The GOP's crowded closet

The GOP's crowded closet
By Joe Conason
The party's culture of concealment has led to embarrassment and personal destruction. Isn't it about time for the right to cure its homophobia?

Copyright by Salon.com
http://www.salon.com/opinion/conason/2007/08/31/gay_republicans/index.html?source=email



Aug. 31, 2007 | "Is everybody gay?"

That was the cry of the lovelorn schoolteacher in the classic 1997 film "In and Out," after her diffident fiancé reveals his true orientation (and dumps her for Tom Selleck). Ten years later, more than a few discombobulated Republicans must be muttering the same question, despite the fervent denial of Sen. Larry "Wide Stance" Craig that he is, indeed, gay. As one embarrassing episode follows another, with almost predictable regularity, perhaps it is time for Republicans and conservatives to ask themselves an obvious question: What makes the Republican Party -- and the conservative movement more generally -- so attractive to closeted homosexual men?

Somewhere in the textbooks of psychosexual pathology there may be a straightforward answer, so to speak. Does the party draw closeted men because they can hide behind Republican homophobia? Or does the party promote homophobia as a political ruse while closeted men run the show? Whatever the answer, the result is routine humiliation and personal destruction. Even worse, the party's culture of concealment encourages right-wing gay-bashing, such as Tucker Carlson's grotesque boast that he and another adolescent thug beat up a gay man who "bothered" him in a bathroom years ago.

Telling such manly tales may relieve the insecurities of Republicans who must contemplate the ever-mounting archive of homosexual history in their party's ample closet. But only Republicans who are truly in denial can ignore the long parade now led by the reluctant Craig -- a conga line of right-leaning queens that dates all the way back to the late Roy Cohn, Joe McCarthy's infamous henchman and an intimate friend of the Reagans'. Perhaps, like Cohn, today's closeted Republicans believe that they aren't really gay at all, except for a few minutes in bed (or in the men's room).

No matter how Cohn deluded himself about his sexuality, however, he was among the founders of modern conservatism, along with late fundraiser and activist Marvin Liebman, who finally came out and denounced the homophobia of the right several years before his death. Both of them lived to witness the conservative resurgence of the Reagan era, led by the likes of Terry Dolan, who operated the National Conservative Political Action Committee from deep within his lifelong closet, attacking "the growing homosexual movement" until not long before he died of AIDS, and Arthur Finkelstein, the renowned Republican political consultant who worked for the NCPAC and dozens of Republican senators, often emphasizing their opposition to gay rights and in particular to gay marriage -- at least until three years ago, when Finkelstein married his male partner in their home state of Massachusetts.

Hypocritical as Finkelstein may be in his mercenary way, at least he is no longer living a lie, having been outed more than a decade ago in the pages of Boston Magazine. Over the past few years, the frequency of outing on the Republican side of the aisle has intensified.

On the first day of the party's New York convention in 2004, the closet doors were flung open again when Rep. Ed Schrock, a Republican from Pat Robertson's home district in Virginia, was forced to drop his bid for reelection. The outing Web site BlogActive.com exposed the secret homosexual life of the 63-year-old retired career Navy officer, Vietnam veteran and member of the House Armed Services Committee.

Hiding in the next Republican closet to be aired out was Jim West, then mayor of Spokane, Wash., an important politician in the Northwest with a strong reputation for opposing gay rights and advocating the removal of gay teachers from schools and daycare centers. In 2005, the Spokane Spokesman-Review revealed that West had been leading a double life, trolling for male sexual partners on the Internet and allegedly abusing two teenage boys who came under his care as a Boy Scout leader. These gamy stories led to West's ouster as mayor by the end of the year. (He died of cancer several months later.)

Then in 2006 came the stunning Mark Foley scandal, which featured the curious "Don't ask, don't tell" behavior of the Republican congressional leadership when confronted with evidence that the Florida representative was pursuing teenage male pages. The Republicans seemed to hope that they could conceal Foley's creepy behavior toward the boys in their care until after the midterm elections. Thanks to Lane Hudson, the gay rights activist who disclosed Foley's misconduct to the media, that scheme backfired badly. The reverberations amplified perceptions of the Republican Congress as decadent and self-serving, leading to the midterm debacle that returned control of Capitol Hill to the Democrats.

The November 2006 election results had scarcely been confirmed when a former male prostitute named Mike Jones convincingly accused right-wing evangelical preacher Ted Haggard of joining him in narcotics-fueled sex romps. Following the familiar cycle of denial and confession, Haggard stepped down as the head of his Colorado Springs, Colo., church and as president of the National Association of Evangelicals, a position he had not hesitated to use on behalf of Republican candidates, notably including George W. Bush. Until his downfall, Haggard had participated in a weekly telephone conference with Bush and other evangelical leaders. The White House and his former comrades on the religious right sought to downplay Haggard's influence after his confession to "sexual immorality."

Around that same time, Michael Rogers of BlogActive.com -- the gay blogger who outed Schrock in 2004 -- posted the first allegations concerning Larry Craig's misbehavior in men's rooms around the country. Having learned about Craig many months earlier from men who reported their encounters with him, Rogers had been warning as early as January 2006 that he was planning to out a senator. His initial reports on Craig attracted the attention of the Idaho media, which nevertheless held back the story until the senator's arrest in a Minnesota men's room and misdemeanor plea became public.

The Craig scandal overshadowed still another embarrassing saga from the closets of the red states. During the first week of August, Glenn Murphy, a Republican county chairman from Indiana, mysteriously stepped down as president of the Young Republican National Federation. In a letter to the nation's Young Republican leaders, he claimed that he was obliged to resign because of a pending major business opportunity. That explanation seemed unlikely in light of news concerning an investigation of Murphy for sexually molesting another man after a party. That young gentleman, a guest in a house where Murphy was staying, awoke the next morning to find the chairman's mouth on his genitalia.

Murphy's star may no longer rise, but his tale is a portent for the future. So long as Republicans promote homophobia, the party's closets will be crowded.

After death, they depart? Widows face deportation

After death, they depart? Widows face deportation
Copyright by The Associated Press
August 31, 2007


SAN FRANCISCO -- Jacqueline Coats' husband drowned after he dove into a Pacific Ocean riptide to rescue two boys. Now the immigrant from Kenya might be forced to leave the United States because he died before filing her residency application.
She is among more than 80 foreign-born widows across the nation who face possible deportation because their husbands died before immigration paperwork was approved. Some attorneys want to challenge the government's policy of rejecting green card requests if an immigrant's American spouse dies before the application is processed. At least one lawyer plans to file a class-action lawsuit.

A group of California state lawmakers filed a bill in January asking the Legislature to grant Coats legal status, but similar measures for other immigrants have seldom passed. The government has also generally denied applications for permanent residence for surviving spouses of U.S. citizens if the death occurs during the first two years of marriage.

Thompson to run for president

Thompson to run for president
Copyright by The Associated Press
August 31, 2007


DES MOINES, Iowa -- Republican Fred Thompson will officially launch his presidential bid Sept. 6.
''I believe that there are millions of Americans who know that our security and prosperity are at risk if we don't address the challenges of our time; the global threat of terrorism; taxes and spending that will bankrupt future generations, and a government that can't seem to get the most basic responsibilities right for its citizens,'' the former Tennessee senator and ''Law & Order'' actor said in a statement Thursday.

Thompson, 65, is vying to be seen as the most consistent mainstream conservative in the race.

Thompson brings to the eight-man GOP field a right-leaning Senate voting record with a few digressions from GOP orthodoxy and a healthy dose of Hollywood star power.

Earlier this year, Thompson saw his popularity soar in polls when he acknowledged he was considering a run.

Hillary tells Letterman: Bill looked into being her veep

Hillary tells Letterman: Bill looked into being her veep
Copyright by The Associated Press
August 31, 2007



NEW YORK -- Hillary Rodham Clinton has already had to forgo one potential running mate -- her husband.

Asked by talk-show host David Letterman if Bill Clinton could serve as her vice president should she be elected to the White House, the former first lady acknowledged that he could not.

''Believe me,'' she joked, ''he looked into that.''

She also remarked that if the Constitution didn't forbid a president from a third term, ''he might be running.''

Such easy banter marked Clinton's seventh appearance on ''The Late Show,'' which was celebrating its 14th anniversary on CBS. She first appeared on Feb. 14, 1994, when Letterman's mother, Dorothy, interviewed her briefly from the Winter Olympics in Norway.

On Thursday's show, Clinton recounted a summer in Alaska during which she donned boots and an apron to gut salmon with a spoon.

''Best preparation for being in Washington that you can possibly imagine,'' she joked.

Clinton talked shop, too, discussing the need for campaign finance reform, how to pull troops out of Iraq and the importance of caring for wounded veterans. She said that while resistance to a female commander in chief has diminished, it hasn't disappeared.

''I think it's not so much that people don't think a woman can do the job, it's just that we've never done it before,'' she said. ''I'm not running because I'm a woman; I'm running because I think I'm the best-qualified and experienced person who can do the job. But I know that it's a big deal that I might be the first woman president.''

Clinton also read a ''Top Ten List'' of tongue-in-cheek campaign promises, including No. 3: ''We will finally have a president who doesn't mind pulling over and asking for directions.''

International Herald Tribune Editorial - Dishonesty about Abu Ghraib

International Herald Tribune Editorial - Dishonesty about Abu Ghraib
Copyright by The International Herald Tribune
Published: August 30, 2007


We would have been hard pressed to think of a more sadly suitable coda to the Bush administration's mishandling of the Abu Ghraib nightmare than Tuesday's verdict in the court-martial of the only officer to be tried for the abuse, sexual assault and torture of prisoners that occurred there in 2003.

The verdict was a remix of the denial of reality and avoidance of accountability that the government has used all along to avoid the bitter truth behind Abu Ghraib: The abuses grew out of President George W. Bush's decision to ignore the Geneva Conventions and American law in handling prisoners after Sept. 11, 2001.

The man on trial, Lieutenant Colonel Steven Jordan, was not a career officer. He was one of a multitude of reservists pressed into Iraq duty, many of them for jobs beyond their experience or abilities. A military jury of nine colonels and a brigadier general decided that he was not to blame for the failure to train or supervise the Abu Ghraib jailers and acquitted him on all charges related to the abuse. He was convicted only of disobeying an order to keep silent about Abu Ghraib.

Our purpose is not to second-guess the verdict. Rather, we fear that this and the other Abu Ghraib trials have served no larger purpose than punishing 11 low-ranking soldiers. Not one officer has been punished beyond a reprimand, and there has been even less accountability at higher levels. Bush, Vice President Dick Cheney, former Defense Secretary Donald Rumsfeld and other top officials have claimed that the abuses at Abu Ghraib were the disconnected acts of a small number of sociopaths. It's clear that is not true.

Abusive interrogations, many of them amounting to torture, were first developed for Guantánamo Bay, Cuba, after Bush declared that international and American law did not protect members of Taliban or Al Qaeda, or any other foreigner he chose to designate as an "unlawful enemy combatant." Once the signal was sent that prisoners in the "war on terror" were not entitled to decent treatment, cynical lawyers conjured up perverse legal arguments to ensure that the jailers' bosses would not be prosecuted for abusing them. The techniques and attitudes developed in Guantánamo Bay were exported to Afghanistan, and then to Iraq.

Pentagon officials say they have learned the bitter lessons of Abu Ghraib. Their civilian bosses clearly have not. The Military Commissions Act of 2006 did not provide adequate protection to military prisoners, and it gave the CIA carte blanche to run overseas prisons to which anonymous men are sent for indefinite detention and abuse. In July, Bush issued an executive order reaffirming his policy of ignoring the Geneva Conventions when he chooses.

The need to be honest about Abu Ghraib and to correct the abuses at military and CIA prisons is not only about upholding the law and American values. It is about the safety of American soldiers. Every abuse the United States visits on detainees increases the risk of American soldiers being abused in foreign prisons. If humanity and law are not reasons enough to end the detainee abuse, then it should be done for the cause that Bush invokes daily: supporting the troops.

International Herald Tribune Editorial - No time for threats

International Herald Tribune Editorial - No time for threats
Copyright by The International Herald Tribune
Published: August 30, 2007


President Nicolas Sarkozy of France made the wrong gesture at the wrong time by brandishing the possible use of force against Iran's nuclear weapons program in his first major foreign policy address. The United States and its allies need to be stepping up their efforts to resolve the serious dangers posed by Iran through comprehensive negotiations and increased international economic pressure, not by talking about military action.

Sarkozy, who has previously said that France would not join Washington in military action against Iran, did not exactly endorse an attack on Iran's nuclear facilities in Monday's speech. He asserted that a nuclear-armed Iran would be "unacceptable" and reaffirmed support for the diplomatic initiative by the United States, France and other world powers. That initiative involves the imposition of UN-mandated sanctions against Iran while offering significant political and economic benefits if Iran stops enriching uranium. It is a deal Tehran so far has refused.

What's scary is that his comments may reflect his understanding of where U.S. policy is headed. Far closer to Washington than his predecessor, Sarkozy just spent time with President George W. Bush on vacation in Maine. His remarks, reflecting his blunt, no-nuance style, will be read as a warning to Tehran and to countries reluctant to increase the penalties for Iran's nuclear ambitions. The message: If the diplomatic initiative fails, Iran will have nuclear weapons or there will be military action to prevent it. Bush added to the bullying Wednesday by suggesting the nuclear threat from Iran was a justification for keeping American troops in Iraq.

Unvarnished comments like Sarkozy's are likely to backfire in Iran, stoking nationalist sentiment to the advantage of hard-line leaders, like President Mahmoud Ahmadinejad, who stand up to the West and resist compromise. They may also be read by Bush administration hawks as a sign of growing European acceptance of the military option.

France has shown impressive diplomatic resolve and should be cashing that in for further diplomatic pressure on Iran. Sarkozy should not give Bush any excuse to lessen the diplomatic push.

The chance of persuading Tehran to forsake nuclear weapons at this point may be slim. But the international community has at least one more opportunity to intensify sanctions. Over the past few years, the United States, Britain, France and Germany have made remarkable strides in forging an international consensus opposed to Iran's nuclear weapons program. But for that to translate into effective sanctions, the UN Security Council must remain united.

Tehran made a deal this month with UN inspectors to resolve questions over its nuclear program that is just another pretense of addressing international concerns. China and Russia, the main obstructionists on the Security Council, will try to use that deal as another excuse to resist tougher sanctions. The United States and its allies must creatively push for the maximum sanctions possible. This is the time for robust diplomacy, not threats.

First Gay Couple Legally Married in Iowa

First Gay Couple Legally Married in Iowa
By HENRY C. JACKSON
Copyright © 2007, The Associated Press
11:07 AM CDT, August 31, 2007


DES MOINES, Iowa - A minister married two men outside his Iowa home Friday morning, sealing the state's first legal same-sex wedding. Less than 24 hours earlier, a judge had thrown out Iowa's ban on gay marriage.

The Rev. Mark Stringer declared college students Sean Fritz and Tim McQuillan legally wed.

"This is it. We're married. I love you," Fritz told McQuillan after the ceremony on the front lawn of the Unitarian minister's home in Des Moines.

On Thursday, Polk County Judge Robert Hanson ruled that Iowa's 1998 Defense of Marriage Act, which allowed marriage only between a man and a woman, violated the constitutional rights of due process and equal protection of six gay couples who had sued.

The ruling cleared the way for gay couples across the state to apply for marriage licenses in Polk County, and more than a dozen had by Friday morning.

The window of opportunity could be narrow, though.

County attorney John Sarcone promised a quick appeal, and he immediately asked Hanson for a stay that would prevent gays and lesbians from getting marriage licenses until the appeal was resolved. A hearing on the stay request is likely next week, said Camilla Taylor, an attorney with Lambda Legal, a New York-based gay rights organization.

In the meantime, the applications began rolling in.

The marriage license approval process normally takes three business days, but couples can pay a $5 fee and get a judge to sign a waiver allowing them to skip the waiting period.

That's what Iowa State University students Fritz and McQuillan did.

"We're both in our undergrad programs and we thought maybe we'd put it off until applying at graduate school, but when this opportunity came up we thought maybe we wouldn't get the opportunity again," Fritz said. "Maybe the chance won't come again."

Friday morning, with the waiver and marriage license in hand, Stringer married the two men, concluding the ceremony by saying, "This is a legal document and you are married."

The two students then kissed and hugged.

The Short View Fed Rates and Commercial Paper By John Authers

The Short View Fed Rates and Commercial Paper By John Authers
Copyright The Financial Times Limited 2007
Published: August 31 2007 03:00 | Last updated: August 31 2007 03:00


The market expects Ben Bernanke to do his duty. The message to the US Federal Reserve could not be clearer. Traders expect a cut in the Fed Funds rate.

But the Fed chairman and his colleagues face a deep dilemma as they meet in Jackson Hole today. Those very expectations provide a strong reason for them to resist the calls.

The expectations can be seen in the renewed flight to the safety of the shortest dated Treasury securities, which seldom vary far from the Fed's target Fed Funds rate. Yields on 3-month T-bills are at 3.6 per cent. The Fed Funds rate is 5.25 per cent. Futures imply that, in two months, Fed Funds will be down to 4.75 per cent.

There are good reasons for a cut. One of the three specific reasons for setting up the Fed, listed in the Federal Reserve Act of 1913, was to "afford means of rediscounting commercial paper" - extending short-term loans.

Banks have acute problems with commercial paper, the short- term debt that underpins many transactions. The amount they have raised this way has fallen $250bn (£124bn) in three weeks.

Since the New Deal, the Fed has also had to pursue "full employment". Early indicators suggest that unemployment is rising. Initial US jobless claims have risen five weeks in a row. That also could justify a cut.

The problem for the Fed is that expectations seem to reflect a cocksure certainty that a "Bernanke Put" is in force. A "put" option allows you to sell for a fixed price: the phrase refers to the belief that the Fed will cut to bail out the stock market if share prices fall.

The surge in Fed Funds futures immediately followed the drop in US financials' share prices.

This is no coincidence. The market assumes that distress for financial institutions guarantees rate cuts in its wake. This implies no downside for taking stupid risks and is toxic for the Fed's credibility.

The Fed governors may need that fresh mountain air.

Financial Times Editorial Comment: The scramble for power in Pakistan

Financial Times Editorial Comment: The scramble for power in Pakistan
Copyright The Financial Times Limited 2007
Published: August 30 2007 19:48 | Last updated: August 30 2007 19:48



The logjam created by the current, lingering episode of military rule in Pakistan looks as though it is finally breaking up. A supreme court decision last week authorised the return of Nawaz Sharif, the exiled prime minister deposed in 1999 by General Pervez Musharraf. Benazir Bhutto, a rival former premier-in-exile, is meanwhile close to cutting a deal with the regime to enable her return, to Pakistan and to office. Ms Bhutto’s part of the bargain is to back Gen Musharraf’s continuing as president, but not as army chief of staff.

There is, in all this fevered manoeuvring, a great deal of venal opportunism, as well as an outbreak of pots calling kettles black. All concerned have reached this juncture as the result of a popular backlash against dictatorship in the streets of Pakistan that has forced supine institutions such as the judiciary and parliament to respond.

Therein lies the best and most realistic hope for rescuing Pakistan from a slide into failed statehood, marked by the spread of jihadi extremism under military tutelage.

Gen Musharraf is part of the problem, not the solution, which, furthermore, requires an open contest rather than the stitch-up he is negotiating with Ms Bhutto. Even if he surrenders his army command, if he is selected for a new term as president by the outgoing parliament – with a pro-regime majority from rigged polls in 2002 – he will have no legitimacy and neither will she.

Mr Sharif may actually hold the stronger position in this scramble home from banishment. But he and Ms Bhutto, having both twice made a mess of governing Pakistan, need to show more than a neo-feudal sense of entitlement and an ability to temporise with jihadis and generals if either is to lead Pakistan out of encroaching chaos.

The first need is for new national and provincial assemblies, freely elected. If they select Mr – not General – Musharraf as president, so be it. But they must also reform the constitution to reinstate the powers of parliament and the prime minister absorbed by the general-as-president, as well as the independence of the judiciary. That is already being vigorously asserted by the supreme court, which is the proper body to decide on Ms Bhutto’s return – not Gen Musharraf.

The struggle against Islamist extremism needs the democratic reinvigoration of Pakistan’s institutions. Rule by the generals may look neater. But by parasitically monopolising scarce resources, licensing jihadism in Kashmir and Afghanistan and clinging on to power, they are assisting in the Talibanisition of Pakistan.

Basra to Helmand: from the frying pan into the fire

Basra to Helmand: from the frying pan into the fire
By Philip Stephens
Copyright The Financial Times Limited 2007
Published: August 31 2007 03:00 | Last updated: August 31 2007 03:00


Britain's government has a problem. It wants to get out of Iraq without reneging on its international obligations or rupturing its relationship with Washington. The answer, some think, is simple. Withdraw the troops from Basra and redeploy them in the fight against the Taliban in southern Afghanistan.

George W. Bush would still be miffed. But the US president is isolated now even among Republicans. By sending reinforcements to Afghanistan, Gordon Brown would avoid the charge of shirking Britain's responsibilities. Better still, the prime minister would leave behind an unpopular, and hopeless, war to strengthen Britain's contribution to a conflict that can still be won.

That, anyway, is the theory. Sounds neat? In some respects it is. Most obviously, the much-reduced British force in Basra cannot quell the bitter struggle between rival Shia groups in southern Iraq. Iraqi government forces likewise are no match for the local militias. For all their skill and courage, the remaining 5,500 British soldiers, soon to be confined to a single base at Basra airport, struggle to defend themselves.

It is clear too that their 7,000 comrades in Afghanistan's Helmand province are in sore need of reinforcement. Nato is fighting a high intensity war against a resurgent Taliban. Most members of the Nato-led International Security Assistance Force baulk at sending forces to the south. The Americans aside, that leaves the burden with the British and Canadians.

Britain's over-stretched army lacks the resources to fight on two fronts. As casualties mount - running at a higher rate now in Afghanistan than Iraq - its commanders want Mr Brown to choose his war.

Politics draws the same conclusion. Iraq belongs to Mr Bush and the departed Tony Blair. Afghanistan is in a different category. The Taliban provided the safe haven from which al-Qaeda planned the atrocities of September 11, 2001. The west's intervention in support of Hamid Karzai's government has the vital legitimacy that flows from the backing of the United Nations.

Thus Menzies Campbell, who as leader of the Liberal Democrats has been one of the most consistent and trenchant opponents of the Iraq war, backs further deployments to Afghanistan. If Iraq is a bad war, Afghanistan is a good one.

As it happens, Islamist extremism in that part of the world also has a particular relevance to Britain. As David Miliband, Mr Brown's foreign secretary, said the other day, most of the domestic terror plots in Britain can be traced back one way or another to the Pashtun tribal lands straddling Pakistan and Afghanistan.

At this point seemingly impeccable logic collides with dismal reality. It is one thing to say that Britain can do little more in Iraq. That the war in Afghanistan is "winnable" is a much more debatable proposition. The answer depends on, among other things, the definition, never spelt out, of what constitutes victory.

A reasonable assumption would be that winning means the establishment of a stable state with the political structures and the security capabilities to deal with violent Islamism. Not a shiny new democracy on the western model - Afghanistan's tribal roots run too deep - but a moderately pluralistic society operating under the rule of law and with a functioning economy.

By that yardstick, Nato and its allies are losing. Tactical military successes against jihadi fighters in southern Afghanistan have been just that - tactical. The strategic advantage lies with the Islamists. The Taliban has a chilling adage: its enemies have watches. It has time.

A measure of the west's failure came this week with the latest UN figures on Afghanistan's opium production. Concentrated in the south, and nurtured by the Taliban, this year's crop rose by 34 per cent. On the UN's estimate Afghanistan is now the source of more than nine-tenths of the world's heroin. Opium accounts for more than half of Aghanistan's economic output and more than three-quarters of its exports. The Taliban takes a large slice of the profits.

The explosion in poppy cultivation speaks to a longer litany of strategic errors since 2001. Washington started out well enough. The initial victory of the Northern Alliance was followed by a determined effort to hand over the country to an Afghan government. At the Bonn conference, the US actively engaged Afghanistan's neighbours - notably Iran and Russia - to underwrite stability. Security, it was promised, would be underpinned by massive economic reconstruction.

Hubris replaced common sense once the Bush administration decided to invade Iraq. Little effort was made to establish security south of Kabul, aid flows were reduced to a trickle and civilian reconstruction was neglected. Iran was cast into darkness as part of the axis of evil. Little wonder the Taliban and its allies regrouped.

There is more, though, to the west's failure than the Bush administration's arrogance and incompetence. I have often heard European politicians describe Afghanistan as an existential test of Nato's, and thus of the west's, resolve in the fight against violent Islamism. They are right.

What is missing is the shared strategic analysis and resolve to turn tactical victories into long-term advantage. That would mean admitting that the war is rooted as much in the tribal and religious politics of Pakistan as in Afghanistan; or that final resolution will depend as much on settlement of the half-century-old dispute over Kashmir as on military victories in Helmand.

All this is too complicated, too long-term, too hard to explain to impatient voters. The west's politicians know that they cannot afford to lose to the Taliban, but are not prepared to ask for the sacrifices needed to win. They talk of victory but will not admit the price in blood and treasure. Nato's forces are thus hamstrung by theological wrangling over the alliance's mission. Civilian aid is a fraction of what it needs to be. And while the west looks impatiently at its watch, the Taliban can afford to bide its time.

So Mr Brown should think hard before being seduced by seemingly neat solutions. As it happens, I do not think he is about to announce a sudden exit from Iraq. The prime minister will seek an orderly withdrawal from Basra. Before he despatches these brave soldiers to Helmand, though, Mr Brown must think hard about their mission. Without clear strategic purpose, the west is destined to discover that legitimate wars can also be lost. It would be more than a pity if, two or three years hence, we are witnessing another ignominious retreat.

Blow as two ‘Muni WiFi’ schemes fail

Blow as two ‘Muni WiFi’ schemes fail
By Chris Nuttall in San Francisco
Copyright The Financial Times Limited 2007
Published: August 31 2007 02:07 | Last updated: August 31 2007 02:07


The “Muni WiFi” movement has been dealt a double blow with the collapse of its San Francisco and Chicago schemes to provide blanket wireless coverage.

The San Francisco scheme – which fell apart on Wednesday night after Earthlink, the internet service provider, said it was pulling out of a contract to build the city’s WiFi network – was one of the most high-profile in the country because of the involvement of Google. The internet company was planning to subsidise a free-access option for users in exchange for including advertising in the service.

Separately, Chicago shelved its plans to provide WiFi coverage over the city’s 228 square miles, saying it would require significant public financing, and that demand was declining.

Muni WiFi has become a victim of flawed business plans, slow user adoption, technology problems and political delays. Alternative technologies have also been emerging – Chicago will be one of the first US cities to benefit from a wireless WiMax service being launched by the carrier Sprint Nextel. WiMax offers broadband internet speeds over long distances.

Both San Francisco and Chicago rejected proposals by Earthlink that they become “anchor tenants” of a WiFi network – providing a guaranteed income for the provider by paying for city services such as wireless video surveillance.

In San Francisco’s case, the city said its departments did not have services that could take advantage of the network.

Earthlink, a pioneer of Muni WiFi in cities such as Philadelphia and Anaheim, has realised that its original business model – bearing the whole cost of building out the infrastructure and then charging users for access – is unprofitable.

The failure of Muni WiFi to live up to expectations contributed to the company’s announcement of 900 job losses this week, almost half its workforce.

Other cities, such as Corpus Christi in Texas and Lompoc in California, have taken on the responsibility of building the networks themselves. Lompoc suffered coverage problems – it found wireless signals struggled to penetrate the walls of homes – and discovered only a few hundred of its 40,000 inhabitants were willing to pay a subscription fee.

The sums have also not added up for “digital inclusion” – ambitious plans to provide free or low-cost access to those on low incomes.

Google seemed to suggest on Thursday that it was still interested in providing free access, but with a new partner. “We hope that the city will be able to reach an agreement that will enable all San Franciscans to enjoy a free WiFi network,” a spokesperson said.

Call for rules to curb predatory lending

Call for rules to curb predatory lending
By Jeremy Grant in Washington
Copyright The Financial Times Limited 2007
Published: August 30 2007 21:15 | Last updated: August 30 2007 23:34


This week, organisers of the forthcoming Five Star Default Servicing conference in Texas trumpeted the event with a promise to “quiet the swarm of negative headlines” about their industry.

DS News – which focuses on what it proudly calls the “rich landscape of default servicing” – pledged to show how lenders were not “out to foreclose on homeowners”.

Small wonder some in the mortgage lending industry are feeling defensive.

With millions of Americans braced for a wave of foreclosures on their homes as a result of the subprime mortgage crisis, politicians in Washington have been pointing the finger of blame at the “unfair and deceptive” mortgage lending practices that many say are responsible for homeowners’ woes.

About 20 per cent of subprime mortgages taken out in 2005 and last year will end in the loss of the home to foreclosure – representing more than 1m lost homes, according to the non-profit Center for Responsible Lending.

Barack Obama, the Democratic presidential hopeful, proposed this week that “irresponsible” lenders be fined and the proceeds used to help people refinance. He also urged tighter regulation to prevent future problems.

Yet Mr Obama’s proposals highlight a double dilemma: how far should any bail-out of distressed borrowers go, and how would the federal government enforce any new rules given fragmentation in the way the mortgage industry is regulated?

Karen Shaw Petrou, managing partner at consultancy Federal Financial Analytics, says: “The big problem is determining which borrowers facing foreclosure were the victims, and who were the speculators with speculative [mortgage] structures who were just caught in a downturn. If every borrower facing foreclosure is rescued, then no borrowers in future will take care to get a prudent mortgage.”

Echoing the Bush administration’s more hands-off approach, Ben Bernanke, Federal Reserve chairman, this week suggested that Congress consider allowing the Federal Housing Administration – which insures home loans – to work with the private sector in helping some borrowers to refinance.

On the regulatory front, the last time Washington tackled predatory mortgage lending was in 1994, when Congress passed the Home Ownership and Equity Protection Act (Hoepa).

The Fed is considering proposing additional rules under Hoepa this year, including those that could deal with pre-payment penalties, seen by critics as among the most egregious practices.

But Randall Kroszner, a Fed governor, has pointed out that crafting new rules under an “unfair and deceptive” standard is hard. “Rules must have broad enough coverage to encompass a wide variety of circumstances so they are not easily circumvented. At the same time, rules with broad prohibitions could limit consumers’ financing options.”

As Mr Bernanke has acknowledged, enforcement of any new rules also would be tricky.

While Hoepa applies to all lenders, enforcement is handled by an alphabet soup of authorities each with some oversight of the US mortgage industry: the Federal Trade Commission, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation, to name three that cover bank lenders. States have their own powers too.

Arguably more problematic, the vast army of non-bank mortgage lenders that has proliferated in recent years is subject to Hoepa rules – yet federal authorities have no power to enforce them, because such brokers and lenders are regulated in their home states.

Gilbert Schwartz, a lawyer with Schwartz & Ballen in Washington, does not believe the answer is federal oversight. “You can’t send people around to every small broker to keep on top of what the fringes of the industry may be doing,” he says.

Deborah Goldstein, the Center for Responsible Lending’s executive vice-president, says the secondary mortgage market has a role to police itself in addition to any tightening of rules on abusive practices. But the CLR still believes the mortgage crisis is in part due to the “unintended consequences of under-regulation” at the time of Hoepa, and urges “substantial regulatory reform”.

Impatient at lack of action in Washington, North Carolina this week struck out on its own, approving a law to limit the ability of mortgage brokers to charge pre-payment penalties.

Next week all eyes will be on the House financial services committee, where Barney Frank will chair a hearing into predatory lending practices.

His committee is also drafting a bill dealing with the problem.

Lunch with the FT: Barney Frank

Lunch with the FT: Barney Frank
By Jeremy Grant
Copyright by the Financial Times 2007
Published: August 31 2007 13:19 | Last updated: August 31 2007 13:19


When I contact Barney Frank’s staff to arrange to meet the US congressman, I expect the suggested venue to be a familiar lunch spot for the politically powerful in Washington DC. Instead, I receive an e-mail with driving directions to a location 50 miles south of Boston.

So here I am in Sagres, a restaurant in Fall River. The waiters keep up a lively Portuguese patter with diners as they move from table to table. There is no sign of Frank. But there are plenty that I am not in Washington. His staff had said he’d like to have lunch in his constituency, near Boston. I hadn’t figured on a Portuguese place miles away. This could be lunchtime in Lisbon, I’m thinking. Or Frank’s idea of a practical joke. Before I have time to decide, the congressman for the 4th District of Massachusetts arrives, sits down and introduces me to the waiter who’s been explaining the menu to me in English. “This is a journalist from the Financial Times – they’re doing restaurant reviews now,” he jokes.

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Frank doesn’t do small talk. He can often be brusque. But he is witty, so much so that he was recently voted funniest member of Congress by the Washingtonian magazine. Yet what really makes the 67-year-old a standout in American politics is that he is a left-leaning liberal who also espouses the free market. A Harvard-trained lawyer, he is equally at home fighting for workers’ rights to organise unions and to promote affordable housing as he is debating regulation of hedge funds or deconstructing the reasons behind the current credit-market turmoil.

As we study the menu, he homes in on the issue that consumes him most: inequality. After adjusting for inflation, the median American household is earning less than it was in 2000. In some polls, three quarters of Americans say they are either worse off – or no better off – than they were six years ago. Productivity is up, but wages have stagnated. “You’ve got this problem where the increased wealth of the last few years, particularly since Bush came in, it’s just been wholly inequitably distributed. And the average citizen says: ‘I’m getting screwed.’ Enough of it now,” he says.

The so-called “middle-class squeeze” is propelling economic issues to the forefront of the 2008 presidential election. As Democrats grapple with how to forge a united front on it, Frank has acquired, through his chairmanship of the House financial services committee, a powerful pulpit from which to shape the debate.

I ask Frank to tell me about Fall River. It becomes clear why he has picked this spot for lunch. Once a booming 19th-century textile town that was home to more immigrants than any other city in the US, it is part of his constituency. Quaker Fabric, a local textile maker, has just announced 800 layoffs. He is here to see what he can do.

We order. Frank picks a hearty Portuguese soup of peas, carrots, cabbage, white beans and noodles, followed by the Shrimp Mozambique – his usual. He knows this cuisine, having been to the Azores a dozen times. Fall River is home to 300,000 Portuguese, most former Azoreans. I go for a similar shrimp starter, then feijoada, a stew consisting of three different Portuguese sausages, cabbage, beef and red beans. He declines wine – “I can’t, I’m going to be working all day” – but after I order a half bottle of red, he agrees to a glass.

Before we get into inequality, I’m curious about one thing. Frank was the first US congressman voluntarily to declare his homosexuality. It has not always been an easy ride since then. In 1990, the House censured him after a scandal in which it emerged that a male escort he’d struck up a relationship with had been operating a prostitution ring from the basement of Frank’s house. He admitted having a relationship with the man, but denied knowledge of his basement activities.

I ask if there have been any problems being the only openly gay man in the House. “No, but I thought there would be.I guess that’s why I’d been on the [Democratic party] leadership track but [former House Speaker] Tip O’Neill did say to me when I told him: ‘Oh, I’m so sad, I thought you were going to be the first Jewish Speaker.’ Interesting that he’d say ‘Jewish’. Tip came from that era.”

It wouldn’t have occurred to him to think of you as the first gay Speaker then, I venture. “Right. I wouldn’t have been, by the way, the first gay Speaker. There were at least two others in the 20th century.” I ask who. He tells me – off the record.

Frank has used his wit and force of intellect to get by. In May, he demonstrated his ability to take on social conservatives as the chamber voted on legislation to allow federal authorities to prosecute hate crimes targeting people because of their sexual orientation. Urging legislators to support the bill in the face of critics who said it would threaten the right to express moral opposition to homosexuality, Frank’s response was classic: “If this bill passes people will still be able to call me a fag. Although if they’re in the banking business, I wouldn’t recommend it.”

He says he has found that by being openly gay in politics the public does appreciate and understand authenticity. “What happens with many American politicians is that they are advised by consultants that they have to change and they have to conform to this stereotype, this persona. Because otherwise you can’t win. And what happens is you become less appealing than you otherwise would be. Al Gore the post-presidential candidate is more like the real Al Gore than Al Gore the candidate.”

As for Barack Obama, the Democratic presidential candidate who portrays himself as a Washington outsider, Frank says he is trying to “become the new version of authenticity”. “But it seems a very laboured authenticity. And you don’t get authenticity by saying: ‘I am authentic.’ It’s one of those things that, once you say it, it’s gone.”

Our food arrives. The feijoada is served, steaming hot, in a steel pot. Frank immediately gets to work on his shrimp. I switch the conversation back to inequality. A statistic I’d seen that week struck me as interesting: just over half the earned income in the US goes to 20 per cent of the population. “And it’s worse than any time since 1929,” Frank picks up. Not only has productivity growth failed to translate into wage growth, government has failed to “retard the increase in inequality” by investing in training colleges. Americans’ ability to access healthcare is still linked to employment.

Frank’s central premise is that “displaced economic anger” in the middle class is why the Bush administration recently failed to pass landmark immigration reform. It has also led to angst over the effects of globalisation. “What I want to say to the business community is this: I agree with you that some of these things are good. They are being held up by an anger that cannot be fixed by things that are intrinsic to these issues themselves; you have got to fix the economic context in which they happen. You have to allow unions to be recognised – that’s been my take with private equity; they need to recognise the service employees and hotel workers. You’ve got to allow unions and you’ve got to stop demonising government so that government can resume the provision of services.”

For a long time the Republicans were able to stave off a debate about inequality by deriding it as class warfare, Frank says, so engaged with his subject that he is speaking as rapidly as he is chewing. That’s no longer the case because of rising anger over outsized pay packages for chief executives. “People have connected the dots,” Frank says. “Compensation of the top three officials in the 1,500 biggest corporations has about doubled as a percentage of profits – from 4.3 [per cent] to 9.2 [per cent]. You’re talking about macroeconomically significant numbers. When they gave [former Home Depot CEO Robert] Nardelli $210m [in severance pay], at the same time they announced they were going to buff up the stores by putting $350m into them. We’re talking about comparable numbers here. It’s now finally come together in a very angry public that says it’s unequal, it’s unfair, you’re getting way too much.”

His solution? A new compact between Democrats and business and conservatives that he sums up thus: “Help us with equity and we can help you with growth.”

Coffee arrives. I suggest that could be hard to stitch together, as much as the business community likes what they see in Barney Frank. He recognises this, and adds that you “can’t do anything without the presidency”. “Here’s what I’m hoping: if you get a Democratic presidency and a Democratic Congress – not a sure thing – then we’d come up with this package. I am hoping that we can prepare the way so that when we offer it they will be accepting of it.”

I suggest that if this strategy works, the Democrats would recapture the political and economic middle ground for a very long time. “And the middle’s huge now,” Frank agrees.

I ask for the bill, reminding him that by tradition the FT pays. “No, no, can’t. Ethics rules. Can’t do it,” he jumps in, waving his hand over the bill and pointing out that especially if the FT’s parent company, Pearson, has a lobbyist in Washington, he cannot be bought lunch. We split it.

Frank starts to rise from the table. His driver has been sitting at the back of the restaurant behind me and has signalled to Frank that it is time for a phone interview with The Boston Globe. They want to ask him about the job losses at Quaker Fabric.

The next day I go online to see how the paper covered the factory closure. Quaker is described as having “at first prospered under free trade agreements”, but the company buckled under a flood of cheap imports from China. Frank is quoted saying the closure is another example of the unfairness of current economic and trade policies. “These working-class people are bearing the brunt of a policy of globalisation that benefits the few and damages the many.”

If Barney Frank’s message isn’t clear by now, I reflect as I leave the restaurant for the drive back to Boston, it should be.

Jeremy Grant is the FT’s US financial correspondent.

Department of Justice unit reviews Gonzales testimony

Department of Justice unit reviews Gonzales testimony
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: August 31 2007 02:02 | Last updated: August 31 2007 02:02


The justice department’s inspector-general is investigating Alberto Gonzales’ testimony before Congress on a terrorist wiretapping surveillance programme and the sacking of several US attorneys-general.

Glenn Fine, who serves as an independent watchdog at the Department of Justice, stopped short of saying he was investigating whether Mr Gonzales, who announced his resignation as US attorney-general this week, committed perjury, but he wrote in a letter to Senator Patrick Leahy that he was investigating “most of the subjects addressed by the attorney-general’s testimony” that have come under scrutiny by lawmakers.

Mr Gonzales offered accounts in sworn testimony before Congress of the Bush administration’s terrorist surveillance programme that appeared to conflict with testimony by the chief of the FBI and the former deputy attorney-general. His truthfulness has also been called into question by lawmakers following his testimony into the circumstances surrounding the firing of nine US attorneys-general.

While Mr Gonzales testified in February that neither James Comey, the former deputy attorney-general, nor other officials had concerns about the terror spying programme, other officials indicated in stark detail that there were deep disputes over the programme.

The attorney-general has since said that the disputed activities were separate from the aspects of the programme he had testified about. Mr Gonzales also testified he had not been involved in deliberations about which US attorneys should be fired, even though documents later showed he had attended a meeting in which the dismissals were approved.

Mr Fine said those issues, as well as the use of national security letters that allowed the FBI to obtain personal information, including telephone, banking, and e-mail records, were being investigated. Mr Fine found in a previous investigation that the White House had misused its authority and improperly obtained personal information about people in the US on hundreds of occasions by using the letters.

Until Thursday it was only known that Mr Fine was investigating the US attorney issue. Mr Leahy, the Democratic chairman of the judiciary committee, said the subjects under investigation had eroded the public’s trust and undermined morale within the justice system “from the top ranks to the cop on the beat”.

“The current attorney-general is leaving, but these questions remain. It is appropriate that the inspector-general will examine whether the attorney-general was honest with this and other congressional committees,” he said.

GE pays price for credit crunch

GE pays price for credit crunch
By David Oakley in London
Copyright The Financial Times Limited 2007
Published: August 31 2007 00:01 | Last updated: August 31 2007 00:01


General Electric, the world’s biggest corporate borrower, on Thursday highlighted the sea-change in the markets since the summer’s turmoil when it paid much higher interest rates to raise debt.

The world’s second-biggest company by market value, and a benchmark for other companies looking to issue, will have to pay an extra €7.2m a year to borrow about €1.9bn as investors demanded much higher premiums in the post-liquidity crunch climate.

The deal, the first significant corporate bond issue in the European markets since July, is a warning sign to other lower rated issuers as September, traditionally a heavy month for raising debt, approaches.

Other issuers forced to pay higher interest rate charges recently have included Deutsche Bank, Citigroup and Comcast, the US cable operator.

GE Capital Corp, GE’s financing arm, is rated Aa1 by Moody’s and AA+ by Standard & Poor’s, the second-highest level on the investment grade scale.

If GECC has to pay higher debt charges, then lower rated issuers, especially those in the junk-grade arena, could face serious difficulties as they seek to refinance.

The uncertainty forced the high-yield market to shut down in Europe this month.

Not a single deal was attempted, according to Dealogic, while in the US only $2bn (€1.46bn) was raised in high-yield bonds.

Robert Whichello, head of European debt markets at BNP Paribas, said: “The world has fundamentally changed. It is a much tougher credit market, particularly for lower rated issuers.”

Dominic White, a fund manager at Morley Fund Management, agreed: “It is a buyers’ market now. The pendulum has certainly shifted in the favour of investors.”

However, bankers and corporate finance directors drew positive conclusions from the deal and praised GECC for pushing ahead in an uncertain market.

GECC priced €1.5bn and £600m (€890m) in 60-year subordinated bonds to yield 100 basis points over mid-swap rates – the pricing reference point for European bond issues.

The company priced a bond structured in the same way in September 2006 at 62 basis points over mid-swaps, which means it had to pay an extra 0.38 percentage points in today’s market.

US inflation slows in July

US inflation slows in July
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 31 2007 15:30 | Last updated: August 31 2007 15:30


US inflation cooled last month, giving the Federal Reserve more scope to cut interest rates in response to the crisis in credit markets.

Fed Chairman Ben Bernanke made clear in a speech on Friday that the central bank is alarmed by threat to the US economy from extreme market turbulence and tightening lending conditions.

Investors are betting on a rate cut when the Fed meets next month, but the 53-year-old chairman is keen to be seen to be responding to economic conditions and not be bailing out Wall Street.

The slowdown in underlying inflation will make it easier for him to justify cutting rates, which can stimulate price rises and encourage investors to take risks in the hope the Fed will step in if things turn sour.

Peter Kretzmer, an economist at the Bank of America, said: ”With the federal open market committee recently acknowledging increased downside risks to the economy, the positive news on the core inflation front will be welcome at the Fed.”

The fresh government figures showed that core inflation - excluding food and energy costs rose 0.1 per cent in July, less than the 0.2 percent gain projected by economists and recorded the previous month.

This put the annual rate of core inflation at 1.9 per cent, according to the Fed’s favoured measure.

There were also positive signs for the economy as consumer spending rose more than forecast in July, a sign that households were adding to economic growth at the start of the third quarter, before the credit crunch.

Personal spending rose 0.4 per cent following a 0.2 per cent gain in June that was bigger than initially estimated, the Commerce Department said.

Mr Kretzmer said: ”These data suggest a relatively favorable economic backdrop for consumers in July, prior to the most recent bout of financial market turmoil.”

Bernanke offers no signal on rate cut/Jackson Hole speech likely to emphasise steps taken to protect economy

Bernanke offers no signal on rate cut
By Krishna Guha in Jackson Hole
Copyright The Financial Times Limited 2007
Published: August 31 2007 15:10 | Last updated: August 31 2007 16:20


Ben Bernanke offered no clear signal that the Federal Reserve is poised to cut interest rates in a speech to central bankers on Friday, even as he reaffirmed its commitment to take into account the likely effects of financial market turmoil on the economy.

The Fed chairman made it clear that there would be no rate cuts simply to bail out investors, declaring “it is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

But he also said that developments in financial markets “can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account.”

The overall tone of the Fed chief’s remarks, at the opening session of its annual retreat in Jackson Hole Wyoming, suggested that the US central bank remains quite uncertain about the likely future path of interest rates.

This stands in contrast to the apparently high degree of certainty in the markets that the Fed will soon embark on a series of rate cuts.

President George W. Bush, in a speech later in the morning, echoed Mr Bernanke in saying that “speculators” could not expect to be bailed out. But he also proposed ways of helping homeowners escape defaulting on their subprime mortgages using modifications in the tax code. He also outlined reforms which might help avoid a repeat of the subprime fiasco.

In his speech, Mr Bernanke described the spillover effects from the turbulence in the markets in terms of risks or possible effects rather than certain consequences.

He made it clear that the magnitude of these effects would depend in large part on how long the current market dysfunction continues.

“If current conditions persist, the demand for homes could weaken further, with possible implications for the broader economy,” he said.

However, the Fed chairman did emphasise that well-functioning financial markets are “essential for a prosperous economy.”

He said recent economic data suggested that the economy grew at a “moderate pace” into the summer, but said that in the light of recent financial market developments, this data may not be a good guide to future economic performance.

He said the Fed would put particular weight on the most timely indicators, and on its contacts with the business community.

Mr Bernanke said the stock of unsold new homes in the US remains “quite elevated” and further declines in homebuilding are “likely.”

He said the Fed was “following closely” developments in financial markets that could put further pressure on the housing market.

Mr Bernanke said borrowers currently “face noticeably tighter terms and standards for all but comforming mortgages [mortgages that are eligible for purchase by Fannie Mae and Freddie Mac].”

The Fed chairman said “financial stress” has “not been confined to mortgage markets.”

He said banks have “become more protective of their liquidity and balance sheet capacity” as they have been obliged to take some risk assets back onto their balance sheets and honour credit lines pledged to back up commercial paper programmes.

Mr Bernanke said “global financial losses have far exceeded even the most pessimistic projections of credit losses” on subprime loans.

He said this likely reflects in part the fear that weakness in US housing will restrain US growth. But he added that ”other factors” were at work too. “Investor uncertainty has increased significantly as the difficulty of evaluating the risks of structured products that can be opaque or have complex payoffs has become more evident,” he said.

He said some repricing of risk was probably “healthy.” But he said this had “interacted with heightened concerns about credit risks and uncertainty about how to evaluate those risks to create significant market stress.”

As in past episodes of financial turmoil, he said, uncertainty about possible forced sales by investors with large borrowings have made other investors “hesitant” about taking advantage of possible buying opportunities.

Mr Bernanke said the subprime mortgage crisis was in large part the result of the ”failure of investors to provide adequate oversight of originators and to ensure that originators incentives were properly aligned.”

He said there would be no return to the days when banks kept all home loans on their books, rather than selling them on to investors.

But he said “clearly the originate-to-distribute model will be modified – is already being modified – to provide stronger protection for investors and better incentives for originators.”


Jackson Hole speech likely to emphasise steps taken to protect economy
By Eoin Callan
Copyright The Financial Times Limited 2007
Published: August 31 2007 03:00 | Last updated: August 31 2007 03:00


Ben Bernanke is likely to use a speech in Jackson Hole today to underscore the emergency steps the Federal Reserve has taken to keep financial markets liquid, writes Eoin Callan.

The moves started two weeks ago with a statement that policymakers detected an increase in risks to growth and would act to avoid adverse consequences for the economy.

The Fed made a 50 basis point cut in the discount rate on its loans to banks, taken to the tune of more than $2bn (€1.5bn, £1bn) by Bank of America, Citigroup, JPMorgan, Wachovia and Deutsche Bank.

It also helped unfreeze some parts of the credit markets by accepting as collateral securities backed by subprime mortgages and asset-backed commercial paper.

The Fed then approved exemptions for some very large banking institutions so they could allocate reserve funds to their more exposed dealer-broker arms.

There have also been less publicised changes to the System Open Market Account securities lending programme, increasing the supply of Treasury bonds sought by nervous investors.

Subject: URGENT::::::: US Postal Service Issues Recall

Subject: URGENT::::::: US Postal Service Issues Recall
Date: Tue, 28 Aug 2007 19:50:34 +0000


US Postal Service Issues Recall
The US Postal Service has issued a recall of a stamp they created
with a picture of President George Bush to honor his achievements
while serving as the president of our nation.
The problem was discovered when claims had been
made that the stamp was not sticking to envelopes, and that mail
which had been sent using the "Bush" postage was not being
delivered. President Bush demanded a full investigation into the allegations.
A special Postal Service Investigation team was formed and
after several months and many dollars spent, made the following findings:
The stamp was manufactured properly.
There was nothing wrong with the adhesive.
People were just spitti ng on the wrong side

Anti-gay group accuses hotel of bias - Inn defends cancellation of banquet room

Anti-gay group accuses hotel of bias - Inn defends cancellation of banquet room
BY TIM WALDORF Naperville Sun
Copyright by The Chicago Sun-Times
August 30, 2007

The Naperville Holiday Inn Select has turned down business from Americans for Truth.
Now the ultra-conservative, Naperville-based national organization dedicated to "confronting the homosexual activist agenda" is accusing the hotel company of illegal anti-Christian, anti-conservative discrimination.

Peter LaBarbera, executive director of Americans for Truth, said his organization had placed a $750 deposit with the hotel to reserve a banquet room for its annual fund-raiser Oct. 6.

But the hotel canceled the arrangement, LaBarbera said, after he was "naive enough" to acknowledge that the event might draw protests by "homosexual activists."

Holiday Inn Select General Manager Dennis Igoe called LaBarbera's allegations of discrimination "ludicrous."

"We took a look at what we had at the hotel on the same evening. We had a wedding in the other ballroom," Igoe said. "For the safety and security of all of our employees and guests, we decided that it is not a function that we wanted to have, based upon the potential of having a protest."

LaBarbera said his group has booked a different venue in Lombard for the fund-raiser and changed the date to Oct. 5.

Marriage Equality Win in Midwest!/Lambda Legal: Making the Case for Equality

Marriage Equality Win in Midwest!

Plaintiff couples in Lambda Legal's Iowa marriage lawsuit: Varnum v. Brien

Nearly two years after six same-sex couples were denied marriage licenses by Polk County Recorder Timothy Brien, an Iowa district court ruled that it is "unconstitutional and invalid" to deny same-sex couples the right to marry.

This is the first marriage case launched in the American Midwest and shows that fairness and equality for all are valued across our nation. The decision brings to life the Iowa Constitution's promise of equality for same-sex couples and their families.

This case now moves forward, and the Iowa Supreme Court will ultimately have the final decision.


Camilla Taylor
Senior Staff Attorney
Arguing Varnum v. Brien
"This decision recognizes that our clients and thousands of other same-sex couples and their families across Iowa are devoted to each other and want the protections and responsibilities that only marriage can provide so that they can take care of each other."
Background:

Lambda Legal filed this lawsuit on behalf of six same-sex couples seeking the right to marry in Iowa. We argue that under the equal protection and due process guarantees of the Iowa Constitution it is unlawful to bar same-sex couples from marrying. The couples in this case have been together between five and more than 17 years. Three of the couples are raising children, others are planning families, and all want the responsibilities of marriage and the protections only marriage can provide.

History:
December 2005 Lambda Legal files marriage lawsuit in Iowa district court for Polk County; case will ultimately be decided by the Iowa Supreme Court.
April 2006 Twenty-six state legislators represented by an antigay legal organization move to intervene in the case as defendants.
August 2006 Court denies legislators' application, ruling that none of the legislators had interests in the case sufficient for intervention.
August 2006 Plaintiffs move to amend their petition in order to add three of their children as parties, among other amendments.
September 2006 Defendant resisted plaintiffs' motion to add the children as parties.
November 2006 Defendant moves for summary judgment.
December 2006 Court grants plaintiffs' motion to amend, including plaintiffs' motion to add three of their children as parties.
January 2007 Plaintiffs file resistance to defendant's motion for summary judgment and cross-moved for summary judgment as well. Plaintiffs also file affidavits from leading child development and other experts who explain the need for marriage rights for same-sex couples. In support of plaintiffs' summary judgment motion, Iowa faith leaders, scholars and religious groups file friend-of-the-court brief as does the Iowa Civil Liberties Union on behalf of a group of Iowa historians and law professors.
March 2007 Defendant files reply brief.
April 2007 Plaintiffs file reply brief.
May 2007 Summary judgment hearing.
August 2007 Victory! The Iowa District Court for Polk County rules in favor of equality!


James L. Bennett,
Midwest Regional Director
Lambda Legal
11 East Adams, Suite 1008
Chicago, IL 60603
312.663.4413 x31
http://www.lambdalegal.org


Lambda Legal: Making the Case for Equality

What a great day for Iowa — and for our communities! An Iowa court has ruled that it is unconstitutional  to deny six same-sex couples in Lambda Legal’s lawsuit the right to marry.

Read the full text of the decision.

Today’s decision brings to life the promise of equality in Iowa’s constitution for same-sex couples and their families. All people deserve to be treated fairly by their government and the decision makes that principle clear.

Lambda Legal originally filed the marriage lawsuit in December 2005. Today’s decision comes after a hearing in May where both sides made arguments before the court.



This time it’s an IOWIN...
Join the Summer of Equality!

Make A Gift
We’re happy that our argument prevailed in court, but we are happy most of all for the couples and families in this case — and for all of the same-sex couples across Iowa who want to get married just as their neighbors do. We thank our co-counsel Dennis Johnson of Dorsey and Whitney and our partners at One Iowa for working steadfastly with us on this case. And we thank all of you for your continued support.

As we head into Labor Day weekend, the official close of summer, this victory wraps up Lambda Legal’s “Summer of Equality ” with a big bang!

But the fight is far from over. We are already preparing the next step as the case moves forward — ultimately the Iowa Supreme Court will have the final word.

Thank you and have a wonderful holiday weekend.

All best,



Kevin Cathcart
Executive Director
Lambda Legal

A November deadline for Mideast peace

A November deadline for Mideast peace
By Roger Cohen
Copyright by The International Herald Tribune
Published: August 29, 2007


WASHINGTON: The sources of global frustration with the Bush administration have been many and varied, but its refusal over several years to bring serious attention to the Israel-Palestine conflict has ranked high. To dream some path led from Baghdad to Jerusalem was always upside-down foolishness.

So President George W. Bush's discovery last month that "Iraq is not the only pivotal matter in the Middle East" was encouraging, as was his virtual abandonment of the turgid negotiating formula known as the "road map." The Bush end game, like Clinton's, is going to see a push for a resolution of the mother of all conflicts.

The upper echelons of the State Department are suddenly full of talk of "a supreme effort" for Israeli-Palestinian peace. The bold convocation of a conference in the United States in November demonstrates that an empty focus on the incremental has been replaced by a thrust for the finish line: Palestinian statehood next year, or at least a detailed framework for that state.

Is this just a hopeless lunge for the history books from a lame-duck administration undone by Iraq? Bush, his swagger gone, is weak. Ehud Olmert, the unpopular Israeli prime minister, may be even weaker. The Palestinians are split, the region radicalized by Iran rising and Iraq fissuring.

But low expectations can be a diplomat's ally. It may seem foolish to speak of exhaustion in a conflict whose capacity for regeneration since 1948 has been boundless. Yet that is what a senior U.S. official found recently in the region, alongside a conviction that "it's time to change the Israeli-Arab equation."

In fact that equation has already changed. The Palestinian national movement and global jihadism are distinct, but to the extent the former has permeated the latter it has redoubled the determination of Palestinian pragmatists like President Mahmoud Abbas and his prime minister, Salam Fayyad, to deliver. Regular Abbas-Olmert meetings in recent weeks are one sign of this.

Another shift has been caused by Iran's growing influence - in Shiite-dominated Iraq, in Lebanon through Hezbollah, and in Gaza through Hamas. This has made Sunni states, including Saudi Arabia, fearful. Israel is Iran's enemy. The enemy of an enemy begins to look like a friend.

"Most, if not all the Sunni countries, see Iran as disturbing, unhelpful and violent," R. Nicholas Burns, the under secretary of state for political affairs, told me. "It's a hard question whether they now see Iran as more dangerous than Israel. But most of these states understand that Israel is not a threat to them while Iran might be."

To coax Gulf countries to reach out to Israel - a Saudi presence at the November conference alongside Israel is a major U.S. strategic aim - the United States is readying a multi-billion dollar military aid package for them. It needs congressional approval, which will not come easily.

The administration believes the package is critical. "It says to the Iranians and Syrians that the United States is the major power in the Middle East and will continue to be and is not going away," Burns said. "It also says we take care of our friends, making sure they are strong, building up their conventional deterrence to Iran."

Strong words that indicate a gamble. Unlike Clinton in 2000, who tried to coax Yasser Arafat to compromise and hoped Middle Eastern states would follow, the Bush administration is trying to capitalize on unease in Sunni countries to get them to lead the way for the Abbas-Fayyad peace-now push.

The other side of this approach is confrontation with Tehran. Burns argues there is no choice so long as Iran will not suspend the enrichment of uranium and sponsoring of terrorists.

The price, however, will be Iranian use of surrogates to attempt to sink in blood any Israeli-Palestinian progress. I would quietly and unconditionally expand existing contacts with Iran in Baghdad to cover all issues. What is the downside to that?

A political contest of immense importance has begun. The United States must deliver by November or its conference will be an empty farce that feeds the sophisticated Iranian propaganda machine.

Delivering means a Saudi presence. It also means enough progress on territorial compromise and the principles to govern the thorniest issues - Jerusalem and refugees - for Palestinians in Gaza to wonder if they may be missing the statehood express.

The Bush administration contributed to the Palestinian hopelessness on which Hamas thrived. It can only undo that damage by ushering in hope.

Readers are invited to comment at my blog: www.iht.com/passages

International Herald Tribune Editorial - Worse health coverage

International Herald Tribune Editorial - Worse health coverage
Copyright by The International Herald Tribune
Published: August 29, 2007


The Census Bureau's report on the state of American health insurance was as disturbing as its statistics on poverty and income.

The bureau reported a large increase in the number of Americans who lack health insurance, data that ought to send an unmistakable message to Washington: Vigorous action is needed to reverse this alarming and intractable trend.

The number of uninsured Americans has been rising inexorably over the past six years as soaring health care costs have driven up premiums, employers have scaled back or eliminated health benefits and hard-pressed families have found themselves unable to purchase insurance at a reasonable price.

Last year, the number of uninsured Americans increased by a daunting 2.2 million, to 47.0 million in 2006 from 44.8 million in 2005. That scotched any hope that the faltering economic recovery would help alleviate the problem.

The main reason for the upsurge in uninsured Americans is that employment-based coverage continued to deteriorate. Indeed, the number of full-time workers without health insurance rose to 22.0 million in 2006 from 20.8 million in 2005, presumably because either the employers or the workers or both found it too costly.

Sadly, the one area where the nation had made progress - reducing the number of uninsured children - took a turn for the worse. The number of uninsured children under 18 dropped steadily and significantly from 1999 to 2004, thanks largely to an expansion in coverage of low-income children under two programs operated jointly by the states and the federal government, Medicaid and the State Children's Health Insurance Program.

Then last year the number of uninsured children jumped more than 600,000 to reach 8.6 million. The main reason, advocacy groups say, is that access and funding for the low-income programs became tighter while employer coverage for dependents eroded.

The challenge to the White House and Congress seems clear. The upward trend in the number of uninsured needs to be reversed because many studies have shown that people who lack health insurance tend to forgo needed care until they become much sicker and go to expensive emergency rooms for treatment. That harms their health and drives up everyone's health care costs.

The most immediate need is to reauthorize and expand the expiring State Children's Health Insurance Program. It has already brought health coverage to millions of young Americans. It should be reinvigorated to bring coverage to many millions more.

International Herald Tribune Editorial - A sobering census report

International Herald Tribune Editorial - A sobering census report
Copyright by The International Herald Tribune
Published: August 29, 2007


The economic party is winding down and most working Americans never even got near the punch bowl.

The Census Bureau reported Tuesday that median household income rose 0.7 percent last year - it's second annual increase in a row- to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005.

This seems like welcome news, but a deeper look at the belated improvement in these numbers - more than five years after the end of the last recession - underscores how the gains from economic growth have failed to benefit most of the population.

The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty - 5 million more than six years before, when the poverty rate fell to 11.3 percent.

What is perhaps most disturbing is that it appears this is as good as it's going to get. Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle.

It seems that ordinary working families are going to have to wait - at the very minimum - until the next cycle to make up the losses they suffered in this one. There's no guarantee they will.

The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains. The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.

This suggests that when household incomes rose, it was because more members of the household went to work, not because anybody got a bigger paycheck. The median income of working-age households, those headed by somebody younger than 65, remained more than 2 percent lower than in 2001, the year of the recession.

Overall, the new data on incomes and poverty mesh consistently with the pattern of the last five years, in which the spoils of the nation's economic growth have flowed almost exclusively to the wealthy and the extremely wealthy, leaving little for everybody else.

Standard measures of inequality did not increase last year, according to the new census data. But over a longer period, the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution. For everybody else, they were lower.

This stilted distribution of rewards underscores how economic growth alone has been insufficient to provide better living standards for most American families. What are needed are policies to help spread benefits broadly - be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care. Unfortunately, these policies are unlikely to come from the current White House. This administration prefers tax cuts for the lucky ones in the top 5 percent.

Nokia takes on the iPhone

Nokia takes on the iPhone
By Eric Pfanner
Copyright by THe International Herald Tribune
Published: August 29, 2007


LONDON: In the same converted 19th-century fish market where Apple three years ago announced the European introduction of its iTunes music store, Nokia said Wednesday that it would soon introduce its own digital music service, along with an easier-to-use, Apple-style mobile interface and an Apple-style touch screen handset.

The Nokia Music Store, scheduled to open later this year, would let users download songs from the Internet to their computers or directly to mobile phones, over wireless networks, which is a feat that Apple's recently released iPhone cannot do.

Analysts said the move heightened the rivalry between Nokia and Apple at the high end of the mobile phone business. "It was obviously going straight at Apple," said Seamus McAteer, senior analyst at M:Metrics, a research firm.

While Nokia executives chose suits and ties rather than the black mock turtlenecks and blue jeans favored by Steve Jobs, the Apple chief executive, they acknowledged that Nokia was not above imitating its new competitor.

"I don't know what is copying and what is original but if there is something good in the world, we copy it with pride," said Anssi Vanjoki, head of the Nokia multimedia division, which makes the company's high-end handsets, when asked about similarities between the iPhone, iTunes and the new devices and services announced by Nokia.

In offering wireless downloads, the Nokia Music Store goes beyond the current capabilities of Apple's iTunes, which requires users to download songs to their personal computers before transferring them to an iPod music player or an iPhone.

The Nokia store, which the company said would be made available first in key European markets, could put pressure on Apple to develop a similar service, analysts said.

The music store also potentially puts Nokia into conflict with operators of mobile networks, many of which have developed music services of their own.

But analysts say that outside of Asia, mobile-phone services like music have been relatively slow to take off, despite the tens of billions of euros that network operators have poured into the technology to enable them.

"Now Nokia is saying, 'You guys had your chance to run music stores, or whatever, and it didn't work, so now we're going to give consumers what they want,' " said Paul Jackson, an analyst at Forrester Research.

In addition to the music store, Nokia said it would revive a game platform called N-Gage, with a number of video game publishers agreeing to supply games to download. The company said it would make all of its mobile content and Internet services available under the brand Ovi, which means "door" in Finnish.

Nokia, which is based in Finland, showed pictures and video clips of the interface that would allow users to navigate through the various Ovi services. Analysts said it appeared to resemble the interfaces for the iPod, iPhone and iTunes, whose simplicity has been seen as a key selling point.

But analysts said they were frustrated by a lack of detail about the Ovi offerings.

"It's a bit of an empty shell for now," said Mark Newman, chief research officer at Informa Telecoms and Media.

On Wednesday, Nokia introduced several phone models with increased storage capacity for music and other media content, and said it would introduce the touch screen phone next year.

While Nokia clearly has one eye on Apple, analysts said network operators might more directly feel its move into services, and that could affect relationships with device manufacturers.

Orange, which is part of France Telecom, for example, has a partnership with the phone maker Sony Ericsson, under which its Walkman-branded phones send users to the Orange music store at the touch of a button. Apple, meanwhile, has signed an exclusive iPhone distribution agreement with AT&T in the United States and is reportedly pursuing similar arrangements for the pending introduction of the phone in Europe.

Analysts said mobile operators who agreed to carry certain Nokia multimedia phones might try to demand that the company disable features that overlap with the carriers' own services.

Yet Nokia has a strong negotiating position, analysts added, because it sells about 400 million phones a year - more than one-third of the global market - so the network operators may not be able to drop a popular handset from their lineups.

Despite all the jockeying for position, the appeal of mobile download services remains uncertain. Even in the leading European market for mobile music, Britain, fewer than 3 percent of cellular subscribers downloaded songs wirelessly in January, according to M:Metrics. About 12 percent of subscribers, meanwhile, listened to music that had been transferred to their phones from PCs.

"How to get them to switch over to something like the Nokia music store remains unclear," said Martin Garner, an analyst at Ovum.

Nokia said it would price music downloads at €1 per song, or €10 per album, in the same range as many existing mobile music services as well as iTunes. In addition, users would have to pay for the use of phone networks for the download, though many operators are starting to offer monthly flat-fee packages.

Say it's so, senator - Gay activists scoff at Craig's 'I'm not gay' speech

Say it's so, senator - Gay activists scoff at Craig's 'I'm not gay' speech
BY DAVID CRARY
Copyright by The Chicago Sun-Times
August 30, 2007


NEW YORK -- Sen. Larry Craig's ''I'm not gay'' declaration met with disdain Wednesday from gay activists, many of whom knew for nearly a year -- long before his recent arrest -- of allegations that the conservative Idaho Republican solicited sex from men in public bathrooms.

They view his case as a prime example of hypocrisy -- a man who furtively engaged in same-sex liaisons while consistently opposing gay-rights measures as a politician.

''He may very well not think of himself as being gay, and these are just urges that he has,'' said Matt Foreman of the National Gay and Lesbian Task Force. ''It's the tragedy of homophobia. People create these walls that separate themselves from who they really are.''

» Click to enlarge image
Idaho's Republican Senator Larry Craig speaks to the media Tuesday in Boise.
(AP)

Detailed accusations against Craig had been available since last year through an Internet-based activist who had a hand in outing several Republican politicians, including former Rep. Mark Foley, the focus of a House page scandal.

The activist, Mike Rogers, went public last October with allegations that Craig engaged in sexual encounters with at least three men, including one who said he had sex with Craig twice at Washington's Union Station.

The Idaho Statesman went even further back into Craig's life, talking to other men who claimed they were solicited by him.

It also mentioned a scandal in 1982, in which a male page reported having sex with three congressmen, and Craig -- although not named by the youth -- issued a statement denying any wrongdoing.

Rogers noted that some politicians, when confronted with evidence about same-sex encounters, have acknowledged their homosexuality -- such as Rep. Barney Frank (D-Mass.) and the late Rep. Gerry Studds (D-Mass.).

Others persist in denial, and Rogers contends they are fair game for exposure if they vote against gay-rights causes.

''I'd love for Larry Craig to come out and be honest with the people of Idaho and run as a Senate candidate and see if the Republican Party is the big tent they claim to be,'' Rogers said.

Craig's political support was eroding by the hour Wednesday as fellow Republicans in Congress called for him to resign and party leaders pushed him unceremoniously from senior posts.

The White House expressed disappointment, and Senators John McCain (R-Ariz.) and Norm Coleman (R-Minn.) both joined calls for Craig to resign.

''My opinion is that when you plead guilty to a crime, you shouldn't serve. That's not a moral stand. That's not a holier-than-thou. It's just a factual situation," McCain said. AP

Allies want him to quit -- Democrat sees gain

WASHINGTON -- Idaho Sen. Larry Craig's political support eroded by the hour on Wednesday as fellow Republicans in Congress called for him to resign and party leaders pushed him unceremoniously from senior committee posts.

The White House expressed disappointment, too -- and nary a word of support for the 62-year-old lawmaker, who pleaded guilty earlier this month to a charge stemming from an undercover police operation in an airport men's room.

Craig ''represents the Republican Party,'' said Rep. Pete Hoekstra of Michigan, the first in a lengthening list of GOP members of Congress to urge a resignation.

The senator's spokesman declined comment. ''They have a right to express themselves,'' said Sidney Smith.

Craig said Tuesday he had committed no wrongdoing and shouldn't have pleaded guilty.

But Sens. John McCain of Arizona and Norm Coleman of Minnesota joined Hoekstra in urging Craig to step down, as did Rep. Jeff Miller of Florida -- and others.

''My opinion is that when you plead guilty to a crime, you shouldn't serve. That's not a moral stand. That's not a holier-than-thou. It's just a factual situation," McCain said.

For the most part, Democrats studiously avoided involvement with an unfolding Republican scandal.

''We at least ought to hear his side of the story,'' said Sen. Christopher Dodd of Connecticut, like McCain a presidential contender.

Rep. Jim Clyburn (D-S.C.) said his party stood to gain. ''All of these people who [are] holier than thou are now under investigations. ... I think the Republican Party will find itself in a great peril next year,'' he said.

FAA hastens checks of Boeing 737s - Worries grow about loose parts in wings

FAA hastens checks of Boeing 737s - Worries grow about loose parts in wings
Copyright © 2007, Chicago Tribune
August 30, 2007


WASHINGTON - Newer Boeing Co. 737 jets must be inspected sooner than first ordered because a problem with loose parts might be more widespread than originally believed, U.S. regulators told eight airlines.

Tuesday night the Federal Aviation Administration shortened to 10 days from 24 the time airlines have to check the 737 wings. Officials have said that loose wing parts could have caused a fire that destroyed a China Airlines plane this month.

The order, which covers 783 Boeing 737s operated by U.S. carriers, was changed after two additional reports of parts coming off wings' main slat tracks, which allow parts on the front of the wings to slide back and forth, FAA spokesman Les Dorr said Wednesday. He didn't know which carrier or carriers found the loose parts.

Slats slide out from the front edge of the wings during takeoff and landing to help stabilize the aircraft, along with flaps that extend from the wings' rear edge.

"We're fully in support of that call and we've been working closely with the FAA on this," said Jim Proulx, a spokesman for Chicago-based Boeing. "We will continue to work with the FAA and the airlines."

The Aug. 20 fire on a China Airlines Boeing 737-800A probably was caused by a loose wing-slat bolt that punctured a fuel tank, trade publication Air Transport World reported last week, citing Japanese safety investigators. All 165 passengers and crew members escaped the fire, which began after the plane landed in Okinawa, Japan.

Boeing 737 models covered by the FAA inspection order are operated by Southwest Airlines Co., AMR Corp.'s American Airlines, Delta Air Lines Inc., Continental Airlines Inc., AirTran Holdings Inc., Alaska Air Group Inc., ATA Holdings Corp. and Aloha Airlines.

Representatives of Southwest, Continental, American, Delta and AirTran said they would meet the new inspection deadline.

Southwest, which has more than a third of the planes covered by the FAA order, finished inspections Tuesday night and found no loose parts, spokeswoman Beth Harbin said. Flight schedules weren't affected, she said. Southwest has 280 of the targeted 737s.

Continental will be "fully compliant" with the FAA's new deadline for inspections of the 153 planes the carrier is reviewing, said spokeswoman Julie King. Continental hasn't found any problems in inspections completed so far, she said.

American completed 19 of 77 inspections and isn't disclosing results, spokesman John Hotard said. The reviews haven't affected service, he said.

Delta Air Lines will finish the inspections of its 71 737-800s ahead of the 10-day requirement without any schedule disruptions, spokeswoman Betsy Talton said.

AirTran, based in Orlando, also will meet the FAA deadline "well in advance," spokesman Dave Hirschman said. AirTran has 50 737s.

Operators of the Boeing 737-600s, -700s, -700Cs, -800s, -900s and -900ERs must verify that the wing parts are properly assembled, Dorr said. If they are, the operators can wait 24 days to use a torque wrench to tighten nuts and bolts, he said.

Before the order was revised, operators had 24 days to inspect and tighten the bolts.

Sears profit drops 40% on lower sale

Sears profit drops 40% on lower sales
By James P. Miller
Copyright © 2007, Chicago Tribune
8:15 AM CDT, August 30, 2007


Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations.

For the quarter ended Aug. 4, Sears had net income of $176 million, or $1.17 a diluted share, off from the year-ago period's $294 million, or $1.88 a share.

The year-ago quarter got some help from a net $22 million special gain that boosted per-share earnings by 14 cents; excluding that gain, per-share earnings last year would have been $1.74.

The earnings were roughly in line with guidance Sears had recently provided. Still, Chief Executive Officer Aylwin Lewis said the company is "disappointed with our second quarter results."

Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion, he noted, and because Sears increased its promotional pricing to move product off the shelves.

"In response," Aylwin said, Sears will be "enhancing our marketing message to more clearly articulate the advantages of our products and services."

Sears noted that in its U.S. Sears stores, sales at stores open at least twelve months (known as "comparable-store sales) declined 4.3 percent, in part because the falloff in the U.S. housing market has hurt sales of the retailer's key appliance segment.

At the parent company's Kmart unit, comparable-store sales dropped 3.8 percent. Sales at the company's Sears Canada unit improved, however.

Sears noted that it spent a hefty $1.5 billion to buy back 9.6 million shares during the latest quarter. It also noted that, as the company disclosed on Aug. 13, directors have approved the expenditure of an additional $1.5 billion to repurchase more shares. As of Aug. 24, Sears said it had $1.4 billion remaining under that authorization.

Altria to split up Philip Morris

Altria to split up Philip Morris
By Christopher Bowe in New York
Copyright The Financial Times Limited 2007
Published: August 29 2007 16:24 | Last updated: August 30 2007 00:25


Altria Group on Wednesday said it would split the international and domestic operations of Philip Morris, the world’s biggest cigarette maker, into separate public companies in a long-anticipated move.

The fast-growing international unit, Philip Morris International, will be spun off to shareholders, severing it from Philip Morris USA, which is suffering from falling US cigarette consumption. The spin-off is set for next year after a unanimous board vote. Timing will be given on January 30.

Louis Camilleri, Altria chief executive, will become chief executive of PMI, whose operations are based in Lausanne, Switzerland, but with a small headquarters office retained in New York. Altria will in effect become PMUSA, led by Michael Szymanczyk, and it will retain its 28.6 per cent stake in the brewer SABMiller.

The move will complete the break-up of the Altria conglomerate, highlighted by the closure of the New York headquarters, cutting about 400 parent company jobs with an estimated $250m in cost savings.

Altria has restructured, including a spin-off in March of Kraft, its US food unit, to boost value for shareholders as the US tobacco litigation threat receded.

The last step marking a milestone in the global tobacco industry was to restructure Philip Morris, which makes Marlboro, one of the world’s most recognisable brands, and PMUSA’s and PMI’s increasingly different business agendas. Mr Camilleri said: “I am convinced that this transaction will enhance growth at both Altria and Philip Morris International.”

A standalone PMI would be a fast-growing global contender. It has a 15.4 per cent share of the international cigarette market, but only 5 per cent of its profits come from emerging markets, which make up 60 per cent of international cigarette consumption. Its balance sheet would be strong and its stock would be robust currency to participate in rapid industry consolidation.

PMI, which accounts for almost three-quarters of the cigarette makers’ total revenue, has made recent acquisitions in Indonesia and Pakistan and eyed fast-growing Asian and eastern European cigarette markets.

Bonnie Herzog, analyst at Citigroup, said: “It’s at this point that we expect the beast to be unleashed...and shareholders will be rewarded.”

Separating PMI and PMUSA is likely to cheer Wall Street as it will free both groups to become more efficient. Altria shares were up by just over 1 per cent at $69.80 at the close.

Lehman Brothers and Centerview Partners advised Altria.