Go to Original
By Dana Milbank
As the chief executive of Bear Stearns, he's getting rather more public assistance than your typical welfare mom - specifically, $30 billion in federal loan guarantees to help J.P. Morgan Chase take over his firm. But then, Schwartz has had rather more than his share of suffering of late.
As his firm collapsed, he was forced to forgo his entire 2007 bonus, leaving his compensation for the past five years at a paltry $141 million, according to Business Week. Things have become so bad that, the Wall Street Journal discovered, Schwartz has had to rent out his 7,850-square-foot home on the ninth green of a suburban New York golf course - leaving the poor fellow with only his 17-room, seven-acre home in Greenwich, his condo in Colorado and the athletic center he built for Duke University.
Schwartz's tale of woe tugs at the heartstrings all the more because he and his colleagues at Bear Stearns were, he believes, blameless for the bankruptcy of two hedge funds and the subsequent collapse of the 85-year-old investment bank. "I am saddened," Schwartz told the Senate banking committee yesterday. He was saddened that Bear Stearns was undone by "unfounded rumors and attendant speculation," despite its impeccable balance sheet.
"Due to the stressed condition of the credit market as a whole and the unprecedented speed at which rumors and speculation travel and echo through the modern financial media environment, the rumors and speculation became a self-fulfilling prophecy," Schwartz told the senators. "There was, simply put, a run on the bank."
Sen. Richard Shelby (R-Ala.) asked the corporate-welfare recipient whether he shares any blame for his indigent circumstances. "Do you believe that your management team has any responsibility for the company's collapse?"
Schwartz could think of no missteps - not even his decision to remain at a conference at the Breakers in Palm Beach while his firm was imploding. "I just simply have not been able to come up with anything, even with the benefit of hindsight," said the blameless chief executive, escorted into the hearing room by superlawyer Robert Bennett.
Fortunately for Schwartz, he had a sympathetic audience in the banking committee, whose members have received more than $20 million in campaign contributions from the securities and investment industry, according to the Center for Responsive Politics. "I want the witnesses to know, and others, that as a bottom-line consideration, I happen to believe that this was the right decision," Chairman Chris Dodd (D-$5,796,000) said before hearing a single word of testimony.
"You made the right decision," Sen. Evan Bayh (D-$1,582,000) told the regulators who worked out the loan guarantee.
"The actions had to be done," agreed Sen. Chuck Schumer (D-$6,162,000).
Only a minority of senators, particularly those with smaller pieces of the campaign-cash pie, dissented. "That is socialism!" railed Sen. Jim Bunning (R-$452,000). "And it must not happen again."
To the extent the lawmakers objected to the Bear Stearns bailout, they worried that the Fed's actions would create a "moral hazard" - an economic term of art - that, as Shelby put it, "encourages firms to take excessive risk based on the expectations that they will reap all the profits while the federal government stands ready to cover any losses if they fail."
Shelby's notion was a curiosity for the senators, who don't often spend a lot of time worrying about moral hazards. No fewer than five other senators invoked the phrase. "I think the moral hazard was minimized," Federal Reserve Chairman Ben Bernanke, one of the witnesses, reassured the senators.
No moral hazard, however, would interfere with the lawmakers' compassion for the beleaguered Schwartz and his fellow witness, J.P. Morgan Chase's Jamie Dimon, who had given a combined $260,000 in political contributions in recent years - a small part of the $1.7 million their co-workers contributed in this election cycle alone. That's a sizable handout - but a good investment compared with the $30 billion federal hand-up.
"On behalf of all of us here on this dais, our sympathies go out to your employees," Dodd told Schwartz after his opening statement. "There's no adequate way we can express our sorrow to them for what happened. Obviously, shareholders, same sort of feelings, but obviously the employees particularly. It's a particularly hard blow."
Of course, some might consider $30 billion an adequate expression of sympathy, but Dodd was apologetic as he gently probed Schwartz. "You both will have forgotten more in the next 10 minutes than I'll ever probably understand about all of this," he told the witnesses, but didn't the irregular trading at Bear Stearns mean than "more than just rumors" were behind Bear Stearns's demise?
"You could never get facts out as fast as the rumors," Schwartz explained. "It looked like there were people that wanted to induce panic."
Sen. Bob Menendez (D-N.J.) reminded Schwartz that two of the firm's funds went bankrupt in 2007. "It caused concern, not only here but on Wall Street," the senator said. "Did that dramatically alter your behavior?"
Evidently not. "I'm not sure I understand the question," Schwartz answered.
Friday, April 4, 2008
(The Late) M.L. King Still Silenced
Go to Original
By Jeff Cohen
By Jeff Cohen
Soon after Martin Luther King Jr.’s birthday became a federal holiday in 1986, I began prodding mainstream media to cover the dramatic story of King’s last year as he campaigned militantly against U.S. foreign and economic policy.
Most of his last speeches were recorded. But year after year, corporate networks have refused to air the tapes.
Last night, NBC Nightly News anchor Brian Williams enthused over new color footage of King that adorned its coverage of the 40th anniversary of the assassination. The report focused on the last phase of King’s life. But the same old blinders were in place.
NBC showed young working-class whites in Chicago taunting King. But there was no mention of how elite media had taunted King in his last year. In 1967 and ‘68, mainstream media saw Rev. King a bit like they now see Rev. Jeremiah Wright.
Back then they denounced King’s critical comments; today they simply silence them.
While noting in passing that King spoke out against the Vietnam War, mainstream reports today rarely acknowledge that he went way beyond Vietnam to decry U.S. militarism in general.
“I could never again raise my voice against the violence of the oppressed in the ghettos,” said King in 1967 speeches on foreign policy, “without having first spoken clearly to the greatest purveyor of violence in the world today – my own government."
In response to these speeches, Newsweek said King was “over his head” and wanted a “race-conscious minority” to dictate U.S. foreign policy.
Life magazine described the Nobel Peace Prize winner as a communist pawn who advocated “abject surrender in Vietnam.”
The Washington Post couldn’t have been more patronizing: "King has diminished his usefulness to his cause, to his country, and to his people."
When King’s moral voice moved beyond racial discrimination to international issues, the New York Times attacked his efforts to link the civil rights and antiwar movements.
King’s sermons on Vietnam could get as angry as those of Barack Obama’s ex-pastor: “God didn’t call America to engage in a senseless, unjust war,” King declared. “We’ve committed more war crimes almost than any nation in the world.”
Economic Criticism
In 1967, King also was criticizing the economic underpinnings of U.S. foreign policy, railing against “capitalists of the West investing huge sums of money in Asia, Africa and South America, only to take the profits out with no concern for the social betterment of the countries."
Today, capitalists of the West reap huge profits from their domination of global media.
Thankfully, we now have the Internet and independent media outlets where King’s later speeches are available for the ages.
If King had survived to hear the war drums beating for the invasion and occupation of Iraq – amplified by TV networks and the New York Times front page and the Washington Post’s editorial page – there’s little doubt where he’d stand.
Or how loudly he’d be speaking out.
And there’s little doubt how big U.S. media would have reacted. On Fox News and talk radio, King would have been Dixie Chicked. . .or Rev. Wrighted. In corporate centrist outlets, he’d have been marginalized faster than you can say Noam Chomsky.
One suspects King would be marveling at the rise of Barack Obama and the multiracial movement behind him. But would he be happy with Obama and other Democratic leaders who heap boundless billions onto the biggest military budget in world history?
In 1967, King denounced a Democratic-controlled Congress for fattening the Pentagon budget while cutting anti-poverty programs, declaring: “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.”
It's Not the Dream; It's Our Nightmare
Go to Original
By Dr. Wilmer J. Leon III
On April 4, America commemorates the assassination of the Rev. Dr. Martin Luther King Jr. We will hear those powerful words "I Have a Dream ..." What many of us don't realize is Dr. King was no dreamer. He was a visionary, not some abstract thinker or philosopher. He was a prophet and a true revolutionary.
The best way to pay tribute to Dr. King and his total sacrifice is to understand what he stood for. Start by reading two speeches. First, read "I Have a Dream." Second, read "Beyond Vietnam: A Time to Break Silence." Don't allow others to selectively define Dr. King for you. Read these two speeches for yourself.
The original title of the "I Have a Dream" speech was "Normalcy - Never Again." Dr. King the realist states, "... we must face the tragic fact that the Negro is still languishing in the corners of American society and finds himself an exile in his own land. So we have come here today to dramatize an appalling condition." That was no dream; that was our reality and a clear indictment of the social conditions in America at that time.
Dr. King the strict constructionist referred to the Constitution and the Declaration of Independence as a promissory note to which every American was to fall heir. He stated, "It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned ... Instead of honoring this sacred obligation, America has given the Negro people a bad check - a check which has come back marked insufficient funds." Again, a clear indictment of America!
Dr. King the prophet said, "There will be neither rest nor tranquility in America until the Negro is granted his citizenship rights. The whirlwinds of revolt will continue to shake the foundation of our nation until the bright day of justice emerges." These are the words of a true revolutionary not a dreamer!
He continued, "We cannot be satisfied as long as a Negro in Mississippi cannot vote and a Negro in New York believes he has nothing for which to vote." That was the reality then and based upon the events in Florida in the 2000 presidential election, Ohio in 2004, and the disenfranchisement of voters in the Democratic primaries in Florida and Michigan, this continues to be our reality today.
The "dream" reference actually comes toward the end of the speech. As the story goes (and this may be lore), Dr. King was close to ending his nine-minute delivery when the great gospel singer, Ms. Mahalia Jackson, who was seated behind him, said, "Tell them about your dream, Martin! Tell them about the dream!" At that point, Dr. King went away from his prepared text. He spoke of the dream in the context of a horrific reality for "Negro's" and the poor. What makes the "dream" significant is its juxtaposition against America's reality, failures and oppression of its own citizens.
Dr. King was correct then and proves to be prophetic today. I'll take some license here ... We must face the tragic fact that, based on the unemployment rate for African-Americans, the racial make up of the majority of those incarcerated in America and the horrific failure of the government's response in Hurricane Katrina "... the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity ... the Negro is still languished in the corners of American society and finds himself an exile in his own land."
It's not the "dream"; it's that vision in the context of a horrific reality!
On April 4, 1967, Dr. King delivered "Beyond Vietnam: A time to Break Silence." If you replace Vietnam with Iraq, Dr. King the prophet and visionary is as relevant today as he was in 1967.
A few lines of the revised speech would read as follows: There is a very obvious and almost facile connection between the "War on Terror," the illegal invasion of Iraq and the struggle I, and others, have been waging in America. It once seemed as if there were a real promise of hope for the poor through the Peace Dividend from the Clinton administration. Then came the buildup in Iraq, this so-called "War on Terror," and I watched the dividend squandered and eviscerated as if it were some idle political plaything of a society gone mad on war, and I knew America would never invest the necessary funds and energies in rehabilitation of its poor so long as adventures like Iraq continued to draw men and skills and money like some demonic destructive suction tube.
Five years ago, as America was preparing to go to war in Iraq, White House economic adviser Lawrence Lindsay estimated the war would cost between $100 billion and $200 billion. Deputy Defense Secretary Paul Wolfowitz claimed Iraq could "really finance its own reconstruction." Lindsey went on to say, "The successful prosecution of the war would be good for the economy." Lindsay was removed, and the White House "re-estimated" the cost at between $50 billion to $60 billion. The estimated budget authority is now over $500 billion.
Dr. King would continue: Now, it should be incandescently clear no one who has any concern for the integrity and life of America today can ignore the present war. If America's soul becomes totally poisoned, part of the autopsy must read Iraq. It can never be saved so long as it destroys the deepest hopes of men the world over.
So, as President Bush and Vice President Cheney continue to fool the nation and misrepresent the truth in a feeble attempt to "unite our country," around this "surge," the "new direction" and the "way forward" in Iraq, remember, those who fail to heed the lessons of history are doomed to repeat them. Dr. King and his lessons are as relevant today as in 1967.
Again, if America's soul becomes totally poisoned, part of the autopsy must read Iraq. It can never be saved so long as it destroys the deepest hopes of men the world over.
Don't take the "dream" out of context. Dr. King was talking about our nightmare!
By Dr. Wilmer J. Leon III
On April 4, America commemorates the assassination of the Rev. Dr. Martin Luther King Jr. We will hear those powerful words "I Have a Dream ..." What many of us don't realize is Dr. King was no dreamer. He was a visionary, not some abstract thinker or philosopher. He was a prophet and a true revolutionary.
The best way to pay tribute to Dr. King and his total sacrifice is to understand what he stood for. Start by reading two speeches. First, read "I Have a Dream." Second, read "Beyond Vietnam: A Time to Break Silence." Don't allow others to selectively define Dr. King for you. Read these two speeches for yourself.
The original title of the "I Have a Dream" speech was "Normalcy - Never Again." Dr. King the realist states, "... we must face the tragic fact that the Negro is still languishing in the corners of American society and finds himself an exile in his own land. So we have come here today to dramatize an appalling condition." That was no dream; that was our reality and a clear indictment of the social conditions in America at that time.
Dr. King the strict constructionist referred to the Constitution and the Declaration of Independence as a promissory note to which every American was to fall heir. He stated, "It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned ... Instead of honoring this sacred obligation, America has given the Negro people a bad check - a check which has come back marked insufficient funds." Again, a clear indictment of America!
Dr. King the prophet said, "There will be neither rest nor tranquility in America until the Negro is granted his citizenship rights. The whirlwinds of revolt will continue to shake the foundation of our nation until the bright day of justice emerges." These are the words of a true revolutionary not a dreamer!
He continued, "We cannot be satisfied as long as a Negro in Mississippi cannot vote and a Negro in New York believes he has nothing for which to vote." That was the reality then and based upon the events in Florida in the 2000 presidential election, Ohio in 2004, and the disenfranchisement of voters in the Democratic primaries in Florida and Michigan, this continues to be our reality today.
The "dream" reference actually comes toward the end of the speech. As the story goes (and this may be lore), Dr. King was close to ending his nine-minute delivery when the great gospel singer, Ms. Mahalia Jackson, who was seated behind him, said, "Tell them about your dream, Martin! Tell them about the dream!" At that point, Dr. King went away from his prepared text. He spoke of the dream in the context of a horrific reality for "Negro's" and the poor. What makes the "dream" significant is its juxtaposition against America's reality, failures and oppression of its own citizens.
Dr. King was correct then and proves to be prophetic today. I'll take some license here ... We must face the tragic fact that, based on the unemployment rate for African-Americans, the racial make up of the majority of those incarcerated in America and the horrific failure of the government's response in Hurricane Katrina "... the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity ... the Negro is still languished in the corners of American society and finds himself an exile in his own land."
It's not the "dream"; it's that vision in the context of a horrific reality!
On April 4, 1967, Dr. King delivered "Beyond Vietnam: A time to Break Silence." If you replace Vietnam with Iraq, Dr. King the prophet and visionary is as relevant today as he was in 1967.
A few lines of the revised speech would read as follows: There is a very obvious and almost facile connection between the "War on Terror," the illegal invasion of Iraq and the struggle I, and others, have been waging in America. It once seemed as if there were a real promise of hope for the poor through the Peace Dividend from the Clinton administration. Then came the buildup in Iraq, this so-called "War on Terror," and I watched the dividend squandered and eviscerated as if it were some idle political plaything of a society gone mad on war, and I knew America would never invest the necessary funds and energies in rehabilitation of its poor so long as adventures like Iraq continued to draw men and skills and money like some demonic destructive suction tube.
Five years ago, as America was preparing to go to war in Iraq, White House economic adviser Lawrence Lindsay estimated the war would cost between $100 billion and $200 billion. Deputy Defense Secretary Paul Wolfowitz claimed Iraq could "really finance its own reconstruction." Lindsey went on to say, "The successful prosecution of the war would be good for the economy." Lindsay was removed, and the White House "re-estimated" the cost at between $50 billion to $60 billion. The estimated budget authority is now over $500 billion.
Dr. King would continue: Now, it should be incandescently clear no one who has any concern for the integrity and life of America today can ignore the present war. If America's soul becomes totally poisoned, part of the autopsy must read Iraq. It can never be saved so long as it destroys the deepest hopes of men the world over.
So, as President Bush and Vice President Cheney continue to fool the nation and misrepresent the truth in a feeble attempt to "unite our country," around this "surge," the "new direction" and the "way forward" in Iraq, remember, those who fail to heed the lessons of history are doomed to repeat them. Dr. King and his lessons are as relevant today as in 1967.
Again, if America's soul becomes totally poisoned, part of the autopsy must read Iraq. It can never be saved so long as it destroys the deepest hopes of men the world over.
Don't take the "dream" out of context. Dr. King was talking about our nightmare!
US financial system faced collapse, bank regulators tell Senate hearing on Bear Stearns bailout
Go to Original
By Barry Grey
At a hearing of the Senate Banking Committee on Thursday, top financial regulators said the unprecedented actions by the Federal Reserve Board last month to prevent the failure of investment bank Bear Stearns were taken to avert a collapse of the entire US financial system.
Federal Reserve Board Chairman Ben Bernanke, New York Federal Reserve Bank President Timothy Geithner, Securities and Exchange Commission (SEC) Chairman Christopher Cox and Under Secretary for Domestic Finance Robert K. Steel defended the government bailout of Bear Stearns and the decision to lend Federal Reserve funds to all of the major US investment banks as emergency measures necessitated by a mounting panic on Wall Street that reached a crescendo in the days preceding the government-engineered takeover of Bear Stearns by JPMorgan Chase.
While the regulators had a vested interest in justifying the allocation of tens of billions of taxpayer dollars to prop up giant Wall Street firms by portraying the immediate crisis they confronted in dire terms, there is no doubt that the disaster scenario over the weekend of March 14-17 which they described was very real. The very fact of their admission of a financial emergency of historic proportions is an extraordinary testament to the profound and systemic nature of an economic crisis that only a few weeks ago President George W. Bush called a “rough patch.”
What none of the officials, and none of the senators on the Banking Committee, broached was what the development of such a potentially catastrophic crisis says about the nature and condition of American capitalism and the responsibility of the CEOs on Wall Street who justify their multi-million-dollar salaries by their supposedly irreplaceable expertise.
Far from the crisis having been resolved by the rescue of Bear Stearns and the associated steps taken by the Fed, when asked by the ranking Republican on the committee, Richard Shelby of Alabama, what were the chances that another emergency bailout would occur, Under Secretary Steel said that he “couldn’t say there will not be another problem.”
The deprecatory demeanor of the senators, led by the senior Democrats on the committee, left no doubt as to who wields the real power in the United States. Sitting across from officials who have overseen and facilitated financial abuses, speculation and gambling with borrowed money on an unprecedented scale, resulting in a social catastrophe for millions of American families, most of the senators went out of their way to commend the assembled regulators and demonstrate their deference to the financial elite.
Democratic Senator Christopher Dodd of Connecticut, the chairman of the committee, reiterated several times in his opening remarks that the bailout of Bear Stearns and the financial markets was “the right decision.” He effusively thanked Bernanke and the other officials for their “patience” in putting up with questions from Congress.
His only criticism was that the Fed should have opened the spigot of cash from its discount window to Wall Street investment banks sooner.
Charles Schumer, Democrat of New York, said, “Everyone agrees that the Fed had no choice and it had to be done.” Tom Carper, Democrat of Delaware, said that “at the end of the day, what the Fed did passes muster.” Evan Bayh of Indiana declared, “You made the right decision.” Jack Reed, Democrat of Rhode Island, said, “Thank you for steering us through a crisis that could have had catastrophic consequences.”
The only discordant note was struck by Jim Bunning of Kentucky, a right-wing Republican, who denounced the bailout of Bear Stearns as an affront to the free market and a form of “socialism.”
Fed Chairman Bernanke opened the testimony with a grim picture of the current financial situation. “Although the situation has recently improved somewhat,” he said, “financial markets remain under considerable stress. Pressures in short-term funding markets, which had abated somewhat beginning late last year, have increased once again.
“Many lenders have been reluctant to provide credit to counterparties, especially leveraged investors, and increased the amount of collateral they required to back short-term security financing agreements. To meet those demands, investors have reduced their leverage and liquidated holdings of securities, putting further downward pressure on security prices.
“Credit availability has also been restricted because some large financial institutions, including some commercial and investment banks and the government-sponsored enterprises, have reported substantial losses and write-downs, reducing their capital available to support increased lending. Some key securitization markets, including those for nonconforming mortgages, continued to function poorly, if at all.”
He outlined the massive injection of funds into the financial markets and steep cuts in interest rates carried out by the Fed in an attempt to counter the housing and credit market crises. This, he said, was the context in which the Fed was advised by Bear Stearns on March 13 that it would have to file for bankruptcy the next day unless the government intervened.
The prospect of a collapse of Bear Stearns, he continued, raised issues that “extended well beyond the fate of one company.” He then outlined its likely impact: “The sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The company’s failure could also have cast doubt on the financial positions of some of Bear Stearns’ thousands of counterparties and perhaps of companies with similar businesses.
“Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.”
In the question-and-answer period, Bernanke objected to characterizations of the Fed’s action as a bailout of Bear Stearns, saying that the firm’s shareholders had suffered massive losses. The issue, he insisted, was the broader threat to the financial system. Saying he was concerned about “other institutions and markets,” he added, “If you want to say we bailed out markets in general, I guess that’s true.”
In response to a question as to how the failure of a single investment bank could bring down the entire financial system, Bernanke said the crisis was the outcome of a “credit boom” which saw a massive growth of debt, “excess risk-taking” and a “deterioration in underwriting standards.”
None of the senators suggested that the heads of major Wall Street firms should be held accountable for, in effect, using the banking system as a giant casino.
The same theme of impending catastrophe was sounded by the other witnesses. SEC Chairman Cox said, “In the cauldron of these events, the actions that the Federal Reserve took—in particular, extending access to the discount window not only the Bear Stearns, but also to the major investment banks—were addressed to preventing future occurrences of the run-on-the-bank phenomenon that Bear endured.”
He noted that the crisis of confidence in financial markets had reached such an extreme point that by March 13, Bear Stearns was unable to borrow against “high-quality collateral,” calling this “an unprecedented occurrence.”
New York Federal Reserve Bank President Geithner outlined in some detail the round-the-clock meetings and negotiations involving the Fed, the Treasury Department, the SEC, Bear Stearns and JPMorgan Chase that occurred during the 96 hours between Bear Stearns’ warning that it was about to declare bankruptcy and the announcement late on March 16 of the investment bank’s takeover by JPMorgan Chase.
He made clear that federal regulators believed they had to reach an agreement before Asian markets opened Sunday night, US time, in order to avoid a full-scale panic. No less significant was his revelation that regulators feared, even after the Bear Stearns takeover had been announced, that other investment banks might fail when markets opened Monday morning. That, according to Geithner, prompted the Fed to announce that it was opening up its discount window to all major investment banks—something that had not occurred since the Great Depression.
He then gave a decidedly somber prognosis for the future. “By reducing the probability of a systemic financial crisis,” he said, “the actions taken by the Fed on and after March 14 have helped avert substantial damage to the economy, and they have brought a measure of tentative calm to global financial markets... Nevertheless, liquidity conditions in markets are still substantially impaired and the process of de-leveraging remains underway. And this will amplify the headwinds facing the US and global economy.”
By Barry Grey
At a hearing of the Senate Banking Committee on Thursday, top financial regulators said the unprecedented actions by the Federal Reserve Board last month to prevent the failure of investment bank Bear Stearns were taken to avert a collapse of the entire US financial system.
Federal Reserve Board Chairman Ben Bernanke, New York Federal Reserve Bank President Timothy Geithner, Securities and Exchange Commission (SEC) Chairman Christopher Cox and Under Secretary for Domestic Finance Robert K. Steel defended the government bailout of Bear Stearns and the decision to lend Federal Reserve funds to all of the major US investment banks as emergency measures necessitated by a mounting panic on Wall Street that reached a crescendo in the days preceding the government-engineered takeover of Bear Stearns by JPMorgan Chase.
While the regulators had a vested interest in justifying the allocation of tens of billions of taxpayer dollars to prop up giant Wall Street firms by portraying the immediate crisis they confronted in dire terms, there is no doubt that the disaster scenario over the weekend of March 14-17 which they described was very real. The very fact of their admission of a financial emergency of historic proportions is an extraordinary testament to the profound and systemic nature of an economic crisis that only a few weeks ago President George W. Bush called a “rough patch.”
What none of the officials, and none of the senators on the Banking Committee, broached was what the development of such a potentially catastrophic crisis says about the nature and condition of American capitalism and the responsibility of the CEOs on Wall Street who justify their multi-million-dollar salaries by their supposedly irreplaceable expertise.
Far from the crisis having been resolved by the rescue of Bear Stearns and the associated steps taken by the Fed, when asked by the ranking Republican on the committee, Richard Shelby of Alabama, what were the chances that another emergency bailout would occur, Under Secretary Steel said that he “couldn’t say there will not be another problem.”
The deprecatory demeanor of the senators, led by the senior Democrats on the committee, left no doubt as to who wields the real power in the United States. Sitting across from officials who have overseen and facilitated financial abuses, speculation and gambling with borrowed money on an unprecedented scale, resulting in a social catastrophe for millions of American families, most of the senators went out of their way to commend the assembled regulators and demonstrate their deference to the financial elite.
Democratic Senator Christopher Dodd of Connecticut, the chairman of the committee, reiterated several times in his opening remarks that the bailout of Bear Stearns and the financial markets was “the right decision.” He effusively thanked Bernanke and the other officials for their “patience” in putting up with questions from Congress.
His only criticism was that the Fed should have opened the spigot of cash from its discount window to Wall Street investment banks sooner.
Charles Schumer, Democrat of New York, said, “Everyone agrees that the Fed had no choice and it had to be done.” Tom Carper, Democrat of Delaware, said that “at the end of the day, what the Fed did passes muster.” Evan Bayh of Indiana declared, “You made the right decision.” Jack Reed, Democrat of Rhode Island, said, “Thank you for steering us through a crisis that could have had catastrophic consequences.”
The only discordant note was struck by Jim Bunning of Kentucky, a right-wing Republican, who denounced the bailout of Bear Stearns as an affront to the free market and a form of “socialism.”
Fed Chairman Bernanke opened the testimony with a grim picture of the current financial situation. “Although the situation has recently improved somewhat,” he said, “financial markets remain under considerable stress. Pressures in short-term funding markets, which had abated somewhat beginning late last year, have increased once again.
“Many lenders have been reluctant to provide credit to counterparties, especially leveraged investors, and increased the amount of collateral they required to back short-term security financing agreements. To meet those demands, investors have reduced their leverage and liquidated holdings of securities, putting further downward pressure on security prices.
“Credit availability has also been restricted because some large financial institutions, including some commercial and investment banks and the government-sponsored enterprises, have reported substantial losses and write-downs, reducing their capital available to support increased lending. Some key securitization markets, including those for nonconforming mortgages, continued to function poorly, if at all.”
He outlined the massive injection of funds into the financial markets and steep cuts in interest rates carried out by the Fed in an attempt to counter the housing and credit market crises. This, he said, was the context in which the Fed was advised by Bear Stearns on March 13 that it would have to file for bankruptcy the next day unless the government intervened.
The prospect of a collapse of Bear Stearns, he continued, raised issues that “extended well beyond the fate of one company.” He then outlined its likely impact: “The sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The company’s failure could also have cast doubt on the financial positions of some of Bear Stearns’ thousands of counterparties and perhaps of companies with similar businesses.
“Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.”
In the question-and-answer period, Bernanke objected to characterizations of the Fed’s action as a bailout of Bear Stearns, saying that the firm’s shareholders had suffered massive losses. The issue, he insisted, was the broader threat to the financial system. Saying he was concerned about “other institutions and markets,” he added, “If you want to say we bailed out markets in general, I guess that’s true.”
In response to a question as to how the failure of a single investment bank could bring down the entire financial system, Bernanke said the crisis was the outcome of a “credit boom” which saw a massive growth of debt, “excess risk-taking” and a “deterioration in underwriting standards.”
None of the senators suggested that the heads of major Wall Street firms should be held accountable for, in effect, using the banking system as a giant casino.
The same theme of impending catastrophe was sounded by the other witnesses. SEC Chairman Cox said, “In the cauldron of these events, the actions that the Federal Reserve took—in particular, extending access to the discount window not only the Bear Stearns, but also to the major investment banks—were addressed to preventing future occurrences of the run-on-the-bank phenomenon that Bear endured.”
He noted that the crisis of confidence in financial markets had reached such an extreme point that by March 13, Bear Stearns was unable to borrow against “high-quality collateral,” calling this “an unprecedented occurrence.”
New York Federal Reserve Bank President Geithner outlined in some detail the round-the-clock meetings and negotiations involving the Fed, the Treasury Department, the SEC, Bear Stearns and JPMorgan Chase that occurred during the 96 hours between Bear Stearns’ warning that it was about to declare bankruptcy and the announcement late on March 16 of the investment bank’s takeover by JPMorgan Chase.
He made clear that federal regulators believed they had to reach an agreement before Asian markets opened Sunday night, US time, in order to avoid a full-scale panic. No less significant was his revelation that regulators feared, even after the Bear Stearns takeover had been announced, that other investment banks might fail when markets opened Monday morning. That, according to Geithner, prompted the Fed to announce that it was opening up its discount window to all major investment banks—something that had not occurred since the Great Depression.
He then gave a decidedly somber prognosis for the future. “By reducing the probability of a systemic financial crisis,” he said, “the actions taken by the Fed on and after March 14 have helped avert substantial damage to the economy, and they have brought a measure of tentative calm to global financial markets... Nevertheless, liquidity conditions in markets are still substantially impaired and the process of de-leveraging remains underway. And this will amplify the headwinds facing the US and global economy.”
Thursday, April 3, 2008
Federal Reserve staff move into offices of investment banks to monitor activities
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By Tom Bawden and Dearbail Jordan
The US Federal Reserve has sent staff into some of Wall Street’s biggest firms and its New York branch is gathering evidence on key traders’ activities as America’s central bank raises its scrutiny of risk to an unprecedented level.
Fed staff have set up shop in Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns to monitor their financial condition just days after Henry Paulson, the US Treasury Secretary, proposed that the Fed become the financial industry’s “risk czar”.
This is the first time in more than a decade that the Fed has put staff in securities firms and is a response, in part, to its decision to extend to investment banks the “discount window” of cheap loans traditionally offered only to the commercial banks. The Fed argues that if it is to act as lender of last resort to the securities firms, it should keep a closer eye on their activities.
The move comes as the central bank’s New York branch separately compiles a list of names and numbers of key traders in specific, esoteric securities such as auction rate preferred securities. These obscure instruments can be traded only at auctions and demand for them has virtually evaporated in recent weeks.
A senior US mutual fund executive, whom the Fed has approached, said: “They are looking in every corner to understand every esoteric financial product — who its traders are, who holds the most, whether its market is liquid and how great the losses could be. They are approaching people like me to find the key players in particular securities and then contacting them to find out the details. I have never heard of that being done before.”
The Fed will use the information to ascertain how effective the measures it has taken so far have been, where in the financial system the biggest dangers lie and how best to curb them. Its action includes a 3 percentage point cut in the base rate since last August and a reduction in its discount window lending rate.
The Fed declined to comment on its attempts to increase its market scrutiny. However, Timothy Geithner, its president, speaking to Congress yesterday, said: “[The banking industry's] most important risk is systemic: if this dynamic continues, unabated, the result would be greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole.” He cited “a self-reinforcing downward spiral” of asset sales, “higher volatility, and still lower prices”.
The market must stabilise to reduce the number of short-sellers seeking to push down the price of a company’s shares by spreading false rumours, analysts said yesterday. Shares in Lehman Brothers and Bear Stearns took a hammering last month after unfounded rumours surfaced that they faced a liquidity crisis.
The Financial Services Authority (FSA) is investigating unusual movement in HBOS shares. The watchdog is probing an unprecendented 20 per cent fall in the shares of the owner of the Halifax on the morning of 19 March amid speculation it was facing a Northern Rock style liquidity crisis. The Bank of England took the unusual step of publicly denying talk that it was cancelling staff holidays over Easter and convening emergency meetings to discuss a bank in crisis, describing the talk as “fantasy” while the FSA has been pledged new powers to help it to crack down on so-called market abuse.
Mr Paulson has made the management of risk a central part of his proposals to overhaul US financial regulations, many of which date back to the Great Depression. Banks have lost more than $232 billion worldwide so far as a result of the credit crunch and losses will continue to mount for some time.
By Tom Bawden and Dearbail Jordan
The US Federal Reserve has sent staff into some of Wall Street’s biggest firms and its New York branch is gathering evidence on key traders’ activities as America’s central bank raises its scrutiny of risk to an unprecedented level.
Fed staff have set up shop in Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns to monitor their financial condition just days after Henry Paulson, the US Treasury Secretary, proposed that the Fed become the financial industry’s “risk czar”.
This is the first time in more than a decade that the Fed has put staff in securities firms and is a response, in part, to its decision to extend to investment banks the “discount window” of cheap loans traditionally offered only to the commercial banks. The Fed argues that if it is to act as lender of last resort to the securities firms, it should keep a closer eye on their activities.
The move comes as the central bank’s New York branch separately compiles a list of names and numbers of key traders in specific, esoteric securities such as auction rate preferred securities. These obscure instruments can be traded only at auctions and demand for them has virtually evaporated in recent weeks.
A senior US mutual fund executive, whom the Fed has approached, said: “They are looking in every corner to understand every esoteric financial product — who its traders are, who holds the most, whether its market is liquid and how great the losses could be. They are approaching people like me to find the key players in particular securities and then contacting them to find out the details. I have never heard of that being done before.”
The Fed will use the information to ascertain how effective the measures it has taken so far have been, where in the financial system the biggest dangers lie and how best to curb them. Its action includes a 3 percentage point cut in the base rate since last August and a reduction in its discount window lending rate.
The Fed declined to comment on its attempts to increase its market scrutiny. However, Timothy Geithner, its president, speaking to Congress yesterday, said: “[The banking industry's] most important risk is systemic: if this dynamic continues, unabated, the result would be greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole.” He cited “a self-reinforcing downward spiral” of asset sales, “higher volatility, and still lower prices”.
The market must stabilise to reduce the number of short-sellers seeking to push down the price of a company’s shares by spreading false rumours, analysts said yesterday. Shares in Lehman Brothers and Bear Stearns took a hammering last month after unfounded rumours surfaced that they faced a liquidity crisis.
The Financial Services Authority (FSA) is investigating unusual movement in HBOS shares. The watchdog is probing an unprecendented 20 per cent fall in the shares of the owner of the Halifax on the morning of 19 March amid speculation it was facing a Northern Rock style liquidity crisis. The Bank of England took the unusual step of publicly denying talk that it was cancelling staff holidays over Easter and convening emergency meetings to discuss a bank in crisis, describing the talk as “fantasy” while the FSA has been pledged new powers to help it to crack down on so-called market abuse.
Mr Paulson has made the management of risk a central part of his proposals to overhaul US financial regulations, many of which date back to the Great Depression. Banks have lost more than $232 billion worldwide so far as a result of the credit crunch and losses will continue to mount for some time.
Legislature's Republicans play blame-the-illegal-immigrant
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By Steve Wiegand
Republican legislators trotted out the first parts of their anti-illegal immigration package of bills Tuesday, and things went about as well as could be expected.
Which is to say, not well at all.
In case you missed it, the Reeps have determined that illegal immigrants are to blame for most of the state's gaping budget deficit. (Democrats are to blame for the rest of it.)
To remedy this problem (the illegal problem, not the Democrat problem), GOP lawmakers put together what they call a "border security" package of "20 common-sense measures" they said "would help the state secure the border and better protect Californians."
Two of the "common-sense" measures went toe to toe with reality, in the form of the Assembly Public Safety Committee.
One of the bills was AB 1882, by Assemblyman Martin Garrick, R-Solana Beach.
What the bill would do is require cops who arrest a drunken driver, after an accident that involves an injury or does more than $600 worth of property damage, to determine whether the drunk is legally in the United States.
If the drunk couldn't prove to the cop's satisfaction his legal right to be on U.S. soil, the cop would be obligated to contact federal immigration officials about it.
Garrick asserted that his bill would "dramatically reduce the number of unnecessary DUI deaths and injuries in California." (I don't think he meant to imply that there are necessary DUI deaths and injuries.)
But he didn't produce any statistical data that show illegal-immigrant drunken drivers are any more of a problem than legal resident drunken drivers. And the idea of asking cops to determine citizenship status without resorting to racial profiling is a pretty tall order.
Plus, a committee analysis raised a host of constitutional questions about the state's limited role in enforcing federal immigration laws.
So Democrats on the committee killed the bill on a party-line vote, although they did extend Garrick the courtesy of having his bill reconsidered, which means he will have the opportunity to have it killed again at a later date.
They also killed, and granted reconsideration to, a bill by Assemblyman Van Tran, R-Garden Grove, that would require state prison officials to determine the immigration status of any new prisoner.
The apparent purpose of AB 2141 is to give the state a firm illegal immigrant inmate count so it can seek reimbursement from the feds for housing illegals.
But prison officials already count illegals, and the state already demands the feds pay up, and the feds already ignore the demands.
These two bills not only exemplify the likely fate of the rest of the GOP package, but what's wrong with it.
There are some questions related to illegal immigration and California on which legislators could and should spend some time and energy.
Should, for example, a person who comes to California illegally at the age of 2 or 3 be allowed to pay the same tuition rates at state colleges as the person who comes here legally at the age of, say, 16?
Are we better off giving illegals driver's licenses if they learn the driving laws, pass the tests and get insurance, or refusing to grant them licenses until they obtain legal residency?
Those kinds of issues strike me as legitimate areas for debate.
It seems like Reeps could accomplish more in this area if they focused more on real problems and less on trying to score political points with the faithful by demonizing illegal immigrants.
Of course, accentuating the negative is what GOP legislators are pretty much relegated to these days.
Maybe they're just sticking with what they're good at.
By Steve Wiegand
Republican legislators trotted out the first parts of their anti-illegal immigration package of bills Tuesday, and things went about as well as could be expected.
Which is to say, not well at all.
In case you missed it, the Reeps have determined that illegal immigrants are to blame for most of the state's gaping budget deficit. (Democrats are to blame for the rest of it.)
To remedy this problem (the illegal problem, not the Democrat problem), GOP lawmakers put together what they call a "border security" package of "20 common-sense measures" they said "would help the state secure the border and better protect Californians."
Two of the "common-sense" measures went toe to toe with reality, in the form of the Assembly Public Safety Committee.
One of the bills was AB 1882, by Assemblyman Martin Garrick, R-Solana Beach.
What the bill would do is require cops who arrest a drunken driver, after an accident that involves an injury or does more than $600 worth of property damage, to determine whether the drunk is legally in the United States.
If the drunk couldn't prove to the cop's satisfaction his legal right to be on U.S. soil, the cop would be obligated to contact federal immigration officials about it.
Garrick asserted that his bill would "dramatically reduce the number of unnecessary DUI deaths and injuries in California." (I don't think he meant to imply that there are necessary DUI deaths and injuries.)
But he didn't produce any statistical data that show illegal-immigrant drunken drivers are any more of a problem than legal resident drunken drivers. And the idea of asking cops to determine citizenship status without resorting to racial profiling is a pretty tall order.
Plus, a committee analysis raised a host of constitutional questions about the state's limited role in enforcing federal immigration laws.
So Democrats on the committee killed the bill on a party-line vote, although they did extend Garrick the courtesy of having his bill reconsidered, which means he will have the opportunity to have it killed again at a later date.
They also killed, and granted reconsideration to, a bill by Assemblyman Van Tran, R-Garden Grove, that would require state prison officials to determine the immigration status of any new prisoner.
The apparent purpose of AB 2141 is to give the state a firm illegal immigrant inmate count so it can seek reimbursement from the feds for housing illegals.
But prison officials already count illegals, and the state already demands the feds pay up, and the feds already ignore the demands.
These two bills not only exemplify the likely fate of the rest of the GOP package, but what's wrong with it.
There are some questions related to illegal immigration and California on which legislators could and should spend some time and energy.
Should, for example, a person who comes to California illegally at the age of 2 or 3 be allowed to pay the same tuition rates at state colleges as the person who comes here legally at the age of, say, 16?
Are we better off giving illegals driver's licenses if they learn the driving laws, pass the tests and get insurance, or refusing to grant them licenses until they obtain legal residency?
Those kinds of issues strike me as legitimate areas for debate.
It seems like Reeps could accomplish more in this area if they focused more on real problems and less on trying to score political points with the faithful by demonizing illegal immigrants.
Of course, accentuating the negative is what GOP legislators are pretty much relegated to these days.
Maybe they're just sticking with what they're good at.
ATA Airlines goes out of business
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ATA Airlines late last night announced it was ceasing operations immediately, stranding passengers holding tickets on its 15 daily flights from Hawaii to the West Coast.
The Indianapolis-based carrier had filed for Chapter 11 bankruptcy protection earlier yesterday.
ATA's Hawaii routes were to Los Angeles, Oakland, Phoenix and Las Vegas.
Although the company said it was canceling flights as of 10 p.m. Hawaii time, its Flight 4586 to Phoenix was scheduled to leave with passengers at 12:10 a.m. today, following a two-hour departure delay.
That was expected to be ATA's last flight out of Hawaii.
The sudden shutdown came two days after Aloha Airlines' final flight and left ticket-holding ATA passengers with the same difficult options: scramble to get a seat on another airline, and seek refunds if purchased by credit card or through the bankruptcy court if ATA tickets were purchased with cash.
The company issued a statement last night saying it could not stay in business after losing a key contract for military charter flights.
ATA, founded in 1973, employed about 2,230 workers and was operating 29 aircraft at the time of its shutdown. It claimed to serve 10,000 passengers daily.
It had seven daily flights out of Honolulu, five from Maui, and one each from Kona, Hilo and Lihue. It has about 50 employees in Honolulu.
The airline was no longer flying as of 4 a.m. Eastern time, a recording on 800-435-9282 (I Fly ATA) said last night.
Shayrah Akers, 25, of Sacramento, Calif., was stuck at Hono-lulu International Airport last night after she could not get a standby seat to Phoenix.
"The economy's just going crazy," Akers said of the two airline shutdowns. She and friend Kelcey Hamilton of Kapolei were on a cell phone last night trying to get a flight before giving up.
Akers appeared to be the only stranded ATA passenger at the airport last night, but more will join her as they discover today their flights have been canceled.
The company last night issued this statement on its Web site:
"After filing for Chapter 11 on April 2, 2008 in the U.S. Bankruptcy Court in Indianapolis, IN, ATA Airlines has discontinued all operations and cancelled all current and future flights. Following the loss of a key contract for our military charter business, it became impossible for ATA to continue operations. Unfortunately, we were not in a position to provide our customers or others with advance notice.
"We apologize for the disruption caused by the sudden shutdown of ATA and regret the impact on passengers, employees, suppliers, and other parties. ATA customers should seek alternative arrangements for current and future travel. A list of other airlines serving ATA's destinations is available here.
"ATA customers who purchased tickets using a credit card should contact their credit card company or travel agency directly for information about how to obtain a refund for unused tickets.
"ATA currently is unable to provide refunds to customers who purchased tickets directly from ATA with cash or a check. These customers may be able to obtain a full or partial refund for their unused tickets by submitting a claim in ATA's Chapter 11 proceedings."
ATA said information about submitting a refund claim will be available at www.bmcgroup
.com/ataairlines.
It also said that passengers who purchased tickets from Southwest Airlines for flights operated by ATA should contact Southwest Airlines at 800-308-5037.
ATA Airlines late last night announced it was ceasing operations immediately, stranding passengers holding tickets on its 15 daily flights from Hawaii to the West Coast.
The Indianapolis-based carrier had filed for Chapter 11 bankruptcy protection earlier yesterday.
ATA's Hawaii routes were to Los Angeles, Oakland, Phoenix and Las Vegas.
Although the company said it was canceling flights as of 10 p.m. Hawaii time, its Flight 4586 to Phoenix was scheduled to leave with passengers at 12:10 a.m. today, following a two-hour departure delay.
That was expected to be ATA's last flight out of Hawaii.
The sudden shutdown came two days after Aloha Airlines' final flight and left ticket-holding ATA passengers with the same difficult options: scramble to get a seat on another airline, and seek refunds if purchased by credit card or through the bankruptcy court if ATA tickets were purchased with cash.
The company issued a statement last night saying it could not stay in business after losing a key contract for military charter flights.
ATA, founded in 1973, employed about 2,230 workers and was operating 29 aircraft at the time of its shutdown. It claimed to serve 10,000 passengers daily.
It had seven daily flights out of Honolulu, five from Maui, and one each from Kona, Hilo and Lihue. It has about 50 employees in Honolulu.
The airline was no longer flying as of 4 a.m. Eastern time, a recording on 800-435-9282 (I Fly ATA) said last night.
Shayrah Akers, 25, of Sacramento, Calif., was stuck at Hono-lulu International Airport last night after she could not get a standby seat to Phoenix.
"The economy's just going crazy," Akers said of the two airline shutdowns. She and friend Kelcey Hamilton of Kapolei were on a cell phone last night trying to get a flight before giving up.
Akers appeared to be the only stranded ATA passenger at the airport last night, but more will join her as they discover today their flights have been canceled.
The company last night issued this statement on its Web site:
"After filing for Chapter 11 on April 2, 2008 in the U.S. Bankruptcy Court in Indianapolis, IN, ATA Airlines has discontinued all operations and cancelled all current and future flights. Following the loss of a key contract for our military charter business, it became impossible for ATA to continue operations. Unfortunately, we were not in a position to provide our customers or others with advance notice.
"We apologize for the disruption caused by the sudden shutdown of ATA and regret the impact on passengers, employees, suppliers, and other parties. ATA customers should seek alternative arrangements for current and future travel. A list of other airlines serving ATA's destinations is available here.
"ATA customers who purchased tickets using a credit card should contact their credit card company or travel agency directly for information about how to obtain a refund for unused tickets.
"ATA currently is unable to provide refunds to customers who purchased tickets directly from ATA with cash or a check. These customers may be able to obtain a full or partial refund for their unused tickets by submitting a claim in ATA's Chapter 11 proceedings."
ATA said information about submitting a refund claim will be available at www.bmcgroup
.com/ataairlines.
It also said that passengers who purchased tickets from Southwest Airlines for flights operated by ATA should contact Southwest Airlines at 800-308-5037.
New study shows US lawmakers have as much as $196 million invested in defense companies
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WASHINGTON: Members of the U.S.Congress have as much as $196 million (€126.2 million) collectively invested in companies doing business with the Defense Department, earning millions since the start of the Iraq war, according to a new study by a nonpartisan research group.
The review of lawmakers' 2006 financial disclosure statements, by the Washington-based Center for Responsive Politics, suggests that members' holdings could pose a conflict of interest as they decide the fate of Iraq war spending. Several members who earned the most from defense contractors have plum committee or leadership assignments, including Democratic Sen. John Kerry, independent Sen. Joseph Lieberman and House Republican Whip Roy Blunt.
The study found that more Republicans than Democrats hold stock in defense companies, but that the Democrats who are invested had significantly more money at stake. In 2006, for example, Democrats held at least $3.7 million (€2.3 million) in military-related investments, compared to Republican investments of $577,500 (€372,000).
Overall, 151 members hold investments worth $78.7 million (€50.6 million) to $195.5 million (€125.9 million) in companies that receive defense contracts that are worth at least $5 million (€3.2 million). These investments earned them anywhere between $15.8 million (€10.1 million) and $62 million (€39.9 million) between 2004 and 2006, the center concludes.
It is unclear how many members still hold these investments and exactly how much money has been made. Disclosure reports for 2007 are not due until this May. Also, members are required to report only a general range of their holdings.
According to the report, presidential hopefuls Barack Obama and John McCain did not report any defense-related holdings on their filings; Hillary Rodham Clinton did note holdings in such companies as Honeywell, Boeing and Raytheon, but sold the stock in May 2007. All three are members of the Senate.
Not all the companies invested in by lawmakers are typical defense contractors. Corporations such as PepsiCo, IBM, Microsoft and Johnson & Johnson have at one point received defense-related contracts, the report notes.
"So common are these companies, both as personal investments and as defense contractors, it would appear difficult to build a diverse blue-chip stock portfolio without at least some of them," wrote the center's Lindsay Renick Mayer.
Still, earning dividends from companies tied to the military "could be problematic" for members that oversee defense policy and budgeting, Mayer adds.
Kerry, a Democrat, a member of the Senate Foreign Relations Committee, is identified as earning the most — at least $2.6 million between 2004 and 2006 from investments worth up to $38.2 million (€24.6 million).
Spokesman David Wade said Kerry, who staunchly opposes the war in Iraq, is one of many beneficiaries of family trusts which he doesn't control. Wade also noted that Kerry does not sit on the Appropriations Committee, which has direct control of the defense budget.
"He has a 24-year Senate record of working and voting in the best interests of our men and women in the military, not of any defense contractors," Wade said.
Lieberman, an independent and chairman of the Senate Homeland Security and Governmental Affairs Committee and a member of the Armed Services Committee, held a considerably smaller share at $51,000 (€32,848.13).
A spokesman for Blunt, a senior member of House Republican leadership who held at least $15,000 (€9,660) in Lockheed Martin stock in 2006, said the insinuation that lawmakers' votes might be affected by their portfolios is "offensive."
"I don't pretend to speak for other offices, but I am fairly certain that no member would consider their personal finances when voting on issues as important as sending our men and women in uniform into harm's way," said Blunt spokesman Nick Simpson.
WASHINGTON: Members of the U.S.Congress have as much as $196 million (€126.2 million) collectively invested in companies doing business with the Defense Department, earning millions since the start of the Iraq war, according to a new study by a nonpartisan research group.
The review of lawmakers' 2006 financial disclosure statements, by the Washington-based Center for Responsive Politics, suggests that members' holdings could pose a conflict of interest as they decide the fate of Iraq war spending. Several members who earned the most from defense contractors have plum committee or leadership assignments, including Democratic Sen. John Kerry, independent Sen. Joseph Lieberman and House Republican Whip Roy Blunt.
The study found that more Republicans than Democrats hold stock in defense companies, but that the Democrats who are invested had significantly more money at stake. In 2006, for example, Democrats held at least $3.7 million (€2.3 million) in military-related investments, compared to Republican investments of $577,500 (€372,000).
Overall, 151 members hold investments worth $78.7 million (€50.6 million) to $195.5 million (€125.9 million) in companies that receive defense contracts that are worth at least $5 million (€3.2 million). These investments earned them anywhere between $15.8 million (€10.1 million) and $62 million (€39.9 million) between 2004 and 2006, the center concludes.
It is unclear how many members still hold these investments and exactly how much money has been made. Disclosure reports for 2007 are not due until this May. Also, members are required to report only a general range of their holdings.
According to the report, presidential hopefuls Barack Obama and John McCain did not report any defense-related holdings on their filings; Hillary Rodham Clinton did note holdings in such companies as Honeywell, Boeing and Raytheon, but sold the stock in May 2007. All three are members of the Senate.
Not all the companies invested in by lawmakers are typical defense contractors. Corporations such as PepsiCo, IBM, Microsoft and Johnson & Johnson have at one point received defense-related contracts, the report notes.
"So common are these companies, both as personal investments and as defense contractors, it would appear difficult to build a diverse blue-chip stock portfolio without at least some of them," wrote the center's Lindsay Renick Mayer.
Still, earning dividends from companies tied to the military "could be problematic" for members that oversee defense policy and budgeting, Mayer adds.
Kerry, a Democrat, a member of the Senate Foreign Relations Committee, is identified as earning the most — at least $2.6 million between 2004 and 2006 from investments worth up to $38.2 million (€24.6 million).
Spokesman David Wade said Kerry, who staunchly opposes the war in Iraq, is one of many beneficiaries of family trusts which he doesn't control. Wade also noted that Kerry does not sit on the Appropriations Committee, which has direct control of the defense budget.
"He has a 24-year Senate record of working and voting in the best interests of our men and women in the military, not of any defense contractors," Wade said.
Lieberman, an independent and chairman of the Senate Homeland Security and Governmental Affairs Committee and a member of the Armed Services Committee, held a considerably smaller share at $51,000 (€32,848.13).
A spokesman for Blunt, a senior member of House Republican leadership who held at least $15,000 (€9,660) in Lockheed Martin stock in 2006, said the insinuation that lawmakers' votes might be affected by their portfolios is "offensive."
"I don't pretend to speak for other offices, but I am fairly certain that no member would consider their personal finances when voting on issues as important as sending our men and women in uniform into harm's way," said Blunt spokesman Nick Simpson.
Memo Justified Warrantless Surveillance
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Washington - For at least 16 months after the Sept. 11 terror attacks in 2001, the Bush administration believed that the Constitution's protection against unreasonable searches and seizures on U.S. soil didn't apply to its efforts to protect against terrorism.
That view was expressed in a Justice Department legal memo dated Oct. 23, 2001. The administration on Wednesday stressed that it now disavows that view.
The October 2001 memo was written at the request of the White House by John Yoo, then the deputy assistant attorney general, and addressed to Alberto Gonzales, the White House counsel at the time. The administration had asked the department for an opinion on the legality of potential responses to terrorist activity.
The 37-page memo has not been released. Its existence was disclosed Tuesday in a footnote of a separate secret memo, dated March 14, 2003, released by the Pentagon in response to a Freedom of Information Act lawsuit by the American Civil Liberties Union.
"Our office recently concluded that the Fourth Amendment had no application to domestic military operations," the footnote states, referring to a document titled "Authority for Use of Military Force to Combat Terrorist Activities Within the United States."
Exactly what domestic military action was covered by the October memo is unclear. But federal documents indicate that the memo relates to the National Security Agency's Terrorist Surveillance Program, or TSP.
That program intercepted phone calls and e-mails on U.S. soil, bypassing the normal legal requirement that such eavesdropping be authorized by a secret federal court. The program began after the Sept. 11 terrorist attacks and continued until Jan. 17, 2007, when the White House resumed seeking surveillance warrants from the Foreign Intelligence Surveillance Court.
White House spokesman Tony Fratto said Wednesday that the Fourth Amendment finding in the October memo was not the legal underpinning for the Terrorist Surveillance Program.
"TSP relied on a separate set of legal memoranda," Fratto told The Associated Press. The Justice Department outlined that legal framework in a January 2006 white paper issued by the Justice Department a month after the TSP was revealed by The New York Times.
The October memo was written just days before Bush administration officials, including Vice President Dick Cheney, briefed four House and Senate leaders on the NSA's secret wiretapping program for the first time.
The government itself related the October memo to the TSP program when it included it on a list of documents that were responsive to the ACLU's request for records from the program. It refused to hand them over.
Late Wednesday, Justice Department spokesman Brian Roehrkasse said department officials believe the October 2001 memo was not about the eavesdropping program, but he did not explain why it was included on requests for documents linked to the TSP.
Earlier, Roehrkasse said the statement in the footnote does not reflect the current view of the department's Office of Legal Counsel.
"We disagree with the proposition that the Fourth Amendment has no application to domestic military operations," he said. "Whether a particular search or seizure is reasonable under the Fourth Amendment requires consideration of the particular context and circumstances of the search."
Roehrkasse would not say exactly when that legal opinion was overturned internally. But he pointed to the January 2006 white paper.
"The white paper does not suggest in any way that the Fourth Amendment does not apply to domestic military activities, and that is not the position of the Office of Legal Counsel," he said.
Suzanne Spaulding, a national security law expert and former assistant general counsel at the CIA, said she found the Fourth Amendment reference in the footnote troubling, but added: "To know (the Justice Department) no longer thinks this is a legitimate statement is reassuring."
"The recent disclosures underscore the Bush administration's extraordinarily sweeping conception of executive power," said Jameel Jaffer, director of the ACLU's National Security Project. "The administration's lawyers believe the president should be permitted to violate statutory law, to violate international treaties and even to violate the Fourth Amendment inside the U.S. They believe that the president should be above the law."
"Each time one of these memos comes out you have to come up with a more extreme way to characterize it," Jaffer said.
The ACLU is challenging in court the government's withholding of the October 2001 memo.
Washington - For at least 16 months after the Sept. 11 terror attacks in 2001, the Bush administration believed that the Constitution's protection against unreasonable searches and seizures on U.S. soil didn't apply to its efforts to protect against terrorism.
That view was expressed in a Justice Department legal memo dated Oct. 23, 2001. The administration on Wednesday stressed that it now disavows that view.
The October 2001 memo was written at the request of the White House by John Yoo, then the deputy assistant attorney general, and addressed to Alberto Gonzales, the White House counsel at the time. The administration had asked the department for an opinion on the legality of potential responses to terrorist activity.
The 37-page memo has not been released. Its existence was disclosed Tuesday in a footnote of a separate secret memo, dated March 14, 2003, released by the Pentagon in response to a Freedom of Information Act lawsuit by the American Civil Liberties Union.
"Our office recently concluded that the Fourth Amendment had no application to domestic military operations," the footnote states, referring to a document titled "Authority for Use of Military Force to Combat Terrorist Activities Within the United States."
Exactly what domestic military action was covered by the October memo is unclear. But federal documents indicate that the memo relates to the National Security Agency's Terrorist Surveillance Program, or TSP.
That program intercepted phone calls and e-mails on U.S. soil, bypassing the normal legal requirement that such eavesdropping be authorized by a secret federal court. The program began after the Sept. 11 terrorist attacks and continued until Jan. 17, 2007, when the White House resumed seeking surveillance warrants from the Foreign Intelligence Surveillance Court.
White House spokesman Tony Fratto said Wednesday that the Fourth Amendment finding in the October memo was not the legal underpinning for the Terrorist Surveillance Program.
"TSP relied on a separate set of legal memoranda," Fratto told The Associated Press. The Justice Department outlined that legal framework in a January 2006 white paper issued by the Justice Department a month after the TSP was revealed by The New York Times.
The October memo was written just days before Bush administration officials, including Vice President Dick Cheney, briefed four House and Senate leaders on the NSA's secret wiretapping program for the first time.
The government itself related the October memo to the TSP program when it included it on a list of documents that were responsive to the ACLU's request for records from the program. It refused to hand them over.
Late Wednesday, Justice Department spokesman Brian Roehrkasse said department officials believe the October 2001 memo was not about the eavesdropping program, but he did not explain why it was included on requests for documents linked to the TSP.
Earlier, Roehrkasse said the statement in the footnote does not reflect the current view of the department's Office of Legal Counsel.
"We disagree with the proposition that the Fourth Amendment has no application to domestic military operations," he said. "Whether a particular search or seizure is reasonable under the Fourth Amendment requires consideration of the particular context and circumstances of the search."
Roehrkasse would not say exactly when that legal opinion was overturned internally. But he pointed to the January 2006 white paper.
"The white paper does not suggest in any way that the Fourth Amendment does not apply to domestic military activities, and that is not the position of the Office of Legal Counsel," he said.
Suzanne Spaulding, a national security law expert and former assistant general counsel at the CIA, said she found the Fourth Amendment reference in the footnote troubling, but added: "To know (the Justice Department) no longer thinks this is a legitimate statement is reassuring."
"The recent disclosures underscore the Bush administration's extraordinarily sweeping conception of executive power," said Jameel Jaffer, director of the ACLU's National Security Project. "The administration's lawyers believe the president should be permitted to violate statutory law, to violate international treaties and even to violate the Fourth Amendment inside the U.S. They believe that the president should be above the law."
"Each time one of these memos comes out you have to come up with a more extreme way to characterize it," Jaffer said.
The ACLU is challenging in court the government's withholding of the October 2001 memo.
"Emergency" Bill Tries to Make Electronic Voting More Accurate, but Will It?
Go to Original
By Steven Rosenfeld
Looking ahead to the fall election, a House bill lets states decide if they want to replace paperless voting systems - or just add printers.
Efforts to improve the machinery that will count the 2008 presidential vote fell prey to a classic Washington compromise on Wednesday, when a House committee approved a bill giving money to both opponents and supporters of controversial paperless electronic voting systems.
The "Emergency Assistance for Secure Elections Act of 2008," or H.R. 5036, now goes to the House floor, where its goal is helping cities and counties create a "verifiable" paper trail and audits for individual votes cast for president and Congress.
But just how that paper trail is achieved is broadly defined in the bill. Opponents of paperless electronic voting can seek federal funds to buy paper ballot-based systems, where voters mark ballots by hand and computer scanners tally the result. Several states, notably California, Ohio and Florida, are making this transition. Meanwhile, proponents of all-electronic voting can keep their machines but seek funds to add printers that theoretically will allow voters to see if their choices have been properly recorded.
Under the bill, the hand-marked paper ballots and new computer printouts would be used to verify the accuracy of vote counts. Jurisdictions taking federal money to buy new machinery would be required to hand count 2 percent of all ballots as part of an audit to ensure the vote count is accurate.
"It will reduce the uncertainly, questions and disputes about the election in many places in our country," said Rep. Rush Holt, D-NJ and the bill's chief sponsor. "It is intended for counties to provide voter verified paper ballots and or audits. And although it does not establish a national standard [for a paper trail], it encourages counties and states to do the right thing. And that means offer voter verified paper ballots and audits."
Election integrity activists, who documented many problems with paperless, electronic voting systems and played a big part in convincing top officials in several states to return to paper ballot-based voting, were generally disappointed in the bill.
"I do not support any version of the HOLT bill or any other proposed bill that solidifies the continued use of DREs with printer," said Nevada's Patricia Axelrod, who has an extensive technical background, in an e-mail Wednesday. DRE, or direct recording equipment, is industry slang for the paperless voting systems.
"I am well-seasoned in the use of such machines as I battling against the Sequoia AVC Edge with Verivote printer now in use throughout the entire State of Nevada since 2004," Axelrod said. "I hasten to assure you that the attachment of a Mickey Mouse printer to a poorly designed, engineered and manufactured computer - one built to the same specifications as your average lap or desk top computer; only with less oversight - is not going to assure accurate and reliable elections."
"I do not support any legislation that perpetuates the myth of verified voting," said New Hampshire's Nancy Tobi, Election Defense Alliance legislative director. "The problem is the current bill is fundamentally wrong in its originating premise. Holt and his supporters believe the key is the audit, but the key is the first count. And the audits they recommend are not even audits. They are spot checks. So you have a fake audit for a fake election."
Holt acknowledged H.R. 5036 was a compromise bill. Activists following its progress in Washington said lobbyists for the disabled community, election officials and the voting machine industry pushed to preserve the use of DREs. The House Majority Leader Steny Hoyer, D-MD, siding with those constituencies, apparently would not allow a bill on the House floor that said paper ballots were superior to paperless voting, they said. However, Holt said most election supervisors at the local level recognized that the paper-based optical-scan systems were more reliable and accurate than DREs with printers.
"We have found that electronic machines with attached printers don't work very well," he said. "I think more and more states are moving away from that. My guess is that states and counties that choose to opt in [to buy new voting machinery] would probably use the technologies that are gaining favor."
Holt said states that have been transitioning from DREs to optical-scan paper-ballot systems, such as California, Ohio and Florida, should be eligible for federal funds to acquire new voting machinery, under the bill. However, one lobbyist who has been tracking the bill questioned if that was the case under its fine print.
Beyond the apparent compromise appeasing both sides of the paperless voting machine debate, the bill also has constitutionally significant ramifications because it accords paper printouts with the same legal standing as hand-marked paper ballots. This factor could become very significant for close elections and recounts.
"Now we will rely on printed receipts as reflective of voter intent, when it's the case that they jam, they don't print, they cause long lines, and they cannot be trusted," said John Bonifaz, Counsel for Voter Action, a public interest law firm. "Voter Action endorsed the original version of this bill, HR 5036, and did that because we think it is critical that we shift from DRE machines to optically scanned paper ballot systems. This substitute bill effectively undermines the underlying principle of that original bill."
Holt said he believed hand-marked paper ballots would be taken more seriously in recounts than print-outs from add-ons to DRE systems. However, he said it was not possible, given the current political landscape, to establish a national standard for a paper record - such as legislation requiring hand-marked paper ballots.
"I think that a hard copy vote that the voter can verify is always going to be regarded better than an ethereal electronic memory. That's the lesson of the last few years," he said. "Now, it is true that in different states, the studies and the experience of the election officials shows that not all methods of recording ballots are equally good. Some systems break down. Some systems don't seem to work very well in practice with voters. But it has not been possible, this year, anyway, to establish a national standard."
The bill would also require any jurisdiction taking federal funds for new machines audit 2 percent of their precincts to determine if the vote count was accurate. An earlier version of the bill required that mandatory audit consist of 3 percent of the precincts. Election officials lobbied to ease that audit requirement, Rep. Zoe Lofgren, D-CA said, when telling Administration Committee of the changes in the bill's text.
The bill also will cover the cost of printing backup paper ballots, in case the DRE systems fail. However, like the rest of the bill, it is an "opt-in" proposal, meaning that any jurisdiction can choose to take advantage of the federal funding, as opposed to mandate.
Still, not all election integrity activists criticized the bill.
"I think it's a good bill," said Warren Stewart of VerifiedVotingFoundation.org. "Maybe it gets us some more audits. It pays for back-up paper ballots for jurisdictions with DREs. It will help states like Iowa change to paper ballots. I think it is unfortunate that it funds the purchase of flawed printers. But legislation is compromise."
By Steven Rosenfeld
Looking ahead to the fall election, a House bill lets states decide if they want to replace paperless voting systems - or just add printers.
Efforts to improve the machinery that will count the 2008 presidential vote fell prey to a classic Washington compromise on Wednesday, when a House committee approved a bill giving money to both opponents and supporters of controversial paperless electronic voting systems.
The "Emergency Assistance for Secure Elections Act of 2008," or H.R. 5036, now goes to the House floor, where its goal is helping cities and counties create a "verifiable" paper trail and audits for individual votes cast for president and Congress.
But just how that paper trail is achieved is broadly defined in the bill. Opponents of paperless electronic voting can seek federal funds to buy paper ballot-based systems, where voters mark ballots by hand and computer scanners tally the result. Several states, notably California, Ohio and Florida, are making this transition. Meanwhile, proponents of all-electronic voting can keep their machines but seek funds to add printers that theoretically will allow voters to see if their choices have been properly recorded.
Under the bill, the hand-marked paper ballots and new computer printouts would be used to verify the accuracy of vote counts. Jurisdictions taking federal money to buy new machinery would be required to hand count 2 percent of all ballots as part of an audit to ensure the vote count is accurate.
"It will reduce the uncertainly, questions and disputes about the election in many places in our country," said Rep. Rush Holt, D-NJ and the bill's chief sponsor. "It is intended for counties to provide voter verified paper ballots and or audits. And although it does not establish a national standard [for a paper trail], it encourages counties and states to do the right thing. And that means offer voter verified paper ballots and audits."
Election integrity activists, who documented many problems with paperless, electronic voting systems and played a big part in convincing top officials in several states to return to paper ballot-based voting, were generally disappointed in the bill.
"I do not support any version of the HOLT bill or any other proposed bill that solidifies the continued use of DREs with printer," said Nevada's Patricia Axelrod, who has an extensive technical background, in an e-mail Wednesday. DRE, or direct recording equipment, is industry slang for the paperless voting systems.
"I am well-seasoned in the use of such machines as I battling against the Sequoia AVC Edge with Verivote printer now in use throughout the entire State of Nevada since 2004," Axelrod said. "I hasten to assure you that the attachment of a Mickey Mouse printer to a poorly designed, engineered and manufactured computer - one built to the same specifications as your average lap or desk top computer; only with less oversight - is not going to assure accurate and reliable elections."
"I do not support any legislation that perpetuates the myth of verified voting," said New Hampshire's Nancy Tobi, Election Defense Alliance legislative director. "The problem is the current bill is fundamentally wrong in its originating premise. Holt and his supporters believe the key is the audit, but the key is the first count. And the audits they recommend are not even audits. They are spot checks. So you have a fake audit for a fake election."
Holt acknowledged H.R. 5036 was a compromise bill. Activists following its progress in Washington said lobbyists for the disabled community, election officials and the voting machine industry pushed to preserve the use of DREs. The House Majority Leader Steny Hoyer, D-MD, siding with those constituencies, apparently would not allow a bill on the House floor that said paper ballots were superior to paperless voting, they said. However, Holt said most election supervisors at the local level recognized that the paper-based optical-scan systems were more reliable and accurate than DREs with printers.
"We have found that electronic machines with attached printers don't work very well," he said. "I think more and more states are moving away from that. My guess is that states and counties that choose to opt in [to buy new voting machinery] would probably use the technologies that are gaining favor."
Holt said states that have been transitioning from DREs to optical-scan paper-ballot systems, such as California, Ohio and Florida, should be eligible for federal funds to acquire new voting machinery, under the bill. However, one lobbyist who has been tracking the bill questioned if that was the case under its fine print.
Beyond the apparent compromise appeasing both sides of the paperless voting machine debate, the bill also has constitutionally significant ramifications because it accords paper printouts with the same legal standing as hand-marked paper ballots. This factor could become very significant for close elections and recounts.
"Now we will rely on printed receipts as reflective of voter intent, when it's the case that they jam, they don't print, they cause long lines, and they cannot be trusted," said John Bonifaz, Counsel for Voter Action, a public interest law firm. "Voter Action endorsed the original version of this bill, HR 5036, and did that because we think it is critical that we shift from DRE machines to optically scanned paper ballot systems. This substitute bill effectively undermines the underlying principle of that original bill."
Holt said he believed hand-marked paper ballots would be taken more seriously in recounts than print-outs from add-ons to DRE systems. However, he said it was not possible, given the current political landscape, to establish a national standard for a paper record - such as legislation requiring hand-marked paper ballots.
"I think that a hard copy vote that the voter can verify is always going to be regarded better than an ethereal electronic memory. That's the lesson of the last few years," he said. "Now, it is true that in different states, the studies and the experience of the election officials shows that not all methods of recording ballots are equally good. Some systems break down. Some systems don't seem to work very well in practice with voters. But it has not been possible, this year, anyway, to establish a national standard."
The bill would also require any jurisdiction taking federal funds for new machines audit 2 percent of their precincts to determine if the vote count was accurate. An earlier version of the bill required that mandatory audit consist of 3 percent of the precincts. Election officials lobbied to ease that audit requirement, Rep. Zoe Lofgren, D-CA said, when telling Administration Committee of the changes in the bill's text.
The bill also will cover the cost of printing backup paper ballots, in case the DRE systems fail. However, like the rest of the bill, it is an "opt-in" proposal, meaning that any jurisdiction can choose to take advantage of the federal funding, as opposed to mandate.
Still, not all election integrity activists criticized the bill.
"I think it's a good bill," said Warren Stewart of VerifiedVotingFoundation.org. "Maybe it gets us some more audits. It pays for back-up paper ballots for jurisdictions with DREs. It will help states like Iowa change to paper ballots. I think it is unfortunate that it funds the purchase of flawed printers. But legislation is compromise."
Scientists Ignored on Toxic Trailers
Go to Original
By Suemedha Sood
Toxin agency slammed at oversight hearing.
Senior management at the Agency for Toxic Substances and Disease Registry, the toxins arm of the CDC, got slammed today at a congressional hearing examining the agency's response when the government trailers housing Hurricane Katrina victims were found to be toxic.
The House Committee on Science and Technology's Subcommittee on Investigations and Oversight today held hearings into how and why the agency failed to protect public health when those trailers were found to be emitting dangerous levels of formaldehyde.
"In almost every respect ATSDR failed to fulfill its mission to protect the public from exposure to formaldehyde at levels known to cause ill-health effects," said Subcommittee Chairman Brad Miller (D-NC), who blamed a "collapse of senior management and leadership."
At the hearing, it became clear that a leading government expert on formaldehyde had tried to alert his superiors about the toxicity levels of the government trailers in New Orleans, but was repeatedly ignored. Ultimately, he was demoted. Today his superiors said they should have followed his advice, but they did not address why they "reassigned" him to a new position.
Dr. Christopher De Rosa, former director of toxicology and environmental medicine at the Agency for Toxic Substances and Disease Registry, said today that his superiors ignored his concerns about formaldehyde levels, kept him out of correspondence regarding its public health consultation and told him to stop writing them emails expressing his concerns about that consultation.
De Rosa, who has worked for the federal government for 28 years, said he learned that his division, which handles toxicology, was kept out of the loop of the agency's work on the trailer issue.. He said today that information regarding the agency's public health consultation was not shared with his division. This was unusual, he explained, because health consultations involving toxicology studies require review from De Rosa's division.
ATSDR Director Dr. Howard Frumkin admitted that the health report did not make its way to De Rosa's division, but said this was because the agency was trying to deliver an expedited emergency response. Frumkin said the division of toxicology was left out of correspondence because the agency needed to act quickly. "In retrospect, clearance in the division [of toxicology] did not occur," Frumkin said. "[S]taff went through the emergency response chain, so only that chain was used." The health consultation went directly from the "emergency chain" to Frumkin's office.
De Rosa maintains that he was kept out of the loop on purpose. When he finally did review the consultation, he immediately contacted Frumkin's office with his concerns. In his emails, De Rosa said the consultation failed to assess the long-term effects of formaldehyde, including the potential for cancer. "Despite my repeated efforts to bring these issues to the attention of my management," said De Rosa, "we had very little constructive follow-up."
De Rosa wasn't the only one who talked about ATSDR's shortcomings. Dr. Meryl Kerol of the University of Pittsburgh also testified today. Kerol, an expert in toxicology, said the report seemed insufficient in its coverage of formaldehyde's long-term health effects, reproductive effects and carcinogenic effects.
The Sierra Club's Becky Gillette went a step further. She testified at the hearing that the "health consultation was a huge disappointment." "[ATSDR] gave completely erroneous advice, covering up this problem when the health of thousands was at stake," said Gillette. She said the agency downplayed formaldehyde levels, which were higher than safe levels according to the agency's own standards.
Gillette added that this wasn't a surprise, though. "Contaminated communities often feel let down by ATSDR," she said.
Frumkin, the agency's director, acknowledged at the hearing that the initial public health consultation was "narrowly focused [and had] an inappropriate level of concern." He also said that the revised report took longer to complete than it should have.
In October 2007, agency scientist De Rosa was demoted. This was a year after he had received a performance-based raise and a bonus.
Frumkin assured the committee that neither he nor the agency had any intention of firing De Rosa. But De Rosa said he has been physically moved around three times, making it difficult for him to interact with other scientists.
At today's hearing, Miller praised what he described as De Rosa's whistle-blowing. "It is not second nature for many managers to value whistle-blowers," Miller said, "but the loyalty we expect is the loyalty of the mission of the agency, the loyalty to protect public health."
By Suemedha Sood
Toxin agency slammed at oversight hearing.
Senior management at the Agency for Toxic Substances and Disease Registry, the toxins arm of the CDC, got slammed today at a congressional hearing examining the agency's response when the government trailers housing Hurricane Katrina victims were found to be toxic.
The House Committee on Science and Technology's Subcommittee on Investigations and Oversight today held hearings into how and why the agency failed to protect public health when those trailers were found to be emitting dangerous levels of formaldehyde.
"In almost every respect ATSDR failed to fulfill its mission to protect the public from exposure to formaldehyde at levels known to cause ill-health effects," said Subcommittee Chairman Brad Miller (D-NC), who blamed a "collapse of senior management and leadership."
At the hearing, it became clear that a leading government expert on formaldehyde had tried to alert his superiors about the toxicity levels of the government trailers in New Orleans, but was repeatedly ignored. Ultimately, he was demoted. Today his superiors said they should have followed his advice, but they did not address why they "reassigned" him to a new position.
Dr. Christopher De Rosa, former director of toxicology and environmental medicine at the Agency for Toxic Substances and Disease Registry, said today that his superiors ignored his concerns about formaldehyde levels, kept him out of correspondence regarding its public health consultation and told him to stop writing them emails expressing his concerns about that consultation.
De Rosa, who has worked for the federal government for 28 years, said he learned that his division, which handles toxicology, was kept out of the loop of the agency's work on the trailer issue.. He said today that information regarding the agency's public health consultation was not shared with his division. This was unusual, he explained, because health consultations involving toxicology studies require review from De Rosa's division.
ATSDR Director Dr. Howard Frumkin admitted that the health report did not make its way to De Rosa's division, but said this was because the agency was trying to deliver an expedited emergency response. Frumkin said the division of toxicology was left out of correspondence because the agency needed to act quickly. "In retrospect, clearance in the division [of toxicology] did not occur," Frumkin said. "[S]taff went through the emergency response chain, so only that chain was used." The health consultation went directly from the "emergency chain" to Frumkin's office.
De Rosa maintains that he was kept out of the loop on purpose. When he finally did review the consultation, he immediately contacted Frumkin's office with his concerns. In his emails, De Rosa said the consultation failed to assess the long-term effects of formaldehyde, including the potential for cancer. "Despite my repeated efforts to bring these issues to the attention of my management," said De Rosa, "we had very little constructive follow-up."
De Rosa wasn't the only one who talked about ATSDR's shortcomings. Dr. Meryl Kerol of the University of Pittsburgh also testified today. Kerol, an expert in toxicology, said the report seemed insufficient in its coverage of formaldehyde's long-term health effects, reproductive effects and carcinogenic effects.
The Sierra Club's Becky Gillette went a step further. She testified at the hearing that the "health consultation was a huge disappointment." "[ATSDR] gave completely erroneous advice, covering up this problem when the health of thousands was at stake," said Gillette. She said the agency downplayed formaldehyde levels, which were higher than safe levels according to the agency's own standards.
Gillette added that this wasn't a surprise, though. "Contaminated communities often feel let down by ATSDR," she said.
Frumkin, the agency's director, acknowledged at the hearing that the initial public health consultation was "narrowly focused [and had] an inappropriate level of concern." He also said that the revised report took longer to complete than it should have.
In October 2007, agency scientist De Rosa was demoted. This was a year after he had received a performance-based raise and a bonus.
Frumkin assured the committee that neither he nor the agency had any intention of firing De Rosa. But De Rosa said he has been physically moved around three times, making it difficult for him to interact with other scientists.
At today's hearing, Miller praised what he described as De Rosa's whistle-blowing. "It is not second nature for many managers to value whistle-blowers," Miller said, "but the loyalty we expect is the loyalty of the mission of the agency, the loyalty to protect public health."
Heavy Troop Deployments Are Called Major Risk
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By Ann Scott Tyson
Readiness is dangerously low, Army chief says.
Senior Army and Marine Corps leaders said yesterday that the increase of more than 30,000 troops in Iraq and Afghanistan has put unsustainable levels of stress on U.S. ground forces and has put their readiness to fight other conflicts at the lowest level in years.
In a stark assessment a week before Gen. David H. Petraeus, the top U.S. commander in Iraq, is to testify on the war's progress, Gen. Richard A. Cody, the Army's vice chief of staff, said that the heavy deployments are inflicting "incredible stress" on soldiers and families and that they pose "a significant risk" to the nation's all-volunteer military.
"When the five-brigade surge went in . . . that took all the stroke out of the shock absorbers for the United States Army," Cody testified before the Senate Armed Services Committee's readiness panel.
He said that even if five brigades are pulled out of Iraq by July, as planned, it would take some time before the Army could return to 12-month tours for soldiers. Petraeus is expected to call for a pause in further troop reductions to assess their impact on security in Iraq.
"I've never seen our lack of strategic depth be where it is today," said Cody, who has been the senior Army official in charge of operations and readiness for the past six years and plans to retire this summer.
Lt. Gen. Raymond T. Odierno, one of the chief architects of the Iraq troop increase, has been nominated to replace Cody. Odierno is scheduled for a Senate confirmation hearing tomorrow.
The testimony reflects the tension between the wartime priorities of U.S. commanders in Iraq such as Petraeus and the heads of military services responsible for the health and preparedness of the forces. Cody said that the Army no longer has fully ready combat brigades on standby should a threat or conflict occur.
The nation needs an airborne brigade, a heavy brigade and a Stryker brigade ready for "full-spectrum operations," Cody said, "and we don't have that today."
Soldiers and Marines also lack training for major combat operations using their entire range of weapons, the generals said. For example, artillerymen are not practicing firing heavy guns but are instead doing counterinsurgency work as military police.
The Marine Corps' ability to train for potential conflicts has been "significantly degraded," said Gen. Robert Magnus, assistant commandant of the Marine Corps.
He said that although Marine Corps units involved in the troop increase last year have pulled out, new demands in Afghanistan, where 3,200 Marines are headed, have kept the pressure on the force unchanged.
"There has been little, if any, change of the stress or tempo for our forces," he said, calling the current pace of operations "unsustainable."
Magnus suggested that if more Marines are freed from Iraq they could also go to Afghanistan. Marines "will move to the sound of the guns in Afghanistan," he said. But he said it would be difficult to keep the force split between the two countries because the Marine Corps has limited resources to command a divided force and supply it logistically.
The Marine Corps is "basically in two boats at the same time," he said.
Both the Army and Marine Corps are working to increase their ranks by tens of thousands of troops - to 547,000 active-duty soldiers and 202,000 Marines - but newly created combat units will not be able to provide relief until about 2011.
U.S. soldiers are currently deploying for 15-month combat tours, with 12 months at home in between. Marines are deploying for seven-month rotations, with seven months at home.
Both services seek to give their members at least twice as much time at home as time overseas.
"Where we need to be with this force is no more than 12 months on the ground and 24 months back," Cody said.
By Ann Scott Tyson
Readiness is dangerously low, Army chief says.
Senior Army and Marine Corps leaders said yesterday that the increase of more than 30,000 troops in Iraq and Afghanistan has put unsustainable levels of stress on U.S. ground forces and has put their readiness to fight other conflicts at the lowest level in years.
In a stark assessment a week before Gen. David H. Petraeus, the top U.S. commander in Iraq, is to testify on the war's progress, Gen. Richard A. Cody, the Army's vice chief of staff, said that the heavy deployments are inflicting "incredible stress" on soldiers and families and that they pose "a significant risk" to the nation's all-volunteer military.
"When the five-brigade surge went in . . . that took all the stroke out of the shock absorbers for the United States Army," Cody testified before the Senate Armed Services Committee's readiness panel.
He said that even if five brigades are pulled out of Iraq by July, as planned, it would take some time before the Army could return to 12-month tours for soldiers. Petraeus is expected to call for a pause in further troop reductions to assess their impact on security in Iraq.
"I've never seen our lack of strategic depth be where it is today," said Cody, who has been the senior Army official in charge of operations and readiness for the past six years and plans to retire this summer.
Lt. Gen. Raymond T. Odierno, one of the chief architects of the Iraq troop increase, has been nominated to replace Cody. Odierno is scheduled for a Senate confirmation hearing tomorrow.
The testimony reflects the tension between the wartime priorities of U.S. commanders in Iraq such as Petraeus and the heads of military services responsible for the health and preparedness of the forces. Cody said that the Army no longer has fully ready combat brigades on standby should a threat or conflict occur.
The nation needs an airborne brigade, a heavy brigade and a Stryker brigade ready for "full-spectrum operations," Cody said, "and we don't have that today."
Soldiers and Marines also lack training for major combat operations using their entire range of weapons, the generals said. For example, artillerymen are not practicing firing heavy guns but are instead doing counterinsurgency work as military police.
The Marine Corps' ability to train for potential conflicts has been "significantly degraded," said Gen. Robert Magnus, assistant commandant of the Marine Corps.
He said that although Marine Corps units involved in the troop increase last year have pulled out, new demands in Afghanistan, where 3,200 Marines are headed, have kept the pressure on the force unchanged.
"There has been little, if any, change of the stress or tempo for our forces," he said, calling the current pace of operations "unsustainable."
Magnus suggested that if more Marines are freed from Iraq they could also go to Afghanistan. Marines "will move to the sound of the guns in Afghanistan," he said. But he said it would be difficult to keep the force split between the two countries because the Marine Corps has limited resources to command a divided force and supply it logistically.
The Marine Corps is "basically in two boats at the same time," he said.
Both the Army and Marine Corps are working to increase their ranks by tens of thousands of troops - to 547,000 active-duty soldiers and 202,000 Marines - but newly created combat units will not be able to provide relief until about 2011.
U.S. soldiers are currently deploying for 15-month combat tours, with 12 months at home in between. Marines are deploying for seven-month rotations, with seven months at home.
Both services seek to give their members at least twice as much time at home as time overseas.
"Where we need to be with this force is no more than 12 months on the ground and 24 months back," Cody said.
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