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By Tom Bergin and Michael Erman
Exxon Mobil Corp. broke its own record for the highest quarterly profit for a U.S. company on Thursday, joining other major oil companies in posting stronger earnings on the back of sky-high oil prices.
The average price of a barrel of oil was slightly less than $125 US during the quarter, nearly double last year, which also increased earnings at Royal Dutch Shell, Eni and Repsol, three of Europe's largest oil companies.
Exxon's second-quarter net income rose 14 per cent to $11.68 billion US, or $2.22 a share, in the quarter. Excluding one-time items, Exxon earned $2.27 a share, more than a quarter below analysts' expectations.
The enormous profits drew criticism from politicians because of the high gasoline prices being paid by consumers.
U.S. presidential candidate Barack Obama termed Exxon's earnings "outrageous" and called for an end to the "tyranny of oil."
"We are making very large profits, I know that," Shell chief executive Jeroen van der Veer told reporters on a conference call. "But we are making very large investments," he said, referring to investments in exploration and production.
Shell, the world's second-largest non-government controlled oil company by market value, reported a five-per-cent rise in second-quarter earnings to $7.9 billion, and said that excluding one-time items, it beat analysts' forecasts.
Despite billions of dollars in capital spending in the quarter, oil and gas production were sluggish.
That, along with weak profit margins from refining, restrained the companies' earnings somewhat.
Western oil companies' output has fallen in recent years and oil producing countries now prefer to award their richest fields to their own national oil companies.
"The problem is that all these companies have no place to go to drill and no place to put their money," said Oppenheimer & Co analyst Fadel Gheit. "Access to resources is closing very, very fast."
Still, the companies' oil and gas exploration and production units were the main profit divers because of high oil prices.
Exxon's oil and gas production fell eight per cent from a year earlier, mostly because of the loss of assets taken over by Venezuela and a labour strike in Nigeria.
EARNING THE BIG BUCKS
Exxon Mobil Corp. pulled in $11.68 billion in profits in the second quarter, the highest quarterly income ever recorded by a U.S. company.
HERE ARE A FEW FACTS ABOUT THE COMPANY'S RECORD HAUL:
- Exxon earned more than $128 million a day, or nearly $1,500 every second during the quarter. The company said that was after it paid $4,100 a second in taxes and $14,700 a second in expenses to run the business.
- Exxon's quarterly earnings were slightly larger than the annual gross domestic product of Afghanistan, which was $11.63 billion in 2007, according to the World Bank.
- With Exxon's quarterly profit, one could potentially buy Gap Inc., Ford or Starbucks, which have market capitalizations of $11.67 billion, $10.76 billion and $10.69 billion, respectively, according to Reuters data.
- $11.68 billion could buy roughly 179,692 new Cadillac Escalades, or 15.57 billion individual Snickers chocolate bars.
ONLINE: Do big oil companies like ExxonMobil deserve criticism for making multibillion-dollar profits?
Saturday, August 2, 2008
Pakistanis Aided Attack in Kabul, U.S. Officials Say
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By MARK MAZZETTI and ERIC SCHMITT
American intelligence agencies have concluded that members of Pakistan’s powerful spy service helped plan the deadly July 7 bombing of India’s embassy in Kabul, Afghanistan, according to United States government officials.
The conclusion was based on intercepted communications between Pakistani intelligence officers and militants who carried out the attack, the officials said, providing the clearest evidence to date that Pakistani intelligence officers are actively undermining American efforts to combat militants in the region.
The American officials also said there was new information showing that members of the Pakistani intelligence service were increasingly providing militants with details about the American campaign against them, in some cases allowing militants to avoid American missile strikes in Pakistan’s tribal areas.
Concerns about the role played by Pakistani intelligence not only has strained relations between the United States and Pakistan, a longtime ally, but also has fanned tensions between Pakistan and its archrival, India. Within days of the bombings, Indian officials accused the Directorate of Inter-Services Intelligence, or ISI, of helping to orchestrate the attack in Kabul, which killed 54, including an Indian defense attaché.
This week, Pakistani troops clashed with Indian forces in the contested region of Kashmir, threatening to fray an uneasy cease-fire that has held since November 2003.
The New York Times reported this week that a top Central Intelligence Agency official traveled to Pakistan this month to confront senior Pakistani officials with information about support provided by members of the ISI to militant groups. It had not been known that American intelligence agencies concluded that elements of Pakistani intelligence provided direct support for the attack in Kabul.
American officials said that the communications were intercepted before the July 7 bombing, and that the C.I.A. emissary, Stephen R. Kappes, the agency’s deputy director, had been ordered to Islamabad, Pakistan’s capital, even before the attack. The intercepts were not detailed enough to warn of any specific attack.
The government officials were guarded in describing the new evidence and would not say specifically what kind of assistance the ISI officers provided to the militants. They said that the ISI officers had not been renegades, indicating that their actions might have been authorized by superiors.
“It confirmed some suspicions that I think were widely held,” one State Department official with knowledge of Afghanistan issues said of the intercepted communications. “It was sort of this ‘aha’ moment. There was a sense that there was finally direct proof.”
The information linking the ISI to the bombing of the Indian Embassy was described in interviews by several American officials with knowledge of the intelligence. Some of the officials expressed anger that elements of Pakistan’s government seemed to be directly aiding violence in Afghanistan that had included attacks on American troops.
Some American officials have begun to suggest that Pakistan is no longer a fully reliable American partner and to advocate some unilateral American action against militants based in the tribal areas.
The ISI has long maintained ties to militant groups in the tribal areas, in part to court allies it can use to contain Afghanistan’s power. In recent years, Pakistan’s government has also been concerned about India’s growing influence inside Afghanistan, including New Delhi’s close ties to the government of Hamid Karzai, the Afghan president.
American officials say they believe that the embassy attack was probably carried out by members of a network led by Maulavi Jalaluddin Haqqani, whose alliance with Al Qaeda and its affiliates has allowed the terrorist network to rebuild in the tribal areas.
American and Pakistani officials have now acknowledged that President Bush on Monday confronted Pakistan’s prime minister, Yousaf Raza Gilani, about the divided loyalties of the ISI.
Pakistan’s defense minister, Chaudhry Ahmed Mukhtar, told a Pakistani television network on Wednesday that Mr. Bush asked senior Pakistani officials this week, “ ‘Who is in control of ISI?’ ” and asked about leaked information that tipped militants to surveillance efforts by Western intelligence services.
Pakistan’s new civilian government is wrestling with these very issues, and there is concern in Washington that the civilian leaders will be unable to end a longstanding relationship between members of the ISI and militants associated with Al Qaeda.
Spokesmen for the White House and the C.I.A. declined to comment for this article. Pakistan’s ambassador to the United States, Husain Haqqani, did not return a call seeking comment.
Further underscoring the tension between Pakistan and its Western allies, Britain’s senior military officer said in Washington on Thursday that an American and British program to help train Pakistan’s Frontier Corps in the tribal areas had been delayed while Pakistan’s military and civilian officials sorted out details about the program’s goals.
Britain and the United States had each offered to send about two dozen military trainers to Pakistan later this summer to train Pakistani Army officers who in turn would instruct the Frontier Corps paramilitary forces.
But the British officer, Air Chief Marshal Sir Jock Stirrup, said the program had been temporarily delayed. “We don’t yet have a firm start date,” he told a small group of reporters. “We’re ready to go.”
The bombing of the Indian Embassy helped to set off a new deterioration in relations between India and Pakistan.
This week, Indian and Pakistani soldiers fired at each other across the Kashmir frontier for more than 12 hours overnight Monday, in what the Indian Army called the most serious violation of a five-year-old cease-fire agreement. The nightlong battle came after one Indian soldier and four Pakistanis were killed along the border between sections of Kashmir that are controlled by India and by Pakistan.
Indian officials say they are equally worried about what is happening on the Pakistan-Afghanistan border because they say the insurgents who are facing off with India in Kashmir and those who target Afghanistan are related and can keep both borders burning at the same time.
India and Afghanistan share close political, cultural and economic ties, and India maintains an active intelligence network in Afghanistan, all of which has drawn suspicion from Pakistani officials.
When asked Thursday about whether the ISI and Pakistani military remained loyal to the country’s civilian government, Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, sidestepped the question. “That’s probably something the government of Pakistan ought to speak to,” Admiral Mullen told reporters at the Pentagon.
Jalaluddin Haqqani, the militia commander, battled Soviet troops during the 1980s and has had a long and complicated relationship with the C.I.A. He was among a group of fighters who received arms and millions of dollars from the C.I.A. during that period, but his allegiance with Osama bin Laden and Al Qaeda during the following decade led the United States to sever the relationship.
Mr. Haqqani and his sons now run a network that Western intelligence services say they believe is responsible for a campaign of violence throughout Afghanistan, including the Indian Embassy bombing and an attack on the Serena Hotel in Kabul earlier this year.
By MARK MAZZETTI and ERIC SCHMITT
American intelligence agencies have concluded that members of Pakistan’s powerful spy service helped plan the deadly July 7 bombing of India’s embassy in Kabul, Afghanistan, according to United States government officials.
The conclusion was based on intercepted communications between Pakistani intelligence officers and militants who carried out the attack, the officials said, providing the clearest evidence to date that Pakistani intelligence officers are actively undermining American efforts to combat militants in the region.
The American officials also said there was new information showing that members of the Pakistani intelligence service were increasingly providing militants with details about the American campaign against them, in some cases allowing militants to avoid American missile strikes in Pakistan’s tribal areas.
Concerns about the role played by Pakistani intelligence not only has strained relations between the United States and Pakistan, a longtime ally, but also has fanned tensions between Pakistan and its archrival, India. Within days of the bombings, Indian officials accused the Directorate of Inter-Services Intelligence, or ISI, of helping to orchestrate the attack in Kabul, which killed 54, including an Indian defense attaché.
This week, Pakistani troops clashed with Indian forces in the contested region of Kashmir, threatening to fray an uneasy cease-fire that has held since November 2003.
The New York Times reported this week that a top Central Intelligence Agency official traveled to Pakistan this month to confront senior Pakistani officials with information about support provided by members of the ISI to militant groups. It had not been known that American intelligence agencies concluded that elements of Pakistani intelligence provided direct support for the attack in Kabul.
American officials said that the communications were intercepted before the July 7 bombing, and that the C.I.A. emissary, Stephen R. Kappes, the agency’s deputy director, had been ordered to Islamabad, Pakistan’s capital, even before the attack. The intercepts were not detailed enough to warn of any specific attack.
The government officials were guarded in describing the new evidence and would not say specifically what kind of assistance the ISI officers provided to the militants. They said that the ISI officers had not been renegades, indicating that their actions might have been authorized by superiors.
“It confirmed some suspicions that I think were widely held,” one State Department official with knowledge of Afghanistan issues said of the intercepted communications. “It was sort of this ‘aha’ moment. There was a sense that there was finally direct proof.”
The information linking the ISI to the bombing of the Indian Embassy was described in interviews by several American officials with knowledge of the intelligence. Some of the officials expressed anger that elements of Pakistan’s government seemed to be directly aiding violence in Afghanistan that had included attacks on American troops.
Some American officials have begun to suggest that Pakistan is no longer a fully reliable American partner and to advocate some unilateral American action against militants based in the tribal areas.
The ISI has long maintained ties to militant groups in the tribal areas, in part to court allies it can use to contain Afghanistan’s power. In recent years, Pakistan’s government has also been concerned about India’s growing influence inside Afghanistan, including New Delhi’s close ties to the government of Hamid Karzai, the Afghan president.
American officials say they believe that the embassy attack was probably carried out by members of a network led by Maulavi Jalaluddin Haqqani, whose alliance with Al Qaeda and its affiliates has allowed the terrorist network to rebuild in the tribal areas.
American and Pakistani officials have now acknowledged that President Bush on Monday confronted Pakistan’s prime minister, Yousaf Raza Gilani, about the divided loyalties of the ISI.
Pakistan’s defense minister, Chaudhry Ahmed Mukhtar, told a Pakistani television network on Wednesday that Mr. Bush asked senior Pakistani officials this week, “ ‘Who is in control of ISI?’ ” and asked about leaked information that tipped militants to surveillance efforts by Western intelligence services.
Pakistan’s new civilian government is wrestling with these very issues, and there is concern in Washington that the civilian leaders will be unable to end a longstanding relationship between members of the ISI and militants associated with Al Qaeda.
Spokesmen for the White House and the C.I.A. declined to comment for this article. Pakistan’s ambassador to the United States, Husain Haqqani, did not return a call seeking comment.
Further underscoring the tension between Pakistan and its Western allies, Britain’s senior military officer said in Washington on Thursday that an American and British program to help train Pakistan’s Frontier Corps in the tribal areas had been delayed while Pakistan’s military and civilian officials sorted out details about the program’s goals.
Britain and the United States had each offered to send about two dozen military trainers to Pakistan later this summer to train Pakistani Army officers who in turn would instruct the Frontier Corps paramilitary forces.
But the British officer, Air Chief Marshal Sir Jock Stirrup, said the program had been temporarily delayed. “We don’t yet have a firm start date,” he told a small group of reporters. “We’re ready to go.”
The bombing of the Indian Embassy helped to set off a new deterioration in relations between India and Pakistan.
This week, Indian and Pakistani soldiers fired at each other across the Kashmir frontier for more than 12 hours overnight Monday, in what the Indian Army called the most serious violation of a five-year-old cease-fire agreement. The nightlong battle came after one Indian soldier and four Pakistanis were killed along the border between sections of Kashmir that are controlled by India and by Pakistan.
Indian officials say they are equally worried about what is happening on the Pakistan-Afghanistan border because they say the insurgents who are facing off with India in Kashmir and those who target Afghanistan are related and can keep both borders burning at the same time.
India and Afghanistan share close political, cultural and economic ties, and India maintains an active intelligence network in Afghanistan, all of which has drawn suspicion from Pakistani officials.
When asked Thursday about whether the ISI and Pakistani military remained loyal to the country’s civilian government, Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, sidestepped the question. “That’s probably something the government of Pakistan ought to speak to,” Admiral Mullen told reporters at the Pentagon.
Jalaluddin Haqqani, the militia commander, battled Soviet troops during the 1980s and has had a long and complicated relationship with the C.I.A. He was among a group of fighters who received arms and millions of dollars from the C.I.A. during that period, but his allegiance with Osama bin Laden and Al Qaeda during the following decade led the United States to sever the relationship.
Mr. Haqqani and his sons now run a network that Western intelligence services say they believe is responsible for a campaign of violence throughout Afghanistan, including the Indian Embassy bombing and an attack on the Serena Hotel in Kabul earlier this year.
Israeli Prime Minister Olmert resigns
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By Ann Talbot
Israeli Prime Minister Ehud Olmert has announced that he will resign as leader of the ruling Kadima party in September. His announcement follows mounting allegations of corruption.
Olmert has been dogged by corruption scandals since he came to power in 2006. The Israeli police are currently investigating six separate cases involving him. He has previously said that he would not stand down until charged. His decision to resign reflects new and more damaging allegations that emerged when New York businessman Moshe, or Morris, Talansky was questioned in an Israeli court.
According to the Jerusalem Post, a source close to Olmert told State Comptroller Micha Lindenstrauss about Olmert’s financial dealings with Talansky and provided documentary evidence of the transactions some months ago. The state comptroller’s office, which was already investigating other allegations against Olmert, began its own investigation and alerted the police.
The most serious allegation is that Olmert received hundreds of thousands of dollars in gifts and loans from Talansky. Talansky alleged that he gave $150,000 to Olmert to finance political campaigns. He claimed not to know what the money was used for, but hinted that some of it was used to fund Olmert’s extravagant lifestyle.
Talansky claims to have lent Olmert money on three occasions to pay for personal trips. There was a loan of $25,000, which was never repaid, to pay for a family holiday in Italy and Greece; $4,717.49 to pay for a stay at the Washington Ritz Carlton; and $15,000 expenses for another trip to the United States.
Following information from Talansky, the police then widened their investigation to include allegations that Olmert committed fraud while he was mayor of Jerusalem.
“According to the suspicions,” a police spokesman said, “during his tenure as Jerusalem mayor and trade and industry minister, Olmert would seek duplicate funding for his trips abroad from public bodies, including from the state, with each of them requested to fund the same trip.”
The police are said to be investigating the allegation that “considerable sums” from this double billing remained in a special account, which was then used to fund private travel abroad for Olmert and his family. This case has become known as “Olmert Tours.”
Records kept by Shula Zaken, Olmert’s personal secretary and aide for the last 30 years, are said to refer to Talansky’s financial dealings with Olmert under the name, “The Laundry Man.” Zaken is also under investigation for allegedly abusing her position to influence tax officials.
Talansky was questioned when he visited Israel earlier this year for Passover. The Israeli authorities initially tried to prevent the press reporting Talansky’s name or nationality. But when the New York Times published his name in May it became impossible to keep the lid on the story.
Talansky’s testimony has allowed the Israeli authorities to put pressure on Olmert’s lawyer Uri Messer and Zaken. Olmert has claimed that Messer and Zaken were responsible for handling Talansky’s donations. Messer claims that Zaken alone handled the money, which was kept in envelopes in her office.
Zaken has so far not cooperated with the investigations, but it is expected that both Messer and Zaken will be offered the opportunity to turn state’s evidence against Olmert. The police have now questioned Olmert four times.
In a separate case, the police are investigating appointments Olmert made while he was the minister for trade and industry. It is alleged that he appointed political associates to government bodies, including the Medium and Small Enterprises Authority. It is also alleged that Olmert arranged investment opportunities for friends while he was industry minister and may have granted special funding for a factory with which a former business partner was associated.
Still ongoing is the “Cremieux Street affair.” Olmert is alleged to have paid $325,000 below the market value for a property in Cremieux Street. The National Fraud Unit questioned Zaken for four hours about the purchase of this $1.2 million apartment. It has been suggested that Olmert speeded up the bureaucratic procedure for the developers while he was acting prime minister and received a discount in return.
One investigation has come to an end without charges. It was alleged that when he was finance minister, Olmert had tried to influence the sale of the state’s controlling share in Bank Leumi to the advantage of a friend. The police dropped this case last November, saying that they did not have sufficient evidence to bring charges.
Olmert’s political career goes back to the 1970s. In 1993 he became mayor of Jerusalem. Some of the corruption allegations date back to his decade in this office. He appears to have met Talansky during his campaign to become mayor. He worked closely with Ariel Sharon in the Likud party, and left Likud with Sharon in 2005 to form Kadima. When Sharon suffered a stroke in 2006, Olmert took over as leader.
Olmert has been a lame duck since Israel’s defeat at the hands of Hezbollah in 2006 after the Israeli army invaded Lebanon. An official inquiry criticised him for launching the invasion of Lebanon and his conduct of the war. The recent exchange of prisoners for the bodies of Israeli soldiers was an added humiliation.
Recent polls showed Olmert with an approval rating of only 14 percent and three out of five Israelis thought he should resign. Half of those polled considered him corrupt.
But Olmert is not alone. Israeli political life is notoriously corrupt and few leading politicians could withstand a close scrutiny of their financial affairs. Olmert’s dealings have become a public embarrassment, but they are symptomatic of the practices of the entire ruling elite. The way in which his case has blown up reveals the very sharp tensions that exist among this tiny layer, which is completely isolated from the mass of the population who have long since become alienated from official public life.
Olmert has been able to survive the debacle in Lebanon as long as he has because he had a certain political value both to the Israeli political elite and in Washington.
Like Sharon, he has always had a hawkish attitude toward the Palestinians. It was he who, as Sharon’s spokesman, declared that Israel was prepared to assassinate former PLO Chairman Yasser Arafat. But as prime minister he was associated with the call for a settlement with the Palestinians and Israel’s neighbours, especially Syria.
This suited the interests of Washington very well. It enabled the Bush administration to give the impression that a peace process was under way. This was important for the US’s allies in Europe and in winning support for the US amongst the Arab regimes—especially in the aftermath of the Iraq invasion.
While negotiations proceeded, it was possible to continue the process of creating a greater Israel by extending Jewish settlements, building a wall to isolate the Palestinians and launching military attacks on Palestinian civilians.
Olmert has stressed that he will continue negotiations with Syria as long as he remains prime minister. This has been seen by some in the media as a prospect of peace. Writing in the Guardian, Rachel Shabi suggested that Olmert could now go “hell for leather” for an agreement with the Syrians and the Palestinians. She quoted Haaretz columnist Akiva Eldar stating, “But now he doesn’t have to worry about consolidating his power as prime minister, he has a clear interest to do it, the mandate to do it and nothing to lose.”
“For Olmert,” Shabi concludes, “success would still depend on the willingness of Labour and Kadima allies to stand by him and effectively enable him to leave a legacy that might make Israelis—and Palestinians—forgive the rest. But by this analysis, Palestinian and Syrian partners on these parallel peace tracks should race with Olmert to get final status agreements on paper in the few remaining weeks of his premiership. It’s a small, rickety and bullet-ridden window, but in a few months it might well be replaced by an impenetrable concrete wall.”
Olmert does indeed seem to be racing toward an agreement with the Syrians. According to a Maariv report on Friday, the two sides are close to a deal. Syria and Israel would end the state of war between them, establishing normal diplomatic relations. On its part Israel would demilitarize the Golan Heights, while Syria would reduce the number of its troops stationed between the Golan Heights and Damascus.
However, far from a peace move, implicit in the deal would be a Syrian agreement to end its close relationship with Iran, which Jerusalem and Washington have in their sights. Olmert made it clear to the Syrians that they had to chose between the “Iranian grip” and their partnership in the “axis of evil,” and, as he put it, rejoining the “family of nations” in pursuit of peace and “economic development.”
Syria entered into talks after Israel bombed what they claimed was a nuclear site in Syria. Reaching an agreement with Israel offers the regime of Bashar Assad the opportunity of repairing relations with the US and Europe, especially France. Assad was welcomed to President Nicolas Sarkozy’s Mediterranean Forum meeting in July.
The purpose of the talks is to detach Syria from its alliance with Iran and to isolate Iran diplomatically in advance of a possible assault by Israel with US backing, or at the very least to place maximum pressure on Tehran to accept US hegemony in the region.
There is no doubt, however, that Olmert’s resignation is indicative of and will also herald a further shift to the right in official Israeli politics.
The candidates competing to replace Olmert as leader of Kadima both have strong right-wing credentials. Foreign Minister Tzipi Livni is currently the favourite to succeed Olmert. She is presented as a candidate untainted by corruption and has called on the coalition to “restore the public’s faith in Israeli politics.” A former Mossad agent, she has stressed her role in Olmert’s security cabinet.
On the Monday before Olmert resigned Livni staged a very public row with him in the Knesset in full view of the cameras. She accused him of giving too many concessions to Syria. Her display was necessary to consolidate her position against her main rival for leadership, Transport Minister Shaul Mofaz.
Livni has led the talks with the Palestinians and favours a two-state solution to the Palestinian question. Until her public row with Olmert, she was regarded as backing his negotiations with Syria.
Mofaz, who has taken a much harder line on the Golan Heights and Jerusalem, is a former chief of staff and defence minister. He is reputed to have told West Bank army commanders in 2001 that he wanted “10 slain Palestinians” in each territorial brigade area. According to the book Boomerang by journalists Ofer Shelah and Raviv Drucker, a senior officer pointed out at the time that Mofaz’s directive would amount to 70 Palestinians being killed each day.
On Thursday Mofaz warned the US not to soften its stance towards Iran after US diplomats met with Iranian officials. He met with Vice President Dick Cheney and Secretary of State Condoleezza Rice to protest the meeting. A spokeswoman for Mofaz said that he was “voicing Israel’s strong concerns.”
In June this year Mofaz said it was “inevitable” that Israel would attack a nuclear Iran.
Essentially the competition between Livni and Mofaz is about who can present themselves as the best war leader. But whoever wins the leadership contest, they must put together another coalition. The fragile Kadima party created by Sharon by winning the backing of a section of the Labor Party may not even survive a leadership contest.
Power may pass directly into the hands of Benjamin Netanyahu, leader of Likud. He was prime minister from 1996 to 1999 and served as finance minister under Sharon. He resigned from Sharon’s government in protest over the withdrawal from Gaza. Netanyahu has called for an immediate election. It is even possible that Mofaz might attempt to form a coalition with Netanyahu in return for the defence portfolio.
By Ann Talbot
Israeli Prime Minister Ehud Olmert has announced that he will resign as leader of the ruling Kadima party in September. His announcement follows mounting allegations of corruption.
Olmert has been dogged by corruption scandals since he came to power in 2006. The Israeli police are currently investigating six separate cases involving him. He has previously said that he would not stand down until charged. His decision to resign reflects new and more damaging allegations that emerged when New York businessman Moshe, or Morris, Talansky was questioned in an Israeli court.
According to the Jerusalem Post, a source close to Olmert told State Comptroller Micha Lindenstrauss about Olmert’s financial dealings with Talansky and provided documentary evidence of the transactions some months ago. The state comptroller’s office, which was already investigating other allegations against Olmert, began its own investigation and alerted the police.
The most serious allegation is that Olmert received hundreds of thousands of dollars in gifts and loans from Talansky. Talansky alleged that he gave $150,000 to Olmert to finance political campaigns. He claimed not to know what the money was used for, but hinted that some of it was used to fund Olmert’s extravagant lifestyle.
Talansky claims to have lent Olmert money on three occasions to pay for personal trips. There was a loan of $25,000, which was never repaid, to pay for a family holiday in Italy and Greece; $4,717.49 to pay for a stay at the Washington Ritz Carlton; and $15,000 expenses for another trip to the United States.
Following information from Talansky, the police then widened their investigation to include allegations that Olmert committed fraud while he was mayor of Jerusalem.
“According to the suspicions,” a police spokesman said, “during his tenure as Jerusalem mayor and trade and industry minister, Olmert would seek duplicate funding for his trips abroad from public bodies, including from the state, with each of them requested to fund the same trip.”
The police are said to be investigating the allegation that “considerable sums” from this double billing remained in a special account, which was then used to fund private travel abroad for Olmert and his family. This case has become known as “Olmert Tours.”
Records kept by Shula Zaken, Olmert’s personal secretary and aide for the last 30 years, are said to refer to Talansky’s financial dealings with Olmert under the name, “The Laundry Man.” Zaken is also under investigation for allegedly abusing her position to influence tax officials.
Talansky was questioned when he visited Israel earlier this year for Passover. The Israeli authorities initially tried to prevent the press reporting Talansky’s name or nationality. But when the New York Times published his name in May it became impossible to keep the lid on the story.
Talansky’s testimony has allowed the Israeli authorities to put pressure on Olmert’s lawyer Uri Messer and Zaken. Olmert has claimed that Messer and Zaken were responsible for handling Talansky’s donations. Messer claims that Zaken alone handled the money, which was kept in envelopes in her office.
Zaken has so far not cooperated with the investigations, but it is expected that both Messer and Zaken will be offered the opportunity to turn state’s evidence against Olmert. The police have now questioned Olmert four times.
In a separate case, the police are investigating appointments Olmert made while he was the minister for trade and industry. It is alleged that he appointed political associates to government bodies, including the Medium and Small Enterprises Authority. It is also alleged that Olmert arranged investment opportunities for friends while he was industry minister and may have granted special funding for a factory with which a former business partner was associated.
Still ongoing is the “Cremieux Street affair.” Olmert is alleged to have paid $325,000 below the market value for a property in Cremieux Street. The National Fraud Unit questioned Zaken for four hours about the purchase of this $1.2 million apartment. It has been suggested that Olmert speeded up the bureaucratic procedure for the developers while he was acting prime minister and received a discount in return.
One investigation has come to an end without charges. It was alleged that when he was finance minister, Olmert had tried to influence the sale of the state’s controlling share in Bank Leumi to the advantage of a friend. The police dropped this case last November, saying that they did not have sufficient evidence to bring charges.
Olmert’s political career goes back to the 1970s. In 1993 he became mayor of Jerusalem. Some of the corruption allegations date back to his decade in this office. He appears to have met Talansky during his campaign to become mayor. He worked closely with Ariel Sharon in the Likud party, and left Likud with Sharon in 2005 to form Kadima. When Sharon suffered a stroke in 2006, Olmert took over as leader.
Olmert has been a lame duck since Israel’s defeat at the hands of Hezbollah in 2006 after the Israeli army invaded Lebanon. An official inquiry criticised him for launching the invasion of Lebanon and his conduct of the war. The recent exchange of prisoners for the bodies of Israeli soldiers was an added humiliation.
Recent polls showed Olmert with an approval rating of only 14 percent and three out of five Israelis thought he should resign. Half of those polled considered him corrupt.
But Olmert is not alone. Israeli political life is notoriously corrupt and few leading politicians could withstand a close scrutiny of their financial affairs. Olmert’s dealings have become a public embarrassment, but they are symptomatic of the practices of the entire ruling elite. The way in which his case has blown up reveals the very sharp tensions that exist among this tiny layer, which is completely isolated from the mass of the population who have long since become alienated from official public life.
Olmert has been able to survive the debacle in Lebanon as long as he has because he had a certain political value both to the Israeli political elite and in Washington.
Like Sharon, he has always had a hawkish attitude toward the Palestinians. It was he who, as Sharon’s spokesman, declared that Israel was prepared to assassinate former PLO Chairman Yasser Arafat. But as prime minister he was associated with the call for a settlement with the Palestinians and Israel’s neighbours, especially Syria.
This suited the interests of Washington very well. It enabled the Bush administration to give the impression that a peace process was under way. This was important for the US’s allies in Europe and in winning support for the US amongst the Arab regimes—especially in the aftermath of the Iraq invasion.
While negotiations proceeded, it was possible to continue the process of creating a greater Israel by extending Jewish settlements, building a wall to isolate the Palestinians and launching military attacks on Palestinian civilians.
Olmert has stressed that he will continue negotiations with Syria as long as he remains prime minister. This has been seen by some in the media as a prospect of peace. Writing in the Guardian, Rachel Shabi suggested that Olmert could now go “hell for leather” for an agreement with the Syrians and the Palestinians. She quoted Haaretz columnist Akiva Eldar stating, “But now he doesn’t have to worry about consolidating his power as prime minister, he has a clear interest to do it, the mandate to do it and nothing to lose.”
“For Olmert,” Shabi concludes, “success would still depend on the willingness of Labour and Kadima allies to stand by him and effectively enable him to leave a legacy that might make Israelis—and Palestinians—forgive the rest. But by this analysis, Palestinian and Syrian partners on these parallel peace tracks should race with Olmert to get final status agreements on paper in the few remaining weeks of his premiership. It’s a small, rickety and bullet-ridden window, but in a few months it might well be replaced by an impenetrable concrete wall.”
Olmert does indeed seem to be racing toward an agreement with the Syrians. According to a Maariv report on Friday, the two sides are close to a deal. Syria and Israel would end the state of war between them, establishing normal diplomatic relations. On its part Israel would demilitarize the Golan Heights, while Syria would reduce the number of its troops stationed between the Golan Heights and Damascus.
However, far from a peace move, implicit in the deal would be a Syrian agreement to end its close relationship with Iran, which Jerusalem and Washington have in their sights. Olmert made it clear to the Syrians that they had to chose between the “Iranian grip” and their partnership in the “axis of evil,” and, as he put it, rejoining the “family of nations” in pursuit of peace and “economic development.”
Syria entered into talks after Israel bombed what they claimed was a nuclear site in Syria. Reaching an agreement with Israel offers the regime of Bashar Assad the opportunity of repairing relations with the US and Europe, especially France. Assad was welcomed to President Nicolas Sarkozy’s Mediterranean Forum meeting in July.
The purpose of the talks is to detach Syria from its alliance with Iran and to isolate Iran diplomatically in advance of a possible assault by Israel with US backing, or at the very least to place maximum pressure on Tehran to accept US hegemony in the region.
There is no doubt, however, that Olmert’s resignation is indicative of and will also herald a further shift to the right in official Israeli politics.
The candidates competing to replace Olmert as leader of Kadima both have strong right-wing credentials. Foreign Minister Tzipi Livni is currently the favourite to succeed Olmert. She is presented as a candidate untainted by corruption and has called on the coalition to “restore the public’s faith in Israeli politics.” A former Mossad agent, she has stressed her role in Olmert’s security cabinet.
On the Monday before Olmert resigned Livni staged a very public row with him in the Knesset in full view of the cameras. She accused him of giving too many concessions to Syria. Her display was necessary to consolidate her position against her main rival for leadership, Transport Minister Shaul Mofaz.
Livni has led the talks with the Palestinians and favours a two-state solution to the Palestinian question. Until her public row with Olmert, she was regarded as backing his negotiations with Syria.
Mofaz, who has taken a much harder line on the Golan Heights and Jerusalem, is a former chief of staff and defence minister. He is reputed to have told West Bank army commanders in 2001 that he wanted “10 slain Palestinians” in each territorial brigade area. According to the book Boomerang by journalists Ofer Shelah and Raviv Drucker, a senior officer pointed out at the time that Mofaz’s directive would amount to 70 Palestinians being killed each day.
On Thursday Mofaz warned the US not to soften its stance towards Iran after US diplomats met with Iranian officials. He met with Vice President Dick Cheney and Secretary of State Condoleezza Rice to protest the meeting. A spokeswoman for Mofaz said that he was “voicing Israel’s strong concerns.”
In June this year Mofaz said it was “inevitable” that Israel would attack a nuclear Iran.
Essentially the competition between Livni and Mofaz is about who can present themselves as the best war leader. But whoever wins the leadership contest, they must put together another coalition. The fragile Kadima party created by Sharon by winning the backing of a section of the Labor Party may not even survive a leadership contest.
Power may pass directly into the hands of Benjamin Netanyahu, leader of Likud. He was prime minister from 1996 to 1999 and served as finance minister under Sharon. He resigned from Sharon’s government in protest over the withdrawal from Gaza. Netanyahu has called for an immediate election. It is even possible that Mofaz might attempt to form a coalition with Netanyahu in return for the defence portfolio.
US unemployment rate rises to four-year high
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By Alex Lantier
The US unemployment rate rose to a seasonally adjusted, four-year high of 5.7 percent in July, according to August 1 figures released by the US Bureau of Labor Statistics (BLS). The number of officially unemployed people reached 8.8 million, up 1.6 million (1 percent) over the last year.
The official jobless rate does not include so-called “discouraged” workers who report having given up looking for work, or those who have been forced to work part-time for economic reasons. Unemployed and “discouraged” workers rose from 5.7 to 7 percent of the workforce in the last 12 months. Adding in workers forced to take part-time work, 10.8 percent of the US workforce was unemployed or underemployed in July, up 2.2 percent over the last year.
US non-farm payroll employment fell by 51,000 jobs in July, and has fallen by 463,000 in 2008. The declines are broad-based, affecting virtually all sectors of the economy.
Temporary employment, considered an indicator of future economic conditions, fell 29,000 in June; the sector has lost 185,000 jobs since January 2008. Retail trade continued to shed jobs, having lost 211,000 positions since its peak in March 2007.
Construction, heavily hit by rising housing inventories and the mortgage crisis, lost 22,000 jobs in July, bringing the total job losses since the peak employment level in September 2006 to 557,000. According to Commerce Department figures, construction spending fell 0.4 percent in July, after a similar 0.4 percent fall in June, to a seasonally adjusted annual rate of $1.0872 trillion.
Manufacturing employment fell by 35,000 in July and by 383,000 over the last 12 months, with notable declines in transportation equipment (8,000 job losses), wood products (4,000 job losses), and textile mills (3,000 job losses). The Institute for Supply Management (ISM) reported factory activity as showing no increase in July 2008, but noted that the July new orders index stood at 45.0, on a scale where a number under 50 indicates contraction. ISM survey director Norbert Ore told the Wall Street Journal, “We expect the third quarter to be quite slow.”
The only sectors that saw increased employment were health care (up 33,000 in July) and mining (up 10,000 in July), mostly in oil- and gas-related industries benefiting from high energy prices.
Restaurants have been particularly hard hit as consumers reduce leisure spending. Plano, Texas-based Metromedia Restaurant Group abruptly shut down hundreds of Bennigan’s and Steak and Ale restaurants nationwide on July 29, eliminating 9,200 jobs as part of Chapter 7 bankruptcy proceedings. The restaurants apparently required infusions of $100 million from parent company Metromedia to meet payroll and debt obligations over the last year. In March Forbes gave the net worth of Metromedia’s owner John Kluge as $9.5 billion.
Other restaurant chains filing for bankruptcy in 2008 include Bakers Square, Village Inn, and Old Country Buffet. Starbucks announced this week plans to cut 1,000 office jobs. This follows last month’s news that the global coffee retailer would close 600 store locations in the US after posting a net loss of $6.7 million during the second quarter of 2008. It also announced the closure of 61 of its 84 locations in Australia.
Airlines also are planning layoffs as they face massive increases in fuel prices and reductions in the number of travelers and flight routes. On July 22 United Airlines announced it would lay off 7,000 of its 52,500 workers by the end of 2009, amid plans to reduce 16 percent of United’s domestic capacity and cut 100 aircraft from its fleet.
On July 17 American Airlines announced it would furlough 900 flight attendants and 200 pilots, and lay off 1,300 of its 13,000 aircraft mechanics—even after the emergency grounding of its entire MD-80 aircraft fleet for wiring risks in March revealed serious problems in its maintenance operations.
Automakers GM and Ford are also preparing further layoffs, as they announced gigantic losses for the second quarter of 2008—$8.7 billion for Ford and $15.5 billion for GM, amid falls in monthly sales volume of 15 and 26 percent, respectively. They attributed these losses to falling demand for their larger, less fuel-efficient vehicles amid high gas prices, restructuring costs, and the effects of the credit crisis on their financing arms, which are scaling back leasing deals due to higher risks of consumer default.
Neither Ford nor GM has publicly announced restructuring plans, but on July 30 the press reported that GM planned to lay off at least 5,000 workers. GM has announced plans to cut its North American production capacity by 300,000 vehicles by next year, and is cutting shifts at plants in Moraine, Ohio and Shreveport, Louisiana.
Other carmakers are announcing substantial decreases in US sales and planned layoffs. Toyota’s July sales figures dropped 18.7 percent, and Nissan announced it would offer buyout packages to 6,000 employees at plants at Smyrna and Decherd, in Tennessee.
The effects of unemployment will be even more difficult on laid-off workers, as unemployment insurance covers fewer and fewer workers. According to Labor Department statistics quoted in a July 29 Wall Street Journal report, only 37 percent of US unemployed workers receive unemployment benefits, down from 55 percent in 1958 and 44 percent in 2001.
The Journal noted: “Those who don’t qualify include many part-time workers, people who quit or were fired, and workers who didn’t earn enough money in a one-year ‘base period’ that often excludes the most recent three to six months. Worker advocates say the New Deal-era system hasn’t been updated enough to reflect an age of more-frequent job changes, more part-time work and falling union membership.”
Fewer than 15 percent of low-wage workers get unemployment benefits, according to the Government Accountability Office.
By Alex Lantier
The US unemployment rate rose to a seasonally adjusted, four-year high of 5.7 percent in July, according to August 1 figures released by the US Bureau of Labor Statistics (BLS). The number of officially unemployed people reached 8.8 million, up 1.6 million (1 percent) over the last year.
The official jobless rate does not include so-called “discouraged” workers who report having given up looking for work, or those who have been forced to work part-time for economic reasons. Unemployed and “discouraged” workers rose from 5.7 to 7 percent of the workforce in the last 12 months. Adding in workers forced to take part-time work, 10.8 percent of the US workforce was unemployed or underemployed in July, up 2.2 percent over the last year.
US non-farm payroll employment fell by 51,000 jobs in July, and has fallen by 463,000 in 2008. The declines are broad-based, affecting virtually all sectors of the economy.
Temporary employment, considered an indicator of future economic conditions, fell 29,000 in June; the sector has lost 185,000 jobs since January 2008. Retail trade continued to shed jobs, having lost 211,000 positions since its peak in March 2007.
Construction, heavily hit by rising housing inventories and the mortgage crisis, lost 22,000 jobs in July, bringing the total job losses since the peak employment level in September 2006 to 557,000. According to Commerce Department figures, construction spending fell 0.4 percent in July, after a similar 0.4 percent fall in June, to a seasonally adjusted annual rate of $1.0872 trillion.
Manufacturing employment fell by 35,000 in July and by 383,000 over the last 12 months, with notable declines in transportation equipment (8,000 job losses), wood products (4,000 job losses), and textile mills (3,000 job losses). The Institute for Supply Management (ISM) reported factory activity as showing no increase in July 2008, but noted that the July new orders index stood at 45.0, on a scale where a number under 50 indicates contraction. ISM survey director Norbert Ore told the Wall Street Journal, “We expect the third quarter to be quite slow.”
The only sectors that saw increased employment were health care (up 33,000 in July) and mining (up 10,000 in July), mostly in oil- and gas-related industries benefiting from high energy prices.
Restaurants have been particularly hard hit as consumers reduce leisure spending. Plano, Texas-based Metromedia Restaurant Group abruptly shut down hundreds of Bennigan’s and Steak and Ale restaurants nationwide on July 29, eliminating 9,200 jobs as part of Chapter 7 bankruptcy proceedings. The restaurants apparently required infusions of $100 million from parent company Metromedia to meet payroll and debt obligations over the last year. In March Forbes gave the net worth of Metromedia’s owner John Kluge as $9.5 billion.
Other restaurant chains filing for bankruptcy in 2008 include Bakers Square, Village Inn, and Old Country Buffet. Starbucks announced this week plans to cut 1,000 office jobs. This follows last month’s news that the global coffee retailer would close 600 store locations in the US after posting a net loss of $6.7 million during the second quarter of 2008. It also announced the closure of 61 of its 84 locations in Australia.
Airlines also are planning layoffs as they face massive increases in fuel prices and reductions in the number of travelers and flight routes. On July 22 United Airlines announced it would lay off 7,000 of its 52,500 workers by the end of 2009, amid plans to reduce 16 percent of United’s domestic capacity and cut 100 aircraft from its fleet.
On July 17 American Airlines announced it would furlough 900 flight attendants and 200 pilots, and lay off 1,300 of its 13,000 aircraft mechanics—even after the emergency grounding of its entire MD-80 aircraft fleet for wiring risks in March revealed serious problems in its maintenance operations.
Automakers GM and Ford are also preparing further layoffs, as they announced gigantic losses for the second quarter of 2008—$8.7 billion for Ford and $15.5 billion for GM, amid falls in monthly sales volume of 15 and 26 percent, respectively. They attributed these losses to falling demand for their larger, less fuel-efficient vehicles amid high gas prices, restructuring costs, and the effects of the credit crisis on their financing arms, which are scaling back leasing deals due to higher risks of consumer default.
Neither Ford nor GM has publicly announced restructuring plans, but on July 30 the press reported that GM planned to lay off at least 5,000 workers. GM has announced plans to cut its North American production capacity by 300,000 vehicles by next year, and is cutting shifts at plants in Moraine, Ohio and Shreveport, Louisiana.
Other carmakers are announcing substantial decreases in US sales and planned layoffs. Toyota’s July sales figures dropped 18.7 percent, and Nissan announced it would offer buyout packages to 6,000 employees at plants at Smyrna and Decherd, in Tennessee.
The effects of unemployment will be even more difficult on laid-off workers, as unemployment insurance covers fewer and fewer workers. According to Labor Department statistics quoted in a July 29 Wall Street Journal report, only 37 percent of US unemployed workers receive unemployment benefits, down from 55 percent in 1958 and 44 percent in 2001.
The Journal noted: “Those who don’t qualify include many part-time workers, people who quit or were fired, and workers who didn’t earn enough money in a one-year ‘base period’ that often excludes the most recent three to six months. Worker advocates say the New Deal-era system hasn’t been updated enough to reflect an age of more-frequent job changes, more part-time work and falling union membership.”
Fewer than 15 percent of low-wage workers get unemployment benefits, according to the Government Accountability Office.
US telecommunications giant Verizon demands job and benefit cuts
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By a Verizon worker
Contracts covering 65,000 workers at the US telecommunications giant Verizon expire Saturday at midnight. Verizon executives are demanding that current and retired union workers accept massive health and pension concessions as well as greater flexibility to cut jobs and move workers.
Verizon has made extensive plans to continue operations in the event of a strike. Management employees from throughout the company will be relocated to work in areas affected by a possible strike. The company has also recruited retired supervisors to work during a strike. Contractors and non-union vendors have been hired and are being trained to do work normally performed by union employees.
Verizon employs 230,000 workers. It is one of two major telecommunications companies in the US providing landline, wireless, broadband and long distance service. The company is currently undertaking a massive upgrade to its network that will allow it to enter into the cable TV market.
The contract covers workers in Verizon’s landline division in the northeastern states and Washington, DC.
For their part, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have made it clear that they are willing to sacrifice the jobs and benefits of their members. The chief concern of the union bureaucracies is to maintain a minimum number of dues-paying members, regardless of their wages, benefits and working conditions. The CWA and IBEW are also reluctant to take any action that might interfere with their promotion of Democratic candidates in the November elections.
The unions have not informed their members of any specific bargaining demands. Instead, they have spoken in generalities about defending jobs and maintaining benefits.
Nor have they set a strike deadline. In the past, both the CWA and IBEW have allowed contract deadlines to come and go without calling a strike. They have put forward the absurd claim that by doing so they are hurting the company by forcing it to cover the costs of an anticipated strike.
If the union bureaucracy does call a strike, it will seek to use it to pressure management into allowing unionization of Verizon wireless and business divisions. To achieve this, the union leadership would be willing to agree to wage and benefit concessions for its current members and sub-standard pay and benefits for workers in newly unionized divisions.
The CWA signed a deal with AT&T, which accepted concessions in exchange for allowing workers in its wireless division to join the union. Since 2005, the CWA has been able to sign up 19,000 additional members.
Verizon is aiming to make its employees pay the cost of creating its new network by gutting health and pension benefits and holding down wages. In 2005, Verizon ended pension benefits for more than 50,000 management employees. At the same time, the company eliminated retiree health benefits for those managers with fewer than 15 years. The company is now seeking to impose similar cutbacks on its unionized work force.
By a Verizon worker
Contracts covering 65,000 workers at the US telecommunications giant Verizon expire Saturday at midnight. Verizon executives are demanding that current and retired union workers accept massive health and pension concessions as well as greater flexibility to cut jobs and move workers.
Verizon has made extensive plans to continue operations in the event of a strike. Management employees from throughout the company will be relocated to work in areas affected by a possible strike. The company has also recruited retired supervisors to work during a strike. Contractors and non-union vendors have been hired and are being trained to do work normally performed by union employees.
Verizon employs 230,000 workers. It is one of two major telecommunications companies in the US providing landline, wireless, broadband and long distance service. The company is currently undertaking a massive upgrade to its network that will allow it to enter into the cable TV market.
The contract covers workers in Verizon’s landline division in the northeastern states and Washington, DC.
For their part, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have made it clear that they are willing to sacrifice the jobs and benefits of their members. The chief concern of the union bureaucracies is to maintain a minimum number of dues-paying members, regardless of their wages, benefits and working conditions. The CWA and IBEW are also reluctant to take any action that might interfere with their promotion of Democratic candidates in the November elections.
The unions have not informed their members of any specific bargaining demands. Instead, they have spoken in generalities about defending jobs and maintaining benefits.
Nor have they set a strike deadline. In the past, both the CWA and IBEW have allowed contract deadlines to come and go without calling a strike. They have put forward the absurd claim that by doing so they are hurting the company by forcing it to cover the costs of an anticipated strike.
If the union bureaucracy does call a strike, it will seek to use it to pressure management into allowing unionization of Verizon wireless and business divisions. To achieve this, the union leadership would be willing to agree to wage and benefit concessions for its current members and sub-standard pay and benefits for workers in newly unionized divisions.
The CWA signed a deal with AT&T, which accepted concessions in exchange for allowing workers in its wireless division to join the union. Since 2005, the CWA has been able to sign up 19,000 additional members.
Verizon is aiming to make its employees pay the cost of creating its new network by gutting health and pension benefits and holding down wages. In 2005, Verizon ended pension benefits for more than 50,000 management employees. At the same time, the company eliminated retiree health benefits for those managers with fewer than 15 years. The company is now seeking to impose similar cutbacks on its unionized work force.
Government report shows sharp fall in US economic growth
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By Andre Damon
The US economy grew at a less-than-expected rate of 1.9 percent in the second quarter of this year, according to figures released Thursday by the Commerce Department. The department also announced revisions to its previous growth estimates, concluding that the US economy contracted for the first time since 1990 in the fourth quarter of 2007.
“We’re in a recession,” Allen Sinai, chief economist at Decision Economics Inc., told Bloomberg News. “It’s going to widen, it’s going to deepen.” The second-quarter growth figures were lower than the 2.3 percent predicted by a Bloomberg survey of economists.
The anemic second-quarter growth estimate is particularly ominous since it covers the period when US taxpayers received hundreds of dollars in rebate checks as a result of a $170 billion stimulus package submitted by the Bush administration and passed by Congress last February. The bounce in consumer spending turned out to be far less than expected, and the impetus to the growth rate for April through June resulting from the rebates will likely be followed by an even deeper slump in the coming months, as consumer spending retreats even further.
Personal consumption, which accounts for two-thirds of total spending, increased by 1.5 percent, slightly higher than the 0.9 percent increase in the first quarter. “The increase in real consumer spending was quite minimal, despite the massive fiscal stimulus,” John Lonski, chief economist at Moody’s Investor Service, told the New York Times. The economy would have contracted by 0.5 percent were it not for a surge in exports, largely the result of the slumping US dollar, which makes US exports relatively cheaper. Exports increased by 9.2 percent, even faster than the 5.1 increase in the first quarter. Imports dropped by 6.6 percent, compared with a 0.8 percent fall in the second quarter. This narrowed the trade deficit to its smallest level in seven years. The growth in exports added some 2.4 percentage points to the growth rate.
The housing sector continued to contract rapidly, with revenues falling by 15.6 percent after a drop of 25 percent in the first quarter.
While the Commerce Department initially estimated the growth rate for the fourth quarter of 2007 at 0.6 percent, in its latest report it revised the estimate downward to minus 0.2 percent, marking the first quarterly contraction of the US economy since 2000. The Commerce Department also announced a small reduction in first quarter 2008 growth estimate, from 1.0 percent to 0.9 percent.
Meanwhile, the financial crisis has only intensified. Merrill Lynch announced Tuesday that it plans to sell $30 billion in mortgage-backed securities at 22 percent of their original value, resulting in a $5.7 billion write-down. The deep discount at which Merrill Lynch was obliged to sell off these assets will place further pressure on the balance sheets of other financial institutions, resulting in tens of billions in additional debt writ-downs and losses.
The sale came only ten days after Merrill reported $9.4 billion in second quarter write-downs and a $4.6 billion loss for the quarter. To compensate for the latest bout of write-offs, the firm has announced an $8.5 billion share offering, bringing the total capital it has been forced to raise to $26 billion.
Deutsche Bank announced a $2.3 billion dollar write-down on Thursday, bringing its total write-downs for this year to over $5 billion. Moody’s, the investment rating agency, warned Thursday that the coming months will bring an intensification of write-downs as housing prices continue to fall and the economy deteriorates. Home prices are down by over 15 percent in the past year, according to the S&P/Case-Schiller index. Former Federal Reserve chairman Alan Greenspan said yesterday that the fall in home values was “nowhere near the bottom.”
In the same speech, Greenspan noted the precarious position of Fannie Mae and Freddie Mac, the giant mortgage finance companies, saying, “I think the ultimate solution is a nationalization of both Fannie and Freddie.”
The Labor Department said Thursday that claims for unemployment insurance jumped by 44,000 to 448,000 this week, the highest level in five years. The department is expected to announce a payroll decline of some 75,000 jobs for July, according to Bloomberg. This would bring total net payroll losses this year to over 500,000.
The number of US workers classified by the government as involuntarily employed part-time has reached 5.3 million, up by one million from a year ago. This figure includes both those who are looking for full-time work but cannot find it and those who have had their hours cut from full-time to part-time. The number of people who have had their hours reduced from full- to part-time at their current job has reached over 3.7 million, the highest figure on record.
“The change in working hours is the canary in the coal mine,” Susan J. Lambert, a professor at the University of Chicago, told the New York Times. “First you see hours get short, and eventually more people will get laid off.” If current layoff rates continue, 2008 will see a net jobs loss of over one million.
By Andre Damon
The US economy grew at a less-than-expected rate of 1.9 percent in the second quarter of this year, according to figures released Thursday by the Commerce Department. The department also announced revisions to its previous growth estimates, concluding that the US economy contracted for the first time since 1990 in the fourth quarter of 2007.
“We’re in a recession,” Allen Sinai, chief economist at Decision Economics Inc., told Bloomberg News. “It’s going to widen, it’s going to deepen.” The second-quarter growth figures were lower than the 2.3 percent predicted by a Bloomberg survey of economists.
The anemic second-quarter growth estimate is particularly ominous since it covers the period when US taxpayers received hundreds of dollars in rebate checks as a result of a $170 billion stimulus package submitted by the Bush administration and passed by Congress last February. The bounce in consumer spending turned out to be far less than expected, and the impetus to the growth rate for April through June resulting from the rebates will likely be followed by an even deeper slump in the coming months, as consumer spending retreats even further.
Personal consumption, which accounts for two-thirds of total spending, increased by 1.5 percent, slightly higher than the 0.9 percent increase in the first quarter. “The increase in real consumer spending was quite minimal, despite the massive fiscal stimulus,” John Lonski, chief economist at Moody’s Investor Service, told the New York Times. The economy would have contracted by 0.5 percent were it not for a surge in exports, largely the result of the slumping US dollar, which makes US exports relatively cheaper. Exports increased by 9.2 percent, even faster than the 5.1 increase in the first quarter. Imports dropped by 6.6 percent, compared with a 0.8 percent fall in the second quarter. This narrowed the trade deficit to its smallest level in seven years. The growth in exports added some 2.4 percentage points to the growth rate.
The housing sector continued to contract rapidly, with revenues falling by 15.6 percent after a drop of 25 percent in the first quarter.
While the Commerce Department initially estimated the growth rate for the fourth quarter of 2007 at 0.6 percent, in its latest report it revised the estimate downward to minus 0.2 percent, marking the first quarterly contraction of the US economy since 2000. The Commerce Department also announced a small reduction in first quarter 2008 growth estimate, from 1.0 percent to 0.9 percent.
Meanwhile, the financial crisis has only intensified. Merrill Lynch announced Tuesday that it plans to sell $30 billion in mortgage-backed securities at 22 percent of their original value, resulting in a $5.7 billion write-down. The deep discount at which Merrill Lynch was obliged to sell off these assets will place further pressure on the balance sheets of other financial institutions, resulting in tens of billions in additional debt writ-downs and losses.
The sale came only ten days after Merrill reported $9.4 billion in second quarter write-downs and a $4.6 billion loss for the quarter. To compensate for the latest bout of write-offs, the firm has announced an $8.5 billion share offering, bringing the total capital it has been forced to raise to $26 billion.
Deutsche Bank announced a $2.3 billion dollar write-down on Thursday, bringing its total write-downs for this year to over $5 billion. Moody’s, the investment rating agency, warned Thursday that the coming months will bring an intensification of write-downs as housing prices continue to fall and the economy deteriorates. Home prices are down by over 15 percent in the past year, according to the S&P/Case-Schiller index. Former Federal Reserve chairman Alan Greenspan said yesterday that the fall in home values was “nowhere near the bottom.”
In the same speech, Greenspan noted the precarious position of Fannie Mae and Freddie Mac, the giant mortgage finance companies, saying, “I think the ultimate solution is a nationalization of both Fannie and Freddie.”
The Labor Department said Thursday that claims for unemployment insurance jumped by 44,000 to 448,000 this week, the highest level in five years. The department is expected to announce a payroll decline of some 75,000 jobs for July, according to Bloomberg. This would bring total net payroll losses this year to over 500,000.
The number of US workers classified by the government as involuntarily employed part-time has reached 5.3 million, up by one million from a year ago. This figure includes both those who are looking for full-time work but cannot find it and those who have had their hours cut from full-time to part-time. The number of people who have had their hours reduced from full- to part-time at their current job has reached over 3.7 million, the highest figure on record.
“The change in working hours is the canary in the coal mine,” Susan J. Lambert, a professor at the University of Chicago, told the New York Times. “First you see hours get short, and eventually more people will get laid off.” If current layoff rates continue, 2008 will see a net jobs loss of over one million.
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