecemeal approach has led to "appalling moral hazard".

"Shareholders have been able to lobby for a higher share price only because the Fed took over the credit risk on $30bn of the investment bank’s dubious paper. The whole affair also amounts to a colossal subsidy for JP Morgan," he said.

Subprime crisis hits governments

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THE SUBPRIME mortgage crisis that pushed homeowners into foreclosure and forced the Federal Reserve to bail out investment banker Bear Stearns has also sent state and local governments across the country scrambling to refinance municipal bonds before they are hit with exorbitant interest rates.
At the center of the storm are long-term variable-interest bonds known as "auction-rate securities." Unlike traditional fixed-rate bonds, the interest rates on these securities are reset every 7, 28 or 35 days through an auction process.

Historically, the rate paid has been less than on traditional bonds, making the national $160-billion auction-rate market a reliable source of cheap financing.

But that market has collapsed in the past two months, sending interest rates climbing. As a result, California, Richmond, the Bay Area Toll Authority, the East Bay Municipal Utility District and Sacramento County are among countless government agencies forced to restructure their bond debts.

For some agencies, the transition will be exceptionally painful if they can't move quickly. For many, the collapse of the auction-rate securities market cost millions of dollars more in interest payments. The public will feel the squeeze through tax increases down the line or less money for much-needed public services and facilities.

That's not to say that issuing auction-rate securities was a bad move by state and local governments. In fact, they have proven very beneficial to

taxpayers over many years. And the government agencies did nothing to cause the market collapse. But the days of cheap money are over for many local governments already strapped for dollars.
After refinancing, Richmond, for example, will be forced to pay about $5 million more during the next two years for interest on about $167 million in bonds issued to fund redevelopment projects and renovate the city center.

The state of California is about to refinance about $400 million in auction-rate securities because rising interest rates have cost taxpayers about $1.5 million extra in the past six weeks. For similar reasons, the state earlier this month refinanced about $500 million in securities that were originally issued to purchase electricity during the energy crisis.

The auction-rate market collapse stems in part from the travails of the insurance companies that promised investors they would cover the principal and interest on the bonds if the government agencies failed to pay. Those insurers are some of the same companies that guaranteed subprime mortgages. When the subprime market imploded, rating agencies downgraded the insurers. That had never happened before. The downgrade, in turn, spooked auction-rate bond buyers because their investments were no longer protected by top-rated insurers.

That sent interest levels on auction-rate securities rising. What had been a cheap alternative to traditional bonds turned into a more-expensive option. In many cases, the auctions "failed," meaning there weren't sufficient bidders to cover the outstanding bonds. Under the terms of the bonds, that triggered a rate increase, which in California could be as high as 15 percent. Elsewhere in the country, the rates can go even higher.

Of the $160 billion auction-rate securities market, there have been about $80 billion of failed auctions over the past month, according to James Goins, Richmond finance director. That city has not had a failed market. But, Goins told the City Council in a March 18 report, the market "has been devastated due to insurer downgrades and lack of liquidity to the point that this market may never come back."

At his urging, city leaders have decided to bail out of auction-rate securities. They expect to refinance their debt by May.

For smaller cities, California Communities, a joint powers authority based in Walnut Creek, is putting together a program to exchange auction-rate bonds for fixed-rate notes. The plan, says program manager James Hamill, is attracting cities, mostly from southern and central California. It will involve the refinancing of an estimated $500 million to $1 billion.

The program will allow cities to join a pool to convert their bonds to one-year obligations. After that time, they will have to restructure again. The bet is that the market will calm down in the meantime. Hamill doesn't expect the cities to return to auction-rate securities.

The Bay Area Toll Authority also has been hard hit by the auction-rate collapse. The agency issues bonds for bridge construction and uses toll revenues to pay them off. The agency has nearly $800 million in outstanding auction-rate securities that it plans to refinance by the end of May.

In the meantime, the authority is paying about $600,000 to $1 million extra interest each month because of the market collapse.

To be sure, some public agencies have emerged almost unscathed. Consider the case of the East Bay Municipal Utility District. The water and sewer agency had about $542 million in outstanding auction-rate bonds at the start of the year, on which it was paying about 3 percent annual interest.

When the market collapsed, the bond rates soared to 9 percent. That cost the district about $3 million in additional interest payments over about two months, according to Finance Director Gary Breaux.

But when the district refinanced its auction-rate debt, it opted for another type of variable rate financing -- one that did not require the agency to carry bond insurance. That was possible because of the district's strong bond rating.

The new bonds are only costing the district about 1.5 percent to 1.8 percent. If those rates stay low, the district might recoup its losses by the end of the year, Breaux says.

The agency benefited by moving fast. To cities and districts facing rapidly rising auction rates, Breaux says, "my advice would be to get out from under it as quickly as you can."

Katrina Victims May Have to Repay Money

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By John Moreno Gonzales

New Orleans - Imagine that your home was reduced to mold and wood framing by Hurricane Katrina. Desperate for money to rebuild, you engage in a frustrating bureaucratic process, and after months of living in a government-provided trailer tainted with formaldehyde you finally win a federal grant.

Then a collector calls with the staggering news that you have to pay back thousands of dollars.

Thousands of Katrina victims may be in that situation.

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in the rush to deliver aid to homeowners in need some people got too much. Now it wants to hire a separate company to collect millions in grant overpayments.

The contractor, ICF International of Fairfax, Va., revealed the extent of the overpayments when it issued a March 11 request for bids from companies willing to handle "approximately 1,000 to 5,000 cases that will necessitate collection effort."

The bid invitation said: "The average amount to be collected is estimated to be approximately $35,000, but in some cases may be as high as $100,000 to $150,000."

The biggest grant amount allowed by the Road Home program is $150,000, so ICF believes it paid some recipients the maximum when they should not have received a penny. If ICF's highest estimate of 5,000 collection cases - overpaid by an average of $35,000 - proves to be true, that means applicants will have to pay back a total of $175 million.

One-third of qualified applicants for Road Home help had yet to receive any rebuilding check as of this past week. The program, which has come to symbolize the lurching Katrina recovery effort, is financed by $11 billion in federal funds.

ICF spokeswoman Gentry Brann said in an e-mail Friday that the overpayments are the inevitable result of the Road Home grant being recalculated to account for insurance money and government aid given to Katrina victims.

Brann said there was a sense of urgency in paying Road Home applicants, and ICF and the state knew applicants would have to return some money.

"The choice was either to process grants immediately or wait until the March 2008 deadline (for submitting Road Home applications) before disbursing any funds," Brann said in her e-mail.

Brann pointed out that 5,000 collections cases would represent a 4-percent error rate for the Road Home that is "quite good for large federal programs."

Frank Silvestri, co-chair of the Citizen's Road Home Action Team, a group that formed out of frustrations with ICF, sees it far differently.

"They want people to pay for their incompetence and their mistakes. What they need to be is aggressive about finding the underpayments," he said. "People relied, to their detriment, on their (ICFs) expertise and rebuilt their houses and now they want to squeeze this money back out of them."

The prospect of Road Home grant collections comes less than two weeks after the Louisiana inspector general and the legislative auditor said they were investigating why former Gov. Kathleen Blanco paid ICF an extra $156 million in her waning days in office to administer the program. With the increase, ICF stands to earn $912 million to run Road Home, a contract that also sweetened its initial public stock offering, and helped it buy out four other companies. It now reaches into government contracting sectors that include national defense and the environment.

Paul Rainwater, executive director of the Louisiana Recovery Authority, the state body that asked for the Blanco-ICF investigations, acknowledged the collections could be painful for applicants, many of whom have used up their nest eggs to rebuild.

"The state must walk a fine line of treating homeowners who have been overpaid with fairness and compassion and ensuring that all federal funds are used for their intended purpose," said Rainwater, an appointee of new Gov. Bobby Jindal.

Upon receiving money from Road Home, grantees sign a batch of forms, including one that says they must refund any overpayments.

Melanie Ehrlich, co-chair of Citizen's Road Home Action Team, which has documented Road Home cases that appear littered with mistakes, said she had no confidence that ICF had correctly calculated overpayments. She charged that the company was more likely using collections as retribution against people who had appealed their award amounts in effort to get the aid they deserved.

"I think they are looking for ways to decrease awards and that's part of dissuading people," she said.

Brann said applicants are told an appeal could boost or diminish their award. She called Ehrlich's charge "a totally unfounded assertion."

Weaponizing the Pentagon's Cyborg Insects

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By Nick Turse

A Futuristic Nightmare That Just Might Come True

Biological weapons delivered by cyborg insects. It sounds like a nightmare scenario straight out of the wilder realms of science fiction, but it could be a reality, if a current Pentagon project comes to fruition.

Right now, researchers are already growing insects with electronics inside them. They’re creating cyborg moths and flying beetles that can be remotely controlled. One day, the U.S. military may field squadrons of winged insect/machine hybrids with on-board audio, video or chemical sensors. These cyborg insects could conduct surveillance and reconnaissance missions on distant battlefields, in far-off caves, or maybe even in cities closer to home, and transmit detailed data back to their handlers at U.S. military bases.

Today, many people fear U.S. government surveillance of email and cell phone communications. With this program, the Pentagon aims to exponentially increase the paranoia. Imagine a world in which any insect fluttering past your window may be a remote-controlled spy, packed with surveillance equipment. Even more frightening is the prospect that such creatures could be weaponized, and the possibility, according to one scientist intimately familiar with the project, that these cyborg insects might be armed with "bio weapons."

For the past 50 years, work by the Defense Advanced Research Projects Agency (DARPA) -- the Pentagon’s blue skies research outfit -- has led to some of the most lethal weaponry in the U.S. arsenal: from Hellfire-missile-equipped Predator drones and stealth fighters and bombers to Tomahawk cruise missiles and Javelin portable "fire and forget" guided missiles. For the last several years, DARPA has funneled significant sums of money into a very different kind of guided missile project, its Hybrid Insect MEMS (HI-MEMS) program. This project is, according to DARPA, "aimed at developing tightly coupled machine-insect interfaces by placing micro-mechanical systems [MEMS] inside the insects during the early stages of metamorphosis." Put simply, the creation of cyborg insects: part bug, part bot.

Bugs, Bots, Borgs and Bio-Weapons

This past August, at DARPA’s annual symposium -- DARPATech -- HI-MEMS program manager Amit Lal, an associate professor on leave from Cornell University, explained that his project aims to transform "insects into unmanned air-vehicles." He described the research this way: "[T]he HI-MEMS program seeks to grow MEMS and electronics inside the insect pupae. The new tissue forms around the insertions, making the bio-electronic interface long-lasting and reliable." In other words, micro-electronics are inserted at the pupal stage of metamorphosis so that they can be integrated into the insects’ bodies as they develop, creating living robots that can be remotely controlled after the insect emerges from its cocoon.

According to the latest reports, work on this project is progressing at a rapid pace. In a recent phone interview, DARPA spokesperson Jan Walker said, "We’re focused on determining what the best kinds of MEMS systems are; what the best MEMS system would be for embedding; what the best time is for embedding."

This month, Rob Coppinger, writing for the aerospace trade publication Flight International, reported on new advances announced at the "1st US-Asian Assessment and Demonstration of Micro-Aerial and Unmanned Ground Vehicle Technology" -- a Pentagon-sponsored conference. "In the latest work," he noted, "a Manduca moth had its thorax truncated to reduce its mass and had a MEMS component added where abdominal segments would have been, during the larval stage." But, as he pointed out, Robert Michelson, a principal research engineer, emeritus at the Georgia Tech Research Institute, laid out "on behalf of DARPA" some of the obstacles that remain. Among them were short insect life-spans and the current inability to create these cyborgs outside specialized labs.

DARPA’s professed long-term goal for the HI-MEMS program is the creation of "insect cyborgs" capable of carrying "one or more sensors, such as a microphone or a gas sensor, to relay back information gathered from the target destination" -- in other words, the creation of military micro-surveillance systems.

In a recent email interview, Michelson -- who has previously worked on numerous military projects, including DARPA’s "effort to develop an ‘Entomopter’ (mechanical insect-like multimode aerial robot)" -- described the types of sensor packages envisioned, but only in a minimalist fashion, as a "[w]ide array of active and passive devices." However in "Insect Cyborgs: A New Frontier in Flight Control Systems," a 2007 article in the academic journal Proceedings of SPIE, Cornell researchers noted that cyborg insects could be used as "autonomous surveillance and reconnaissance vehicles" with on-board "[s]ensory systems such as video and chemical."

Surveillance applications, however, may only be the beginning. Last year, Jonathan Richards, reporting for The Times, raised the specter of the weaponization of cyborg insects in the not-too-distant future. As he pointed out, Rodney Brooks, the director of the computer science and artificial intelligence lab at Massachusetts Institute of Technology, indicated that the Pentagon is striving toward a major expansion in the use of non-traditional air power -- like unmanned aerial vehicles and cyborg insects -- in the years ahead. "There’s no doubt their things will become weaponized," he explained, "so the question [is]: should they [be] given targeting authority?" Brooks went on to assert, according to The Times, that it might be time to consider rewriting international law to take the future weaponization of such "devices" into account.

But how would one weaponize a cyborg insect? On this subject, Robert Michelson was blunt: "Bio weapons."

Cyborg Ethics

Michelson wouldn’t elaborate further, but any program using bio-weapons would immediately raise major legal and ethical questions. The 1972 Biological and Toxin Weapons Convention outlawed the manufacture and possession of bio-weapons, of "[m]icrobial or other biological agents, or toxins whatever their origin… that have no justification for prophylactic, protective or other peaceful purposes" and of "[w]eapons, equipment or means of delivery designed to use such agents or toxins for hostile purposes or in armed conflict." In fact, not only did President George W. Bush claim that Iraq’s supposed production and possession of biological weapons was a justification for an invasion of that nation, but he had previously stated, "All civilized nations reject as intolerable the use of disease and biological weapons as instruments of war and terror."

Reached for comment, however, DARPA’s Jan Walker insisted that her agency’s focus was only on "fundamental research" when it came to cyborg insects. Although the focus of her agency is, in fact, distinctly on the future -- the technology of tomorrow -- she refused to look down the road when it came to weaponizing insect cyborgs or arming them with bio-weapons. "I can’t speculate on the future," was all she would say.

Michelson is perfectly willing to look into future, especially on matters of cyborg insect surveillance, but on the horizon for him are technical issues when it comes to the military use of bug bots. "Surveillance goes on anyway by other means," he explained, "so a new method is not the issue. If there are ethical or legal issues, they are ones of ’surveillance,’ not of the ’surveillance platform.’"

Peter Eckersley, a staff technologist for the Electronic Frontier Foundation, a digital rights and civil liberties group, sees that same future in a different light. Cyborg insects, he says, are an order of magnitude away from today’s more standard surveillance technologies like closed circuit television. "CCTV is mostly deployed in public and in privately owned public spaces. An insect could easily fly into your garden or sit outside your bedroom window," he explained. "To make matters worse, you’d have no idea these devices were there. A CCTV camera is usually an easily recognizable device. Robotic surveillance insects might be harder to spot. And having to spot them wouldn’t necessarily be good for our mental health."

Does Michelson see any ethical or legal dilemmas resulting from the future use of weaponized cyborg insects? "No, not unless they could breed new cyborg insects, which is not possible," he explained. "Genetic engineering will be the ethical and legal battleground, not cybernetics."

Battle Beetles and Hawkish Hawkmoths

Weaponized or not, moths are hardly the only cyborg insects that may fly, creep, or crawl into the military’s future arsenal. Scientists from Arizona State University and elsewhere, working under a grant from the Office of Naval Research and DARPA, "are rearing beetle species at various oxygen levels to attempt to produce beetles with greater-than-normal size and payload capacity." Earlier this year, some of the same scientists published an article on their DARPA-funded research titled "A Cyborg Beetle: Insect Flight Control Through an Implantable, Tetherless Microsystem." They explained that, by implanting "multiple inserted neural and muscular stimulators, a visual stimulator, a polyimide assembly and a microcontroller" in a 2 centimeter long, 1-2 gram green June beetle, they were "capable of modulating [the insect’s] flight starts, stops, throttle/lift, and turning." They could, that is, drive an actual beetle. However, unlike the June bug you might find on a porch screen or in a garden, these sported on-board electronics powered by cochlear implant batteries.

DARPA-funded HI-MEMS research has also been undertaken at other institutions across the country and around the world. For example, in 2006, researchers at Cornell, in conjunction with scientists at Pennsylvania State University and the Universidad de Valparaiso, Chile, received an $8.4 million DARPA grant for work on "Insect Cyborg Sentinels." According to a recent article in New Scientist, a team led by one of the primary investigators on that grant, David Stern, screened a series of video clips at a recent conference in Tucson, Arizona demonstrating their ability to control tethered tobacco hawkmoths through "flexible plastic probes" implanted during the pupae stage. Simply stated, the researchers were able to remotely control the moths-on-a-leash, manipulating the cyborg creatures’ wing speed and direction.


Cyborg insects are only the latest additions to the U.S. military’s menagerie. As defense tech-expert Noah Shachtman of Wired magazine’s Danger Room blog has reported, DARPA projects have equipped rats with electronic equipment and remotely controlled sharks, while the military has utilized all sorts of animals, from bomb-detecting honeybees and "chickens used as early-warning sensors for chemical attacks" to guard dogs and dolphins trained to hunt mines. Additionally, he notes, the DoD’s emphasis on the natural world has led to robots that resemble dogs, monkeys that control robotic limbs with their minds, and numerous other projects inspired by nature.

But whatever other creatures they favor, insects never seem far from the Pentagon’s dreams of the future. In fact, Shachtman reported earlier this year that "Air Force scientists are looking for robotic bombs that look -- and act -- like swarms of bugs and birds." He went on to quote Colonel Kirk Kloeppel, head of the Air Force Research Laboratory’s munitions directorate, who announced the Lab’s interest in "bio-inspired munitions," in "small, autonomous" machines that would "provide close-in [surveillance] information, in addition to killing intended targets."

This month, researcher Robert Wood wrote in IEEE Spectrum about what he believes was "the first flight of an insect-size robot." After almost a decade of research, Wood and his colleagues at the Harvard Microrobotics Laboratory are now creating small insect-like robots that will eventually be outfitted "with onboard sensors, flight controls, and batteries… to nimbly flit around obstacles and into places beyond human reach." Like cyborg insect researchers, Wood is DARPA-funded. Last year, in fact, the agency selected him as one of 24 "rising stars" for a "young faculty awards" grant.

Asked about the relative advantages of cyborg insects compared to mechanical bugs, Robert Michelson noted that "robotic insects obey without innate or external influences" and "they can be mass produced rapidly." He cautioned, however, that they are extremely limited power-wise. Insect cyborgs, on the other hand, "can harvest energy and continue missions of longer duration." However, they "may be diverted from their task by stronger influences"; must be grown to maturity and so may not be available when needed; and, of course, are mortal and run the risk of dying before they can be employed as needed.

The Future is Now

There is plenty of technical information about the HI-MEMS program available in the scientific literature. And if you make inquiries, DARPA will even direct you to some of the relevant citations. But while it’s relatively easy to learn about the optimal spots to insert a neural stimulator in a green June beetle ("behind the eye, in the flight control area of the insect brain") or an electronic implant in a tobacco hawkmoth ("the main flight powering muscles… in the dorsal-thorax"), it’s much harder to discover the likely future implications of this sci-fi sounding research.

The "final demonstration goal" -- the immediate aim -- of DARPA’s HI-MEMS program "is the delivery of an insect within five meters of a specific target located at hundred meters away, using electronic remote control, and/or global positioning system (GPS)." Right now, DARPA doesn’t know when that might happen. "We basically operate phase to phase," says Walker. "So, it kind of depends on how they do in the current phase and we’ll make decisions on future phases."

DARPA refuses to examine anything but research-oriented issues. As a result, its Pentagon-funded scientists churn out inventions with potentially dangerous, if not deadly, implications without ever fully considering -- let alone seeking public or expert comment on -- the future ramifications of new technologies under production.

"The people who build this equipment are always going to say that they’re just building tools, that there are legitimate uses for them, and that it isn’t their fault if the tools are abused," says the Electronic Frontier Foundation’s Eckersley. "Unfortunately, we’ve seen that governments are more than willing to play fast-and-loose with the legal bounds on surveillance. Unless and until that changes, we’d urge researchers to find other projects to work on."