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Saturday, February 17, 2007

Boston Globe Editorial - Soldiers' emotional ills

Boston Globe Editorial - Soldiers' emotional ills
Copyright by The The Boston Globe
February 17, 2007

The U.S. military and the Department of Veterans Affairs are failing to respond effectively to the mental and emotional ills of America's troops. The mental-health screening for soldiers and marines returning from Iraq or Afghanistan consists of a form to fill out. Not only is that grossly inadequate, but the troops are reluctant to acknowledge any difficulties they are having because they know this will delay reunions with their loved ones.

This would change if Congress passed a bill, first introduced in 2005 by Representative Martin Meehan of Massachusetts, that would substantially improve the way the military and the Veterans Administration deal with Post-Traumatic Stress Disorder. The bill would require a thorough mental-health examination of every service member returning to civilian life. Treatment would typically be provided when the veteran is back in his community, so that owning up to problems would not keep veterans from rejoining their families.

Congress should act quickly. Spending for veterans' healthcare has been rising in recent years, but President George W. Bush's new budget calls for cuts in 2009 and 2010 and a freeze from then on. Congress should make sure that VA facilities have all the funding they need. America does not support its troops by turning its back on them when they become veterans.

International Herald Tribune Editorial - The pain of U.S. autoworkers

International Herald Tribune Editorial - The pain of U.S. autoworkers
Copyright by The International Herald Tribune
Published: February 16, 2007

American autoworkers are suffering through another round of layoffs, factory closings and buyouts. DaimlerChrysler has announced that it will cut 13,000 jobs in North America. Ford Motor and General Motors offered buyouts to nearly 200,000 hourly workers in 2006.

These losses stoke fears that America's manufacturing base is disappearing. With the loss of three million American factory jobs since the end of 2000 and the trade deficit at an all-time high, it's easy to see China's spectacular growth and assume that American factories are being gutted by foreign competition.

But global competition is not the whole cause for the car manufacturers' problems, just as the answers are not to be found in protectionism.

Many of the car companies' difficulties stem from bad decisions and uninspired car designs. Chrysler lost $1.48 billion last year and Ford lost $12.7 billion, the most in more than a century, while Toyota reported record profits and sales.

The plight of the workers who have lost their jobs has to be addressed, but the U.S. manufacturing sector is far more robust than the struggle of the carmakers suggests. According to the United Nations, the United States accounted for 21.2 percent of world manufacturing in 2000. As China surged ahead in recent years, the U.S. share of world manufacturing barely budged, falling to 21.1 percent by 2005, the most recent year available. U.S. factories produced a record $1.5 trillion in goods that year.

In part, that's because foreign companies have invested so much in factory capacity in America. In a recent report, a Democratic research organization, the Progressive Policy Institute, cited government figures showing that foreign manufacturers invest billions more in the United States than American manufacturers invest abroad.

Many of the lost jobs did not drain off to foreign competition, but to technological change. Robots and computers have allowed far fewer workers to produce more than ever. That kind of high-tech manufacturing is one reason successful American companies like Boeing and Caterpillar can compete with companies in countries where the labor costs are low.

This is not to ignore the human dimension. It is too easy for free-trade advocates to blame the robots and ignore the pain of the blue-collar workers they have sidelined. The long-term answer is the vexing question of training American workers for a new world of jobs. But there are more short-term issues as well, starting with taking care of those Americans who suddenly find themselves without jobs right now.

The burden falls on pro-trade politicians and those who support them, unless they want to see high tariffs and duties, which will ultimately choke global and domestic growth. Pro-trade politicians have to make sure that a lost factory job does not mean a drastic decline in living standards. As the tide rises, America cannot allow millions to drown.

BBVA expands in US with $9.6bn deal

BBVA expands in US with $9.6bn deal
By Mark Mulligan in Madrid
Copyright The Financial Times Limited 2007
Published: February 16 2007 09:23 | Last updated: February 17 2007 02:52

BBVA, Spain’s second-largest bank, on Friday stepped up its push into the US by unveiling an agreed $9.6bn (€7.3bn) acquisition of Compass Bancshares, a franchise covering six states.

News of the deal drew a cool reception from investors, who drove BBVA shares down 5 per cent in early trading. However, by the close on the Madrid stock exchange they had recovered ground, and finished down 2.7 per cent at €19.49.

Analysts voiced concerns about the dilutive effect of the planned €4bn capital increase to part-fund the deal, which comes just three months after a €3bn share issue aimed at improving the balance sheet.

There were also worries about the erosion of BBVA’s core capital ratios. “History shows investors should be wary of acquisitive companies,” UBS said.

However, Standard & Poor’s affirmed the bank’s credit ratings, highlighting BBVA’s “healthy asset quality, conservative risk management and a benign economic environment in most markets”.

Shareholders in the US retail bank, which is present in Alabama, New Mexico, Arizona, Florida, Colorado and Texas, will be offered 2.8 American Depositary Shares of BBVA per Compass share, or $71.82 in cash.

The Spanish bank said the offer represented a 16 per cent premium over Compass’s average trading price over the past 10 days. It will finance the purchase through the capital increase, supplemented with the proceeds of planned asset sales. Among these is the disposal of its 5 per cent stake in Iberdrola, Spain’s second-largest power group.

BBVA, described the deal as a “decisive step” in its US campaign, which until now has involved the purchase of small banking franchises in Texas.

In 2005 it paid $850m for Laredo National Bancshares and last year acquired State National Bancshares and Texas Regional Bancshares for $2.7bn.

Although its strategy was built on linking Mexican immigrants in Texas with its Bancomer operation in Mexico, chief executive Francisco González said on Friday BBVA saw scope for exporting the “universal” Spanish banking model to the US. “When it comes to offering full financial services, we are ahead of the pack, compared with our American peers,” he told the FT.

With $34.2bn in assets, 417 branches and profits last year of $460m, Compass is by far BBVA’s most important US – and global – purchase to date. The deal confirms its growing frustration with Europe, where in 2005 it abandoned plans to buy Banca Nazionale de Lavoro of Italy.

GM in exploratory talks with Chrysler

GM in exploratory talks with Chrysler
By John Reed in London, Richard Milne in Frankfurt and Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: February 16 2007 21:47 | Last updated: February 16 2007 21:47

General Motors is in exploratory talks with Chrysler after DaimlerChrysler, its German parent, this week said it might sell the struggling US unit.

Other potential suitors for Chrysler, including car companies and private equity groups, have also expressed preliminary interest, insiders told the Financial Times on Friday.

Daimler’s US shares rose as much as 6.1 per cent as rumours of the talks emerged.

The Stuttgart-based German-US company made the approach to GM through its bankers after saying it was considering “all options” for Chrysler, which lost €1.1bn ($1.4bn) last year. “Yes, we are in talks,” a GM insider told the FT. “They started on Wednesday.”

The talks were preliminary, and it remained unclear whether they might result in an offer to buy Chrysler, joint ventures in specific areas, or any deal at all. “We are in a very early stage,” the GM official said.

People close to Daimler said there had been “lots of conversations” with several carmakers since the announcement.

“Everyone you can imagine is going to kick the tyres here,” said one.

The head of a US investment bank in Germany said a number of private equity firms were in discussion with DaimlerChrysler.

It has hired JPMorgan to advise it on its options. A person involved in the talks said no substantive discussions with any potential buyer had taken place but that a range of carmakers and private equity houses were likely to be interested.

Daimler declined to comment. However, there was a feeling at the company that it did not want to be rushed into anything, and wanted to study all options in detail, from an outright sale to a Chrysler spin-off.

GM said: “We do have discussions with other carmakers with issues of mutual interest, but we won’t comment on any speculation of discussions.”

GM, which this year is expected to be overtaken by Japan’s Toyota as the world’s biggest carmaker, last year explored then rejected the possibility of an alliance with Renault and Nissan.

Analysts expressed scepticism on Friday that GM’s shareholders would support the idea of a tie-up with Chrysler, the most focused of Detroit’s Big Three, at a time when both face declining sales in the world’s biggest car market.

GM has not made a full car-company acquisition in its recent history, although, like other groups, it forms ad hoc alliances and joint ventures.

However, “if DaimlerChrysler really want to sell Chrysler, then Rick will have to examine what the potential advantage would be”, the GM official said, referring to Rick Wagoner, chief executive.

House denounces Bush’s Iraq strategy

House denounces Bush’s Iraq strategy
By Edward Luce in Washington
Copyright The Financial Times Limited 2007
Published: February 16 2007 23:07 | Last updated: February 17 2007 02:56

The US House of Representatives on Friday issued a rebuke to George W. Bush’s Iraq strategy in the first concrete demonstration of opposition to the war by Capitol Hill since the US-led invasion almost four years ago.

The 246-182 vote was non-binding and will have no impact on Mr Bush’s plan to deploy 21,500 extra troops in addition to the 131,000 already there as part of his “new way forward in Iraq” unveiled last month.

But leaders of the Democratic party, which won midterm congressional elections in November largely on the back ofdisaffection over Iraq, said yesterday’s symbolic step would be followed by measures to limit Mr Bush’s ability to “escalate” the war.

The vote, to be followed by a similar one in the Senate on Saturday, marked the most significant questioning of a US president’s wartime authority since the 1970 vote to rescind the 1964 Gulf of Tonkin resolution, which led to war in Vietnam.

Nancy Pelosi, Democratic speaker of the House, said: “The stakes in Iraq are too high to recycle proposals that have little prospect for success. The passage of this legislation will signal a change in direction in Iraq that will end the fighting and bring our troops home.”

The White House said Friday’s resolution went against the wishes of the Iraqi government and the US military in Iraq.

Republican leaders said the Democratic party was attempting a “slow bleed” of operations in Iraq that would culminate in a move to cut off congressional funding for US troops there. Seventeen of the 201-strong Republican caucus voted with Friday’s resolution, fewer than party leaders had feared.

“They [supporters of the resolution] are gambling on failure,” said Tony Snow, White House spokesman. “The president has a plan for success...What we’re afraid of is that this is, in fact, going to serve as a precursor for cutting off our troops.”

Democratic leaders plan to tread a fine line in the next few weeks that will involve taking further steps to oppose Mr Bush’s prosecution of the war - such as attaching conditions to future congressional funding of military operations - while also making it clear they will continue to support American troops in the field.

“The Democratic party is highly conscious of the fact that the overwhelming majority of the American public opposed the Vietnam war and yet it was the Democrats who emerged as the losers politically,” said Mark Schmitt at the New America Foundation, a centrist think-tank in Washington.

Among Democratic plans being floated are measures that would require the Iraqi government to meet certain benchmarks before new funds were authorised and conditions on the US administration’s ability to redeploy military units to the battlefield. The US army has complained that it is severely under-equipped and overstretched.

Friday, February 16, 2007

Hershey to cut workforce by 10%

Hershey to cut workforce by 10%
By Jonathan Birchallin New York
Copyright The Financial Times Limited 2007
Published: February 16 2007 02:00 | Last updated: February 16 2007 02:00

Hershey, the largest US chocolate maker, is to cut over 10 per cent of its workers in a reorganisation of its manufacturing that will include building a new factory in Mexico.

The company said it expected to cut about 1,500 jobs over the next three years from its current workforce of more than 13,000. It will also reduce the number of manufacturing lines it operates by almost a third as it seeks to reduce costs.

The restructuring is expected to cost $575m but deliver annual savings that will rise to between $170 and $190 by 2010, the company said.

David West, chief operating officer, said the savings would allow the company to increase investment in promoting Hershey's brands and to pursue the development of new products, as well as further international expansion.

Hershey, which has lost market share to its arch rival Mars, recently announced the setting up of a manufacturing joint venture in China with Lotte Confectionery of South Korea. It said the factory in Mexico would also be focused on both low-value added products and on emerging markets.

Andrew Lazar, analyst at Lehman Brothers, said in a note to investors that the magnitude of the plan and associated savings "are likely quite a bit larger than previously forecast", and that "bottom-line, this plan should provide Hershey with far more marketing firepower".

The supply chain changes follow a reorganisation 14 months ago of Hershey's management operations, centred in the small town of Hershey in central Pennsylvania, that included a new focus on international growth.

Since a controversial and ultimately unsuccessful takeover battle over the company in 2002, Hershey has introduced new variations of its traditional lines, such as Hershey's Chocolate Kisses and Reese's Peanut Butter Cups, while adding more premium and snack products.

It shares rose over 2 per cent on news of the supply chain changes yesterday to $52.52 at lunchtime in New York.

US economic data point to soft landing

US economic data point to soft landing
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: February 16 2007 14:21 | Last updated: February 16 2007 14:21

US inflation pressures eased while construction activity fell to a 10-year low in a sign that the economy is heading for a soft landing, according to fresh government figures published on Friday.

Wholesale inflation eased as the producer prices index fell 0.6 per cent, while core inflation excluding volatile food and energy prices rose 0.2 per cent, in line with expectations.

The moderating inflation picture is consistent with the economic outlook sketched out by Ben Bernanke this week when the Federal Reserve chairman appeared testified before Congress.

Mr Bernanke said the price pressures were easing but core inflation remained “somewhat elevated” as he pointed to interest rates on hold for many months.

The drop in housing activity was much sharper than economists were expecting but is likely to be seen as a welcome sign by the Fed that new construction is slowing as housebuilders sell off excess inventory.

Construction activity began on 1.4m homes last month, down from 1.64m in December. There were also signs of further weakness ahead as applications for building permits fell to 1.57m from 1.61m.

Jeoff Hall, an economist at Thomson Financial, said: “Homebuilders are starting to feel better about the ability to clear excess inventory. I don’t think they’re ready to start building again yet. But the sentiment is improving and that will be apparent later in the year.”

Gary Bigg, an economist at Bank of America, said the figures pointed to stabilisation in the construction sector and suggested “that demand is leveling off” with cooling in the overheated South and West and a rally in the Northeast and Midwest.

The 14 per cent drop in housing starts prompted markets to price in a small chance of interest rates being cut in the first half of this year, with futures traders assuming a 16 per cent chance that the Fed would be forced to cut.

Americans to stand trial in rendition case

Americans to stand trial in rendition case
By Tony Barber in Rome
Copyright The Financial Times Limited 2007
Published: February 16 2007 13:04 | Last updated: February 16 2007 13:04

An Italian judge on Friday ordered 25 alleged CIA agents and the former head of Italy’s military intelligence service to be put on trial on charges of kidnapping an Egyptian imam in Milan and spiriting him abroad in February 2003.

The trial will be the first criminal prosecution of people alleged to have been involved in the US Central Intelligence Agency’s controversial abductions of terrorist suspects after the attacks on the US of September 11 2001.

It also presents a fresh problem for US-Italian relations, already dogged by disputes over the planned expansion of a US military base in north-eastern Italy and the ability of Italy’s centre-left government to keep Italian forces fighting under Nato auspices in Afghanistan.

Caterina Interlandi, the Milan judge who ordered the trial, set June 8 as the date for the start of the proceedings.

The case concerns Osama Mustafa Hassan Nasr, also known as Abu Omar, who prosecutors say was kidnapped on a Milan street, bundled into a van, driven to a US airbase at Aviano, flown to another US base in Germany and then taken to Egypt for interrogation.

Among those accused are 26 Americans, all but one alleged to be CIA agents, and Nicolò Pollari, the former head of Italy’s military intelligence service, whom the government removed from his post last November.

None of the Americans is believed to be in Italy at present, and it appears improbable that any will show up voluntarily for the trial. Their court-appointed lawyers say they are not even in contact with their clients.

From the point of view of the US and Italian governments, however, the case has the potential to throw an unwelcome light on the degree to which Italy co-operated with the CIA kidnapping policy, known as the “rendition programme”.

The centre-left government of Romano Prodi, prime minister, is unwilling to meet prosecutors’ demands to seek the extradition of the Americans so that they appear in court in Milan.

The kidnapping of Mr Nasr occurred one month before the US-led invasion of Iraq, when Silvio Berlusconi, the centre-right opposition leader, was prime minister. He prided himself on being a devoted ally of the US but says his government was not involved in the abduction.

Mr Pollari has likewise denied responsibility for the kidnapping and told the court in a pre-trial hearing last month that he had “opposed any illegal actions” that may have taken place in connection with Mr Nasr.

Ricky Martin Defends Obscene Gesture

Ricky Martin Defends Obscene Gesture
Copyright 2001-2007 Cox Texas Newspapers, L.P. All rights reserved
February 16, 2007

SAN JUAN, Puerto Rico — Ricky Martin, who was a headliner at the 2001 inauguration ball for President George W. Bush, has a message for the American commander in chief about war.

At a recent concert, the 35-year-old singer stuck up his middle finger when he sang the president's name in his song "Asignatura Pendiente," which includes the words, "a photo with Bush." The gesture last Friday prompted cheers from thousands of fans in the San Juan stadium.

Latin American pop singer Ricky Martin gestures towards the crowd, with two of his dancers pictured at right, during a song in the first concert of his Black and White tour, in San Juan, Puerto Rico, Friday, Feb. 9, 2007. (AP Photo/Brennan Linsley)

On Thursday, the Puerto Rican heartthrob repeated his criticism of the Iraq war and explained his changed position on Bush.

"My convictions of peace and life go beyond any government and political agenda and as long as I have a voice onstage and offstage, I will always condemn war and those who promulgate it," Martin said about his action in an e-mail statement sent to The Associated Press via a spokesman.

Martin, like other artists, has been highly critical of the war in Iraq.

Best known to international audiences for his smash hit "Livin' la Vida Loca," Martin is a huge star in Puerto Rico, where symbols of national identity — such as the Puerto Rican flag and anthem — are widely adored, and residents have complicated feelings about Washington.

The United States seized Puerto Rico in 1898 at the end of the Spanish-American War.

Puerto Rico's 4 million people are U.S. citizens and can be drafted into the military but cannot vote for president and have no voting representation in Congress. They also do not pay federal taxes.

International Herald Tribune Editorial - Undermining U.S. troops

International Herald Tribune Editorial - Undermining U.S. troops
Copyright by The International Herald Tribune
Published: February 15, 2007

How do you explain to the thousands of American troops now being poured into Baghdad that they will have to wait until the summer for the protective armor that could easily mean the difference between life and death?

It's bad enough that these soldiers are being asked to risk their lives without President George W. Bush demanding that Iraq's leaders take any political risks that might give the military mission at least an outside chance of success. But according to an article in The Washington Post this week, at least some of the troops will be sent out in Humvees not yet equipped with FRAG Kit 5 armor. That's an advanced version designed to reduce deaths from roadside bombs, which now account for about 70 percent of United States casualties in Iraq.

The more flexible materials used in the FRAG Kit 5 make it particularly helpful in containing the damage done by the especially deadly weapon the Bush administration is now most concerned about: those explosively formed penetrators that Washington accuses Iran of supplying to Shiite militias for use against American troops.

Older versions of Humvee armor are shattered by these penetrators, showering additional shrapnel in the direction of a Humvee's occupants. The FRAG Kit 5 helps slow the incoming projectile and contains some of the shrapnel, giving the soldiers a better chance of survival.

Armor upgrades like this have become a feature of the Iraq war, as the Pentagon struggles to keep up with the constantly more powerful weapons and sophisticated tactics of the various militia and insurgent forces attacking American troops. But the U.S. Army, the National Guard and the Marine Corps have been caught constantly behind the curve.

Unglamorous and relatively inexpensive staples of ground combat, like armor, have never really captured the imagination and attention of military contractors and Pentagon budget-makers the way that "Top Gun" fighter jets, stealthy warships and "Star Wars" missile interceptors generally do.

The army says it is now accelerating its production of FRAG Kit 5 armor and handing it out to Baghdad- bound units on a priority basis. But it acknowledges that the armor upgrading project will not be completed until summer. Right now, it's February, and the new American drive in Baghdad has already begun.

That's a shame, if not an outright scandal, because up-to-date armor is essential for saving American lives.

How to live with a nuclear North Korea

How to live with a nuclear North Korea
By Bennett Ramberg
Copyright by The International Herald Tribune
Published: February 15, 2007

LOS ANGELES: Despite the agreement reached in Beijing this week, Pyongyang is not going to give up the bomb. What it will give up for promised fuel-oil stocks are its decrepit nuclear reactor and reprocessing facility, which have reached the end of their useful lives.

The failure of the Beijing talks to include a plan to eliminate the North's nuclear weapons and material and leave the matter to later discussions is a step back from the September 2005 agreement. This reflects a fact of life: For Kim Jong Il, the bomb marks insurance for survival. Nothing can compensate for that.

Still there remain grounds for solace. Washington already has in place two legs of a required three- prong strategy to prevent the North's initiation of a nuclear strike and the dissemination of nuclear material to other rogue nations or terrorists. Under an agreement known as the Proliferation Security Initiative, the Bush administration has enlisted dozens of countries to look for and intercept North Korean nuclear contraband. Should Pyongyang shut down its visible nuclear production program, as the Beijing agreement provides, it will eliminate a source of new weapons material. And, to prevent a premeditated North Korean nuclear attack, both South Korean and American forces maintain an effective deterrent and retaliatory capacity.

However, there remains one glaring loophole, the possibility that Pyongyang could launch an atomic strike prompted by fears of a pre-emptive attack or failed intelligence. This challenge will grow should the North miniaturize its nuclear arsenal for placement on ballistic missiles.

Given this risk, we should prepare a "Plan B" in the likely event the Beijing agreement fails. Confidence- building measures — reflecting North Korea's nuclear weapons reality — provide a practical path.

Confidence building is not foreign to the Korean peninsula. From 2000 to 2003, the two Koreas kept a hot line open. South Korea's sunshine policy of economic and political engagement, which generated aid and investment, promoted the reunification of families and encouraged dialogue between senior officials.

A return to Washington's passive-aggressive course would not serve anyone's security. Plan B would not reward Pyongyang for perfidy, but reflect nuclear reality. Resurrecting and expanding a hot line linking Pyongyang with Seoul, Tokyo, Beijing, Moscow and Washington would be an obvious step. Normalizing relations between Washington and Pyongyang, without preconditions, would enhance communications. It also would give Washington a window into this most secret of countries.

Military confidence building would attempt to apply other elements of the Soviet-American experience: prenotification of large troop movements, military data exchanges, limits on forces near the North- South border, just to name a few. The United States also could provide the North with low-resolution satellite intelligence of the borderland.

South Korea would renew its economic and political engagement policy. Investment and aid for civil development would offer a practical formula to abate Pyongyang's incentive to sell nuclear materials and other contraband to generate hard currency for legitimate international commerce. It also would provide the best means to expose the North's population to the possibilities of economic prosperity, which, in time, could generate political reform.

North Korea is just beginning its learning curve as a nuclear-armed state. Under Plan B, confidence building and transparency steps provide the means to insure that Pyongyang's insecurities do not become our problem.

Bennett Ramberg served in the State Department during the administration of George H.W. Bush.

News Analysis: Doubts on dismantling N. Korea's arsenal

News Analysis: Doubts on dismantling N. Korea's arsenal
By Donald Greenlees
Copyright by The International Herald Tribune
Published: February 15, 2007

HONG KONG: For decades, North Korea badgered its communist allies to supply it with a nuclear reactor and the technical know-how that could have allowed it to build a nuclear bomb. It eventually achieved both.

After such a long struggle, North Korea is unlikely to easily agree to dismantle the weapons it possesses, despite an agreement this week to start the denuclearization of the Korean Peninsula, analysts said.

They said that at best it would require long and arduous negotiations, and further diplomatic and economic concessions, before North Korea would agree to dismantle its stockpile of nuclear weapons, without any certainty that it was fully disclosing the extent of its nuclear weapons capability. The agreement has been widely criticized for failing to directly address the issue of scrapping the nuclear weapons already built by North Korea.

But Joseph Bermudez, an expert on the North Korean military and a senior analyst with Janes Information Group, said Washington had been "desperate" to get a deal as time was running out for six-nation talks in the nuclear crisis to make progress and it had "settled for less than could be had."

"I believe the North Koreans will say dismantling nuclear weapons is not in the letter of the agreement," he said in an interview.

North Korea agreed on Tuesday to shut down and seal its nuclear reactor at Yongbyon and an associated plutonium reprocessing plant in the next 60 days. Eventually, they are to be abandoned. It also agreed to furnish a "list of all its nuclear programs."

But the deal omitted explicit mention of what would happen to the stockpile of up to a dozen nuclear warheads that North Korea is suspected of possessing. This appears to have been left to one of several working groups set up under the agreement for further talks.

"The word weapon or disarmament doesn't seem to be anywhere in the agreement," said Bruce Bennett, a senior defense analyst and specialist on Korean security at the RAND Corporation. "So what we have agreed, at least in the letter of the law, is to stop their production but not necessarily to get rid of what they already have."

But, he said, the agreement is likely to limit the North's capacity to build new weapons and that alone has the potential to improve regional security.

Bennett cited two factors behind the argument that forcing North Korea to stop further weapons production will contribute to a better security climate. The first is that there will be less temptation for either South Korea or Japan to reverse policy and seek their own nuclear deterrent forces.

There have been concerns that if the North's program goes unchecked, South Korean public opinion could shift in favor of the country acquiring nuclear weapons, coinciding with the potential emergence of a more conservative government in presidential elections later this year.

The second factor is that North Korea will find it harder to improve the quality of its existing capability and have fewer options as to how it uses nuclear weapons if the number of bombs it has is kept small and it is prevented from obtaining the material to build more.

In a 2005 paper on the military implications of North Korea's nuclear weapons program, Bennett warned that there was a risk of North Korea using nuclear weapons not as a last resort but in the opening stages of a conflict and to target vital military installations if it acquired a sufficiently large arsenal.

"As the numbers of North Korean weapons grow, nuclear use becomes more likely, and that use will tend to start early in a campaign." Bennett said.

In such a scenario, North Korea might calculate that it could use a nuclear weapon against a military target without necessarily risking automatic nuclear retaliation because it would retain the potential for escalation by next hitting a major population center.

Bennett calculated that a 10-kiloton bomb dropped on a South Korean city could kill about 200,000 people. The Oct. 9 test was estimated to be only 1 kiloton, underscoring the importance of preventing North Korea from improving the yield of its weapons or developing an effective missile-delivery system.

Still, parties to the Beijing agreement could face considerable difficulties in trying to rein in the North's efforts to improve on the effectiveness of its nuclear capability, even while it closes its facilities for producing plutonium.

Although the agreement requires North Korea to declare all its nuclear programs, including the state of efforts to produce highly enriched uranium, there are doubts that it will engage in anything like full disclosure.

Kim Tae Woo, a nuclear policy specialist at the Korea Institute for Defense Analyses, said North Korea had been actively seeking to build a nuclear weapon based on highly enriched uranium for at least the past decade to complement its plutonium-based program.

"We believe that enrichment-related shipments from Pakistan to North Korea started in the mid or late 1990s," he said in a recent interview.

"Less than 10 years later, the question is, can the country make a uranium bomb with about a 10-year history of enrichment effort?" Kim added. "Maybe they are approaching that."

North Korea has denied claims by the United States and other governments that it obtained equipment to embark on a uranium-enrichment program.

Without full disclosure and dismantlement of all the North's civilian and weapons-related nuclear programs, Bermudez, the Janes analyst, said the Beijing deal would do little to calm worries about the security situation on the Korean Peninsula.

He warned that North Korea could easily try to circumvent efforts at denuclearizing the peninsula by carrying on secret research to enhance its capability.

"The physical design of a nuclear weapon can occur totally independently from the production of fissile material," he said.

"You can go ahead and keep refining your design, testing your design, imploding cores, getting better performance, refining your equations and your data set to produce a more reliable design," Bermudez added. "The only thing you won't be able to do is test it using fissile material."

Russia may drop out of arms-reduction treaty

Russia may drop out of arms-reduction treaty
Copyright by The Associated Press
Published: February 15, 2007

MOSCOW: A top Russian general said Thursday that Moscow might unilaterally drop out of a key Soviet-era arms reduction treaty with the United States that had banned medium-range nuclear missiles, Russian news agencies reported.

General Yuri Baluyevsky, chief of the military's general staff, said Russia could pull out of the Intermediate- Range Nuclear Forces Treaty, negotiated between the Soviet leader Mikhail Gorbachev and President Ronald Reagan in 1987.

The decision would depend, he said, on whether the United States completed plans to deploy components of missile defense systems in Poland and the Czech Republic — plans that have drawn sharp criticism from President Vladimir Putin.

"We shall see what our American partners do," Baluyevsky was quoted as saying by Interfax, ITAR-Tass and RIA Novosti. "Their actions to deploy missile defense sites in Europe are inexplicable."

Putin has said he does not trust American claims that the planned European missile-defense system is intended to counter threats from Iran, and he has warned that Russia would take retaliatory measures.

At a security conference in Munich on Saturday, Putin said that the arms reduction treaty was outdated and that many nations had since developed their own medium-range missiles, a type eliminated by Russia and the United States.

Relations between Washington and Moscow have been strained by Russia's opposition to what Putin called an "overly aggressive American foreign policy." Moscow has been particularly critical of the U.S. intervention in Iraq.

The United States, meanwhile, is concerned about what it says is the erosion of political freedoms in Russia and by what it sees as Moscow's use of its vast oil and natural gas reserves to reward friends and punish foes.

Thursday, February 15, 2007

Attack on Obama draws Howard into election scrap

Attack on Obama draws Howard into election scrap
By Raphael Minder in Sydney
Copyright The Financial Times Limited 2007
Published: February 15 2007 02:00 | Last updated: February 15 2007 02:00

The main contenders in this year's Australian federal elections have been forced into a surprisingly early and forceful debate on the country's involvement in the US-led coalition in Iraq after an attack by John Howard, the prime minister, on Barack Obama, the US Democratic presidential candidate.

Mr Howard sparked a storm of criticism, and a strong rebuff from Mr Obama, after suggesting on Sunday that terrorists would want Mr Obama elected because of his proposal to withdraw US troops from Iraq by March 2008.

He went on to attack Kevin Rudd, the leader of the opposition Labor party, for lacking "guts". That prompted Mr Rudd to challenge the prime minister to a televised debate on Iraq, an idea Mr Howard dismissed.

The spat has left political commentators questioning the normally astute centre-right prime minister's judgment, both in his handling of Sydney's relationship with Washington and his electoral strategy.

Some pundits suggested the unprecedented meddling in US politics showed Mr Howard was running out of ideas of how to undermine Mr Rudd, who was elected Labor leader in December and has since overtaken Mr Howard in opinion polls.

Mr Rudd has an approval rating of 65 per cent, the highest for a Labor leader in 35 years, according to the most recent ACNielsen survey, published on Monday in the Sydney Morning Herald newspaper.

Since the September 11 attacks, Mr Howard has played a particularly strong hand on foreign policy and national security issues, accusing previous Labor leaders of weakening their commitment to Australia's long-standing alliance with the US. However, Mr Rudd, a former diplomat, has managed to soften the Labor stance on Iraq, reasserting yesterday that he wanted a staged withdrawal but in close consultation with Washington.

Some pundits suggested Mr Howard had at least managed to shift the debate away from issues such as climate change, where he has recently been caught flat-footed. He was pushed into making contradictory statements by Mr Rudd's persistent call for stricter curbs on carbon dioxide emissions.

They also noted that attacking Mr Obama was unlikely to damage Mr Howard's reputation in the eyes of Australian voters. Far more significant would be a dramatic turn in Australia's military fortunes in Iraq, where it has so far avoided combat casualties.

"This is a sign of how the debate in Australia will be shaping up in coming months," said John Warhurst, a professor at the Australian National University. "There will be no running away on the issue of Iraq. I suspect Mr Howard feels there are more votes in sticking to his guns than attempting a compromise. He can show he is consistent, has values and a clear point of view - whether right or wrong."

But Michael Fullilove, the director of the global issues programme at the Sydney-based Lowy Institute for International Policy, said Mr Howard had been caught "defying the zeitgeist", both over climate change and by attacking the rising star of US politics. "Even if [taking on Mr Obama] was premeditated, it has certainly not played out the way he would like it to," he said.

Chicago Tribune Editorial - Kill (the dollar) bill

Chicago Tribune Editorial - Kill (the dollar) bill
Copyright © 2007, Chicago Tribune
Published February 15, 2007

If the third time is the charm, the U.S. Mint finally will be able to sell the country on a $1 coin. But don't bet on it.

The Mint puts a new presidential series of $1 coins into circulation Thursday. The new series will feature a U.S. president on the head and the Statue of Liberty on the tail.

This is the third time in 30 years that the Mint has created a dollar coin. It also appears destined to be the Mint's third failure. For some reason, Americans are creatures of habit when it comes to currency.

The government created the Susan B. Anthony dollar coin in 1979, but people said they couldn't tell it apart from the quarter. It failed. The government tried again in 1999 with the Sacagawea dollar coin. A wiser Mint cast that one in the color of gold so it wouldn't be confused with the silver quarter.

Seen a Sacagawea coin lately? Probably not, unless you're a collector.

Now come the presidents, starting with a George Washington coin. Everybody loves the father of our country, but there's little reason to think they'll embrace his coin.

A $1 coin does make great practical sense. Coins last much longer than paper money does. A dollar now buys about what a quarter did in 1974. More vending machine items cost a dollar and change--but slipping a crinkled dollar bill into a machine can be an exercise in frustration. It's a sad feeling to be rejected by a soda machine.

There is a way to force the country to accept dollar coins: Kill the dollar bill.

The Government Accountability Office estimates that the dollar coin would save as much as $500 million a year in replacement and distribution costs, if we discontinued paper dollars.

Congress won't stop printing greenbacks, but that's how paper-to-coin conversions have succeeded in other countries. Canada successfully converted to a dollar coin by leaving its public with no other choice. After it met initial grumbling, the coin, affectionately known as the "loonie" for the common Canadian loon embossed on one side, has been warmly embraced. It has been joined by a two-dollar "twonie."

Washington, by contrast, has been timid. Congress has authorized dollar coins three times, but it hasn't discontinued the dollar bill.

Americans have shown no more enthusiasm for the dollar coin than they have shown for the metric system, professional soccer and electric cars. So politicians are probably reluctant to tell voters what they can and can't carry in their pockets and purses. But they should. It would be a practical switch for consumers and a money-saving move for the federal treasury.

- - -

What do you think?

Should the U.S. kill the dollar bill? Why or why not? E-mail us by 2 p.m. Thursday at with "Dollar" in the subject line. Include your name, hometown and contact information. Responses will be published online and in Friday's Voice of the People.

International Herald Tribune Editorial - Congress and self-reform

International Herald Tribune Editorial - Congress and self-reform
Copyright by The International Herald Tribune
Published: February 14, 2007

American taxpayers have been slowly discovering the bad, the ugly and, lately, a touch of good in Congress' tight relations with the lobbying industry. Last November's candidates promised all manner of reform, and the good was the enactment of a long-overdue ban on lobbyists' currying insider clout by taking lawmakers on free vacations and other junkets. But the bad remains to be dealt with: the practice of lawmakers' creating secondary "leadership" kitties to sock away extra money from lobbyists and other special-interest donors beyond the usual campaign committees.

What's ugly are the crass ways members routinely press lobbyists for leadership donations. They use the money to cross-pollinate fellow politicians' campaigns and as a slush fund to pay for extra trips and other indulgences that are hardly the stuff of leadership.

Critics in Congress know the free- flowing PACs, or political action committees, should be banned under campaign finance law. The leaders of the House Democratic campaign committee, in fact, have already canceled the committee's annual ski weekend for lobbyists. Members should follow suit and ban the grossly misnamed leadership PACs as a step toward serious campaign finance reform.

"Only a moron would sell a vote for a $2,000 contribution," said one typical House member preoccupied with fund-raising. The comment unfortunately raises the question of what more tempting price might emerge.

International Herald Tribune Editorial - The lesson of North Korea

International Herald Tribune Editorial - The lesson of North Korea
Copyright by The International Herald Tribune
Published: February 14, 2007

It is welcome news that North Korea has agreed to move toward dismantling its nuclear weapons program in exchange for fuel oil and international acceptance — including the hope of eventual recognition by the United States. When dealing with Pyongyang (and for that matter, the Bush administration), a lot can slip betwixt the cup and the lip. But if all goes as agreed, the world will be safer.

The obvious question to ask is: What took so long? And even more important: Will President George W. Bush learn from this belated success? Will he finally allow his diplomats to try negotiation and even compromise with other bad and undeniably dangerous governments?

Bush could probably have gotten this deal years ago, except that he decided he didn't have to talk to anyone he didn't like. So long as the White House refused to talk, North Korea churned out plutonium.

And once American negotiators were finally allowed to mix their sanctions with sanity and seriously negotiate, they struck a deal.

We'll overlook the irony of this administration, which considers the word multilateral an epithet, insisting on Tuesday that Bush had not compromised on anything because the Chinese, Japanese, South Koreans and Russians were also involved.

There are still a lot of negotiations to come before North Korea disarms — and no guarantees. If the past is prelude, it will try to reopen the bidding or try to squirrel away a few nuclear weapons or their makings. Its closest neighbors, China and South Korea, which have been enabling Pyongyang for years, will try to excuse any backsliding. So the Bush administration will have to be the deal's lead enforcer. For that, its behavior needs to be above reproach. Bush should start by ordering his aides to embrace the triumph of diplomacy, no matter how much it pains them.

As for the lessons to be learned, there are a lot of other bad actors out there with whom Bush is still refusing to speak. Iran is resisting the White House's saber rattling. Bush could test Tehran by including it in a regional conference to discuss how to contain Iraq's chaos. And it would certainly enliven the discussion on Iran's nuclear program if the White House suggested that it would drop its plans for regime change once and for all and move toward diplomatic recognition if Tehran would control its nuclear appetites.

And there are others, like Syria, which might — with the right incentives — be persuaded to rethink its ill-begotten friendships with Hezbollah and Tehran.

We are not saying that all of these governments will respond, even to a cold calculation of their own interests. But this administration has not tried to find out.

There will be a lot of talk in Washington about Bush salvaging a failing presidency. We don't want to take away from the glow. But there are a lot of other dangers out there. And we hope that Bush learns the most basic lesson of this week's deal: Sometimes you really do have to talk to your enemies, even if you have to grit your teeth.

Fourth quarter report from Realtors shows largest price drop on record as markets with price declines now outpace those with gains.

Record home price slump - Fourth quarter report from Realtors shows largest price drop on record as markets with price declines now outpace those with gains.
By Chris Isidore,
Copyright by CNN
February 15 2007: 2:54 PM EST

NEW YORK ( -- The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday.

Prices slumped 2.7 percent in the fourth quarter compared to the fourth quarter of a year earlier, according to the report from the National Association of Realtors. That's the biggest year-over-year drop on record, and follows a 1.0 percent year-over-year decline in the third quarter.

In addition, 73 metropolitan areas reported a decline in the fourth quarter, compared to a year earlier. That outpaced the 71 that saw a gain. It was both a record number and percentage of markets showing a decline in the group's quarterly report. Five markets saw prices unchanged.

Latest prices in your hometown
That decline was a far more widespread than the third quarter, when only 45 markets reported drops and 102 saw gains, or the second quarter when only 26 saw a year-over-year slump in prices. The national median price was still showing a year-over-year gain in the second quarter.

The most recent median prices are down even more - 3.4 percent, since hitting record highs in the second quarter. Almost three-quarters of the markets, reported on by the group, saw declines in median prices over the last six months, with eight reporting double-digit declines.

Vacation markets, where investor-buyers had driven up prices during the building boom of 2005, were particularly hard hit.

The Sarasota-Bradenton-Venice, Fl., market saw the biggest year-over-year decline in the fourth quarter, with prices plunging 18 percent.

When looking at the change between the fourth quarter and the second-quarter peak, Palm Bay-Melbourne-Titusville, Fl., market saw the biggest drop, with median prices plunging 19.5 percent.

Top 10 foreclosure markets
But the weakness in prices wasn't restricted to those kinds of vacation markets. Springfield, Illinois reported a 16.2 percent drop in the fourth quarter compared to the third quarter, the biggest decline during that time frame, along with a 10.4 percent decline compared to a year earlier.

Still the trade group statement said it believed that the worst was over for the drop in prices.

"Examination of data within the quarter shows home prices stabilizing toward the end," said a statement from David Lereah, the Realtors' chief economist. "When we get the figures for this spring, I expect to see a discernable improvement in both sales and prices."

Part of the decline in prices was due to the drop in sales pace. Total existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate of 6.24 million units in the fourth quarter, down 10.1 percent from a 6.94 million-unit level in the fourth quarter of 2005.

And the slower pace of sales, coupled with investor-buyers from 2005 trying to sell homes and condos they had bought, created a glut of homes on the market, according to other real estate readings, which also fed into the decline in home prices.

Realtors President Pat Vredevoogd Combs, a Grand Rapids, Mich. Realtor, admitted the group doesn't expect to see a big gain in 2007 statistics.

Unlock your home's value
"Right now, buyers are responding to seller pricing and incentives, and there's a bit of a pent-up demand as a result of buyer hesitation during the second half of 2006," she said in the group's statement. "We're not looking for big changes, but a gradual rise in sales and home prices is projected - that will be good for the overall housing market and related industries."

She said that since most home owners stay in a home six years on average, a look at five-year price gains shows most homeowners are doing OK despite the recent weakness. The median five-year price gain is 41.8 percent, according to the group's figures.

The nation's leading home builders have all reported declining prices for new homes, which are not captured in this report. KB Home (Charts) reported a net loss of $49.6 million, or 64 cents per share, for the fiscal fourth quarter ended Nov. 30, earlier this week. Other leading builders reporting weakness in prices include Lennar (Charts), Pulte Home (Charts), Centex (Charts), D.R. Horton (Charts) and Toll Brothers (Charts).

The most expensive market in the latest report was San Jose-Sunnyvale-Santa Clara, Calif., where the median home price $760,000. That was up $20,000, or 2.7 percent from a year earlier, but down $19,000, or 2.4 percent, from the third quarter and off $35,000, or 4.4 percent, from the second-quarter peak.

The cheapest market was Elmira, N.Y., where the median price was $78,400. That was off 0.5 percent from a year earlier, and down 16.2 percent from the third quarter, which is when prices there peaked.

Despite the record weakness, there were some markets that showed strong price gains. The best was Atlantic City, N.J., where the median price was $339,800, up 25.9 percent compared to a year earlier.

Wednesday, February 14, 2007

Giuliani's dress rehearsal by Garrison Keillor

Giuliani's dress rehearsal by Garrison Keillor
Copyright © 2007, Chicago Tribune
Published February 14, 2007

Rudolph Giuliani is running for president, it would seem, and watching his interviews reminds you that it is quite a leap from City Hall to the White House, and that the lecture circuit is not the best preparation for higher office. Out there, Mr. Giuliani is saying the same applause lines night after night, but in a TV studio, even with the friendly folks at Fox News, the lines sound overpracticed. He purses his lips, furrows his brow, juts his chin, gives his teeth-baring grin, but there isn't much evidence of thoughtfulness, which is what people are keen to hear these days. We'd like to see that he's paying attention, reading the papers, getting around, listening to smart people who aren't running for office and who can tell him what he needs to know.

What the former New York City mayor wants to talk about is Sept. 11, 2001, and standing tough against terror and how important it is to win the war in Iraq, but people are either opposed to the war or sick of hearing about it. Meanwhile, he has to dance around the subjects of abortion and gay rights as he adjusts a Manhattan point of view to something that will pass muster in South Carolina. It is never pretty, watching a politician revise himself in full view, and Mr. Giuliani is revising like mad. And then there is that video.

Back in 2000, for a City Hall roast, Mr. Giuliani got himself dolled up in drag and made a video in which Donald Trump flirts with him and kisses his breasts. It's included in a new movie, "Giuliani Time," and you can see it on YouTube just by typing "Giuliani in drag" into the search box.

Say what you will about the Current Occupant, there is no video out there of him waltzing around in a long lavender gown and a brassiere, and blond wig, while an aging tycoon nuzzles his chest. He may have sunk low back in his drinking days, but he managed to keep his adventures private. I doubt that Massachusetts Gov. Mitt Romney or Sen. John McCain (R-Ariz.) ever donned women's apparel for the cameras.

This is not a major issue. The Giuliani candidacy is going to bring up once again his record as mayor and his failure, having taken office not long after the World Trade Center bombing of 1993, to do much of anything to protect the city from another attack and to coordinate fire and police radio communications, a doable thing in the age of electronics that would have saved countless lives. His appointment of Bernard Kerik as police commissioner, his brass-knuckles style of politics that put him at loggerheads with the New York Port Authority and other bodies of government, his airy disinterest in the New York public schools, his tolerance of police misbehavior, the cheesy way he split up with his wife. There are plenty of bigger issues. But the video has a creepy fascination to it. The man in the lavender dress and the blond wig surely never contemplated running for president. It was the two planes hitting the towers a year later that made him a celebrity and then a candidate, nothing he had accomplished himself in public office.

Mr. Giuliani should put the issue behind him by answering a few questions: (1) How much did he have to drink that night, and what was he drinking? (2) Whose idea was it--his own or an aide's? If the latter, was there wagering involved and how much was bet? (3) Were the garments new or used, and who picked them out? And was he wearing male or female underthings? (4) On a scale of 1 to 10, how good did he feel in that dress?

And why will Mr. Giuliani not pledge right now to abide by a White House dress code if elected? Trousers with legs and shoes without heels. No pantyhose. Makeup only for TV appearances. No earrings, no necklaces. A contract with America that he'll be gender-appropriate. Is this too much to ask? We could make an exception for a nightshirt, and on St. Andrew's Day, he could put on a kilt, but otherwise, a male president should wear pants. Call me old-fashioned but the leader of the free world shouldn't feel a need to cross-dress. Putting on a flight suit and helmet is as far as he should go into the realm of fantasy. Otherwise, a suit and tie.


Garrison Keillor is an author and host of "A Prairie Home Companion."

Fetal testing can reduce stillbirths in older moms

Fetal testing can reduce stillbirths in older moms
By Joi Preciphs
Copyright © 2007, Chicago Tribune and Bloomberg News
Published February 14, 2007

Testing mothers older than 40 for fetal distress at 38 weeks significantly reduced stillbirth rates, according to a study of U.S. government data.

Fetal monitoring had greater effect in reducing the number of stillborn babies in older mothers, who are also at greater risk for stillbirths than those younger than 35, the analysis showed. The study, presented at a meeting Saturday, looked at women with no pre-existing complications who carried their babies to at least 38 weeks. Forty weeks is considered full term.

"The cumulative risk of stillbirth at 38 weeks in an uncomplicated patient over 40 is similar to the risk of stillbirth at 41 weeks in an uncomplicated patient who is less than 35 years old," said lead researcher Mert Ozan Bahtiyar, an associate professor at the Yale School of Medicine, in the study.

Fetal distress and a prolonged second stage of labor are more common in older women, according to the March of Dimes, a non-profit organization that supports treatments for birth defects. Older women also are at higher risk for developing high blood pressure and diabetes during pregnancy.

Bahtiyar and colleagues examined death statistics from the Centers for Disease Control and Prevention of more than 11 million individual deliveries between 1995 and 1997. The women in the study ranged from 15 to 44 years of age and were at least 37 weeks pregnant.

Using a mathematical model, the researchers calculated the number of late-stage pregnancy tests needed for each age group to prevent one stillbirth. The tests usually consist of monitoring the heart rate and other biological indicators.

The model suggests that for women ages 35 to 39, initiation of fetal testing at 38 weeks would require at least 1,717 late-stage pregnancy surveillance tests to be performed by 40 weeks of pregnancy to prevent one stillbirth. For women ages 40 to 44, just 494 tests would be required to prevent a similar event from occurring by 40 weeks, the study said.

Early prenatal testing is usually recommended to women older than 35 to screen for conditions such as Down syndrome, a genetic condition associated with mental retardation. Fetal stress testing is typically reserved for women with complications or a prior history of complications during pregnancy, Bahtiyar said in a telephone interview.

Bahtiyar presented an abstract of the study at the Society for Maternal-Fetal Medicine's annual meeting in San Francisco.

Shortfall in trade sets mark - Oil imports, Chinese goods cited in 5th straight record annual deficit

Shortfall in trade sets mark - Oil imports, Chinese goods cited in 5th straight record annual deficit
Copyright © 2007, Chicago Tribune and Bloomberg News
Published February 14, 2007

WASHINGTON -- The U.S. trade deficit widened to a record amount for the fifth straight year in 2006, as American purchases of Chinese goods and imported oil more than offset an increase in exports.

The gap between imports and exports expanded 6.5 percent last year, to $763.6 billion, the Commerce Department said Tuesday. The shortfall increased to $61.2 billion in December from a month earlier, more than economists forecast.

China replaced Mexico as America's second-largest trading partner, behind Canada, during the year, intensifying complaints from lawmakers that the nation is keeping its currency weak to spur exports. The deficit also was swollen by rising oil prices.

"The big picture is exports are growing, but in '06 imports grew faster, particularly consumer goods from China," said Chris Low, chief economist at FTN Financial in New York. "The crude oil rise was entirely from price increases."

For the year, imports increased to an unprecedented $2.2 trillion from $1.99 trillion in 2005. Exports rose to a record $1.44 trillion from $1.28 trillion.

"In the long run, I expect the deficit to gradually shrink," said Nigel Gault, director of U.S. research at Global Insight Inc. in Lexington, Mass. "We expect growth in exports combined with slower import growth. The 2007 annual deficit should be substantially below the 2006 figure."

Imports of goods and services rose 2.1 percent in December, to $186.7 billion. Shipments of consumer goods to the U.S. increased to a record $40 billion, and purchases of foreign autos and parts surged to $22.6 billion, also an all-time high.

Oil imports increased to $23.2 billion from $21.5 billion in November, which was the lowest figure since July 2005. America's oil import bill jumped to $302.5 billion last year from almost $252 billion in 2005.

In December, exports rose 0.6 percent, to $125.5 billion, reflecting higher sales of autos, food and consumer goods.

The politically charged trade gap with China shrank to $19 billion in December from $22.9 billion in November, but for all of last year the deficit surged to $232.5 billion from $201.5 billion.

Treasury Secretary Henry Paulson told the Senate Budget Committee last week that the U.S. is pressing China to seek more flexibility in the Chinese currency's value.

"They've been moving it more quickly, but it's not moving quickly enough," Paulson said.

The trade gap with Japan narrowed to $7.5 billion in December from $7.9 billion in November. For all of last year, it expanded to $88.4 billion from $82.5 billion.

The shortfall with Canada, America's biggest trading partner, widened to $5.6 billion in December from $5.2 billion in November. It narrowed to $72.8 billion for all of 2006 from $78.5 billion.

Chase plans growth while others fight cuts - Interest rates add to industry's struggles

Chase plans growth while others fight cuts - Interest rates add to industry's struggles
By Becky Yerak
Copyright © 2007, Chicago Tribune
Published February 14, 2007

Maybe Chicago's bank-branch bubble isn't bursting after all.

In a sign that Chicago remains one of the nation's most vibrant big-city retail banking centers, market share leader JPMorgan Chase & Co. said Tuesday that it expects to open 15 to 20 branches in the area this year, up from the 14 it cut the ribbon on in 2006.

Chase, whose 340 area branches have helped give it deposit market share of 15.3 percent, also said it plans to hire 170 personal bankers here by March 31. At least a third will be new jobs, with turnover accounting for the rest.

It's an uncharacteristically bullish move at a time when at least five other Chicago-area banks have cut jobs or closed branches during the past six months in a market that a Federal Deposit Insurance Corp. study shows is the nation's most competitive major metropolitan area.

"Among the 25 largest metropolitan areas, the Chicago area is the least concentrated, with deposit market share widely dispersed among a large number of banks," said Richard Gilloffo, an FDIC regional manager.

But institutions here find themselves torn between jostling for market share while trying to become more efficient, particularly in an unfavorable interest-rate environment. So long-standing predictions that the local banking scene was due for a shakeout have finally been coming to fruition.

`Tremendous growth'

"In the past several years, there has been tremendous growth in bank branches in the Chicago area," said Linda Koch, chief executive of the Illinois Bankers Association. "With that comes significant overhead, and given the interest-rate environment and competitive environment, some banks are forced to cut expenses, and, unfortunately, that includes personnel."

Late last month, Bank of America Corp. announced 49 technology layoffs in Chicago as part of 550 U.S. job cuts.

Harris Bank, the market's third-biggest bank, said last month that it was cutting 250 U.S. jobs, mostly in the Chicago area, as part of a plan by its Canadian parent, BMO Financial Group, to reduce its workforce by 1,000. The cuts include an undetermined number of branches, though Harris said it still plans to add six to eight locations in the market in 2007.

About 500 Chicago-area workers at LaSalle Bank Corp., the area's second-biggest bank, and other ABN Amro Bank NV units will lose their jobs as its Dutch-owned parent cuts costs in North America.

And in September, Washington Mutual Inc. said it was closing 16 percent of its 172 Chicago-area branches. Charter One has pruned its local network too.

But while layoffs appear to be all the rage at some players, Chicago expansion is hardly grinding to a halt.

To be sure, the city lost its bragging rights last year as the metro area with the most branch openings, with New York moving into the No. 1 spot.

And expansion has slackened. The growth rate of new bank branches in the Chicago area was 5.4 percent in the 12 months ended June 30, down from an 8.2 percent growth rate in the previous 12 months.

That placed Chicago 79th in the latest FDIC ranking of the fastest-growing markets, a far cry from its 19th-place ranking for the previous period.

But 5.4 percent growth was still good enough to put Chicago in the top quartile of 369 markets, and its 161 new branches were surpassed only by New York's 207.

Chase isn't the only one doing the growing.

Fifth Third, which entered the market in 2001, when it inherited 88 branches in an acquisition, has grown to 152 area branches and plans to open 15 to 20 in 2007.

"Last year, we added more than 200 jobs in this market, and my guess is we'll match that this year," said Terry Zink, an executive vice president for Fifth Third Bancorp.

Three-fourths of the hiring is due to branch expansion. "We're not cutting back anywhere," he said.

Zink said he wasn't surprised to hear about the cuts at LaSalle or Harris, noting that their operations need to become more efficient. But he was surprised that Bank of America is cutting jobs because it's traditionally a cost-conscious outfit.

"Maybe it had some roadblocks in Chicago that I'm not aware of," Zink said. "The market is still competitive, and the end game in Chicago is going to be consolidation."

Other banks growing

National City also is expanding here. An accounts receivable processing center near Midway Airport, one of the two it has nationwide, has about 175 employees and is in the process of hiring about 100 more.

National City, which has 67 branches in the area, is planning to open six new branches this year. It recently cut ribbons on locations in Wheaton and Downers Grove, and plans to break ground within the next month on a branch at 35th and State Streets in Chicago.

TCF Bank is expanding its retail footprint in Illinois and Wisconsin by eight to 11 branches this year, up from only three last year, but it declined to comment on its overall staffing policy.

The bank finds its profit margins under pressure by an abnormal interest-rate curve.

"Normally, with a steeper interest-rate curve, if you take in a deposit, you can lend it out for a larger spread with minimal interest-rate risk," said Mark Dillon, executive vice president for TCF Bank.

But with long-term interest rates nearly equal to short-term rates, those spreads are being squeezed, resulting in lower margins.

Said Dillon: "There's not a bank in the country that's not affected by that one."


- - -

Where banks boom


25 largest markets ranked by their competitiveness for banking

1 Chicago

2 St. Louis

3 Los Angeles

4 Washington

5 Miami

6 Denver

7 Philadelphia

8 Riverside, Calif.

9 Boston

10 San Diego

11 Baltimore

12 New York

13 Tampa

14 Houston

15 Seattle

16 Portland, Ore.

17 San Francisco

18 Detroit

19 Atlanta

20 Phoenix

21 Pittsburgh

22 Cleveland

23 Minneapolis

24 Cincinnati

25 Dallas

Market Insight: US subprime lending market woes

Market Insight: US subprime lending market woes
By Saskia Scholtes
Copyright The Financial Times Limited 2007
Published: February 13 2007 18:56 | Last updated: February 13 2007 18:56

A savage sell-off has swept through the credit derivatives market for sub-prime mortgages since HSBC and New Century Financial delivered a bitter pill to investors last week.

The financial institutions’ warning of difficulties with their portfolios of loans to American borrowers has sent credit derivative investors running for cover. And while the market for credit derivatives on sub-prime mortgages might be small, the extent of the sell-off has raised concerns about the vulnerability of the broader structured finance world.

The cost of buying insurance against default on sub-prime mortgage bonds issued in 2006, as measured by a key index, has soared. The ABX index reflects market views, expressed in basis points, of the general credit risk of the underlying securities.

The ABX index for bonds, rated BBB-, has soared about 300bp higher since last week’s news, reflecting a perceived increase in risk, and pushing the index to a record level above 960bp, signalling an alarming rise in investor concern over the potential losses on 2006 mortgage bonds.

“Liquidity has (temporarily) evaporated from the ABX market and a ferocious sell-off has caught most of the market off-guard,” say Gary Jenkins and Jim Reid, analysts at Deutsche Bank. “This is perhaps evidence that in the world of structured credit and leveraged positions, things can change very quickly if the facts change.”

The Deutsche analysts say that so far the knock-on impact has been limited. But they add the unknown risk is whether any investor in ABX products faces liquidation pressure elsewhere in their portfolios.

“As a minimum, the conclusion we draw from this recent (and so far isolated) event is that we need the US economy to be strong for the leverage in the system not to cause a panic, and that when the next downturn in the economy does come, credit is unlikely to be immune frm this,” they say.

The ABX has undoubtedly become a popular barometer for tracking sentiment in the troubled sub-prime sector in recent months – as one of the few places where investors can express bearish views on the US housing market.

“Shorting sub-prime credit has finally worked for the housing bears, finding its ultimate expression through the ABX index,” says Gyan Sinha, mortgage strategist at Bear Stearns.

However, there are good reasons to believe that the recent extreme price action in the index is more of a knee-jerk reaction to negative headlines, amplified by the illiquidity of an index which sees little trading and there is uncertainty over the fair value of the index.

The problem is, explains Vince Breitenbach, head of US Credit Research at Barclays Capital, “there is a lack of natural long-position interest
in the lower rated tranches of this index.”

What this means is that while there are hedge funds and mortgage originators lining up to take bearish views on the sub-prime mortgage market and on the state of US housing in general, there are very few investors willing to take the other side of the trade.

“As a result, bearish market sentiment on housing has been distilled into this narrow nook of the market,” says Mr Sinha.

Instead, he argues, a considered analysis of the fundamental value of the 20 underlying bonds referenced in the index, shows that much of the price action has been purely sentiment-driven. One indication of this is the mismatch between prices in the derivative index, and prices in the underlying markets for credit default swaps on the individual bonds.

“The current levels of the index are especially intriguing considering that both the cash as well as the single-name CDS markets are trading at much tighter levels versus the index,” says Mr Sinha.

However, Mr Sinha says while the 2006 vintage of mortgages have not been ”the industry’s shining moment”, sophisticated players in the ABS markets have been aware of an increase in subprime delinquencies and defaults for several months.

So while the sub-prime sector may experience some more pain, Mr Sinha argues an overreaction to headline risk could create opportunities for contrarian investors.

At current prices, Mr Sinha estimates those willing to take the other side of the ABX trade and hold on for 10 years could receive an annualised return of 12.92 per cent – not too shoddy for BBB- risk.

Financial Times Editorial - From the axis of evil to a grand bargain

Financial Times Editorial - From the axis of evil to a grand bargain
Copyright The Financial Times Limited 2007
Published: February 14 2007 02:00 | Last updated: February 14 2007 02:00

The six-party talks hosted by China have finally produced a detailed if preliminary agreement pointing towards the eventual denuclearisation of North Korea. After the latest, 16-hour session of horse-trading between officials from the US, Japan, Russia, China and the two Koreas, the regime of Kim Jong-il has pledged to shut down its nuclear programmes in exchange for diplomatic recognition, oil and other aid.

Sceptics - and there are plenty of those in the US and Japan - will point out that this is not the first time that North Korea has reached such an agreement. A US-North Korea deal in 1994 eventually came to nothing after the US accused Pyongyang of pursuing a secret uranium enrichment programme alongside the suspended plans to build plutonium-based weapons.

But everything changed last October after North Korea detonated its first nuclear device, giving a new urgency to the faltering talks. President George W. Bush, who branded North Korea in the second year of his presidency as part of the "axis of evil", now runs an administration as eager to compromise with this residual Stalinist regime as his first team was to confront it.

At the core of yesterday's multilateral deal is a bilateral "grand bargain" between the US and North Korea, brokered by China. All those tonnes of heavy fuel oil are not half as important as talks between Washington and Pyongyang aimed at "moving towards full diplomatic relations", US moves to stop designating North Korea as a "state sponsor of terrorism" and the intention to negotiate separately a permanent peace on the Korean peninsula.

This encouraging deal - while still tentative and fragile - is constructed to maintain momentum, lock in multilateral pressure, and provide regular rewards for the progressive abandonment of each and every phase of North Korea's nuclear programme. Christopher Hill, the US negotiator, dealt skilfully not only with Washington's North Korean enemy but also with China and Russia, its great power rivals, and South Korea, its awkward ally.

Some big questions remain. A key difference from the Agreed Framework negotiated by the Clinton administration in 1994 - so derided by the first-term Bush team - is that Pyongyang now has the bomb. From now on, each stage of negotiations is going to get even tougher. Second, if the US can treat with North Korea, which has the bomb, can it reach a grand bargain with Iran, which (so far) has not? Third, was it ultimately China that persuaded North Korea to strike a deal, and can Beijing therefore use its growing influence to resolve other international problems? Above all, does Kim Jong-il, the "Dear Leader", really intend to implement the outline agreement that his representatives have accepted in Beijing? Only if he does will yesterday be remembered as a milestone in the struggle against the proliferation of nuclear weapons.

Mortgage worries rise as key credit index hits record levels

Mortgage worries rise as key credit index hits record levels
By Richard Beales and David Wighton in New York
Copyright The Financial Times Limited 2007
Published: February 14 2007 02:00 | Last updated: February 14 2007 02:00

Concerns over risky US mortgage lending mounted yesterday as a key indicator of credit problems hovered at record levels, another small mortgage lender failed and a big homebuilder admitted borrowers' difficulties could damage its business.

Investor worries over loans made to US borrowers with weak credit histories have grown since housing market activity slumped last year. They were throwninto sharper relief last week when HSBC and New Century warned they had underestimated the spike in defaults on so-called sub-prime mortgages.

A credit derivative index tracking credit risk on sub-prime mortgage bonds has soared to a record high this week. The ABX index, based on bonds rated BBB-, has traded at levels approaching 1,000 basis points- up from 650bp a week agoand about 250bp last autumn.

Meanwhile, California-based ResMAE Mortgage filed for bankruptcy yesterday, becoming the latest in a string of sub-prime lenders to succumb. The company, backed by prominent investment firms Thomas H Lee and Putnam Investments, said the sub-prime market had been "crippled".

KB Home, the US housebuilder, said deteriorating lending conditions could affect the projected recovery in housing. "If sub-prime tightens up and underwriting tightens up, it's going to impact demand," said Jeffrey Mezger, chief executive.

Sub-prime mortgage-backed bonds have suffered in the fallout along with the shares of specialist lenders such as New Century and Countrywide, and bigger diversified banks such as HSBC and Citigroup.

But the sell-off in the ABX indices has been most dramatic. These indices allow traders to buy and sell insurance against default on mortgage-backed bonds. As the cost of this protection rises, earlier protection buyers make paper gains and sellers make losses.

Peter DiMartino, asset-backed securities strategist at RBS Greenwich Capital, said the reason for the sell-off included fears that more lenders would announce bad news.

Most analysts do not see signs that the sub-prime upheaval is spreading to other parts ofthe credit markets. Other kinds of debt, such as company bonds, remain near all-time highs.

Credit Suisse said yesterday it was buying $19.1m of ResMAE's assets and would provide financing to allow it to continue operating. Merrill Lynch, Lehman Brothers, Morgan Stanley and Barclays Capital have also bought sub-prime lenders in recent months.

Additional reporting by Doug Cameron in Chicago and Saskia Scholtes in New York

Daimler says all options open for Chrysler

Daimler says all options open for Chrysler
By John Reed in London and Richard Milne in Frankfurt
Copyright The Financial Times Limited 2007
Published: February 14 2007 12:00 | Last updated: February 14 2007 12:34

DaimlerChrysler is leaving all options on the table for its unprofitable Chrysler unit, the German-American carmaker said on Wednesday.

The dramatic announcement confirms long-running rumours that DaimlerChrysler is considering selling or otherwise spinning off Chrysler.

It comes ahead of the company’s annnouncement of a restructuring plan in Detroit in conjunction with its 2006 results.

The statement is likely further to unsettle workers awaiting the announcement of expected job cuts later today, and incur the anger of the United Autoworkers Union. Shares of DaimlerChrysler surged 4.8 per cent per cent to €51.60 on the news.

“Today the supervisory board will reach a decision on the board of management’s decision to restructure the Chrysler Group,” the company said in a statement on Wednesday morning. “The board of management intends to consider other, more far-reaching strategic options with partners in order to support and facilitate the programme,” it said.

“No option is being excluded in the interest of arriving at the best possible solutiion for the Chrysler Group and DaimlerChrysler as a whole.”

DaimlerChrysler is expected to announce the closure of US plants and elimination of at least 10,000 jobs later on Wednesday, when the company makes its annual results announcement in Detroit for the first time later on Wednesday.

The plan is expected to include plans to share more parts and systems between Mercedes-Benz and Chrysler, signalling further integration of the company’s two carmaking units.

However, in making Wednesday’s statement DaimlerChrysler has in effect admitted its failure to make Chrysler work on a sustainable business since buying the US carmaker in 1998.

The phrasing of the statement is similar to comments made by Bodo Uebber, Daimler’s chief financial officer, in October that were swiftly retracted.

It suggests there is considerable uncertainty and unease within the company as to how to proceed.

In practice, a public flotation or sale of Chrysler to strategic investors would prove difficult because of health-care and pension liability costs on its books worth an estimated €20bn to €30bn, analysts said.

Instead, more focus in the short-term will likely be given to the restructuring plan to be announced later on Wednesday. Analysts said Daimler had to be careful to avoid threatening unions and workers too much that they would be demotivated in the necessary turnaround effort.

But investors are seen as accepting a big financial hit if Chrysler is got rid of and Daimler’s balance sheet is large enough to absorb such a large sum, even though the carmaker’s credit rating would be likely to suffer and the quality and quantity of its debt decline.

Daimler Chrysler’s bond prices rose on Wednesday. Traders saw the company’s announcement as positive for debt as Chrysler is a low margin business, making little in the way of profits.

The company’s main benchmark bonds, a 10-year due to mature in 2011 and a seven year due to mature in 2013, saw prices rise a touch while yields fell. The company’s five-year credit default swaps also fell, implying that investors think the company is less likely to default should it spin-off Chrysler. However, traders stressed prices were unlikely to move much further until the company announces its results at 2pm GMT.

Additional reporting by David Oakley

Tuesday, February 13, 2007

The changing face of $1 coins - U.S. Mint officials say they believe consumers are ready this time

The changing face of $1 coins - U.S. Mint officials say they believe consumers are ready this time for an alternative to paper dollars, as well as for another collector's item
By Azam Ahmed
Copyright © 2007, Chicago Tribune
Published February 13, 2007

This time it's going to work, they swear.

A $1 coin is the right piece of change at the right time, said the U.S. government, which will unveil the presidential dollar this week.

Other attempts, such as the Eisenhower, Susan B. Anthony and Sacagawea, were doomed to fail when $1 coins were deemed obscure or unnecessary.

But with inflation, it's become inconvenient to lug around quarters: think parking meters, where one quarter buys about 10 minutes, or laundry machines, where handfuls are required for just two loads.

"The timing is much different today than even six years ago," about the time when the Sacagawea golden dollar coins came out, said U.S. Mint Director Edmund Moy.

But tell that to Chicago consumers like Derek Duman.

"I prefer as little change as possible," said Duman, 43, who works in sales. "We're becoming a cashless society, so I think it's a waste, personally."

While Duman said he liked the idea of presidential coins, he pointed to his cup of Starbucks coffee to make a point. "I just bought this $2 cup with a credit card. I think the coins are cool, but I just don't know how much I'll use them."

And then there are folks like Donna Crabbe, a retiree, who doesn't so much think they're useless as foreign and unfamiliar.

"I like change but I'm just not used to using them," said Crabbe. "If you did away with the dollar, maybe I'd get used to using them."

That won't happen. The coins are not specifically aimed at replacing the paper dollar, but to give consumers options, according to a congressional bill passed in 2005.

Proponents of the $1 coin also think the timing might be right based on examples of acceptance of coins around the world, where small denominations come only in coins. The British 50 pence coin as well as the 1- and 2-pound coins are one example, as are the 1- and 2-euro coins.

Moy said he thinks the new coins also will succeed because they will be stamped with presidential profiles, making them collector's items and educational pieces.

Starting Thursday, the Mint will roll out George Washington coins and will continue down the line with every president afterward, provided they have been deceased for at least two years. Four coins will be released each year, one every three months, putting John Adams, Thomas Jefferson and James Madison up to bat in 2007.

The program hopes to mimic the popularity of the 50-state quarter program, which releases five new coins every year. By Mint estimates, about 140 million Americans collect the state quarters, roughly half the U.S. population.

"The 50-state quarter program is by far the most successful coin program the mint has ever done. The idea is to take some of the successful lessons learned and apply them to the dollar program," said Moy. "We suspect that a lot of the 140 million people are also going to be interested in collecting the presidential dollar."

But in terms of the coin's acceptance, there are hitches: Cities, for instance, must decide whether to retrofit parking meters so they can accept the new coins. And they won't get any financial assistance from the federal government. For that matter, neither will other retailers that the Mint is hoping will push the campaign forward.

"This is an economic decision that the users of coins each need to make themselves," said Moy. "The way we're going about it is to convince consumers of the benefits of these coins."

The presidential coins will be the same size and proportions of the Sacagawea coins, which means vending machines and parking meters that are equipped to accept Sacagawea coins will not have to make adjustments on equipment.

The City of Chicago already converted its downtown business district parking meters to be golden-dollar friendly, said Ed Walsh, spokesman for Chicago's department of revenue. As a result, the city is hoping that no further modifications will be necessary.

And while some people prefer paper dollars to coins jangling in their pockets or purses, the vending machine industry prefers coins.

"In the vending industry, using a dollar coin is much more efficient than a dollar bill," said Brian Allen, director of government affairs at National Automated Merchandising Associations. "Bills tend to jam in the machines, which can be very expensive to fix."

The estimated cost in lost sales and repairs from jammed dollar bills is about $1 billion a year, according to the trade group.

Supermarkets, however, are concerned about possible delays in checkout because some people in the past have confused dollar coins with quarters.

"It was a little bit of a problem five years ago," said Will Vargas, an assistant store manager at Treasure Island in Chicago. "Even for the cashiers, it was kind of hard to tell apart from quarters because they looked almost alike."

Self-checkout lanes, an increasingly popular option in grocery stores, may also have to install new machines that accept the coins.

The Mint also claims it will make a profit selling the coins to the Federal Reserve Bank. The coins cost 20 cents to produce, and when the Fed buys them at face value, the 80-cent profit is deposited in the general U.S. budget.

The Mint also says coins are more cost effective to make than paper currency. Coins last a minimum of 30 to 40 years in circulation, said Moy, while dollars last roughly 18 months and cost about 4 cents to produce. Over a 30 year period, the approximate cost of having dollars in circulation would be 80 cents, compared with the 20 cents for a dollar coin.

So far, the Mint has made 300 million George Washington coins, the exact amount the Fed has ordered, Moy said. After producing nearly three times the number of Sacagawea dollars needed in 2000, about 1.3 billion, Moy said the Mint had no plans to produce more than demand requires.

"Part of the problem with Sacagawea was the Mint overanticipated what those orders were going to be," he said. "This time, we have geared ourselves to make whatever the Fed wants quickly and exactly to their order, because we don't want to be left with inventory."


'07 ELECTION Gutierrez decides to back Daley - Congressman turns around on mayor he once criticized

'07 ELECTION Gutierrez decides to back Daley - Congressman turns around on mayor he once criticized
By Gary Washburn
Copyright © 2007, Chicago Tribune
Published February 13, 2007

U.S. Rep. Luis Gutierrez (D-Ill.), who strongly criticized Mayor Richard Daley when Gutierrez was considering a run for mayor, on Monday gave the incumbent a glowing endorsement.

Gutierrez said he and Daley "don't see eye to eye on every issue," but he praised the mayor for seeking to improve the city's public schools and spread the benefits of a possible 2016 Olympics into Chicago's neighborhoods. He also cited Daley's "unwavering" support of immigration rights.

On the issue of City Hall corruption, another subject of Gutierrez's earlier criticism, the congressman asserted Monday that "the mayor has taken aggressive steps to deal with that."

Gutierrez said Daley called to ask for his support and that he decided to endorse after the two had a Saturday morning breakfast about a month ago to discuss issues.

The subjects included low high school graduation rates among Hispanic students, something that Gutierrez said Daley wants to remedy.

Daley said Monday that "we both are concerned about the low number of Hispanic students, especially young men, who are not going on to higher education. We have to do a better job for them and our city."

Daley said he has appointed an advisory committee that will work with public school officials to address the problem.

Overall, the mayor has accomplished much, Gutierrez said.

"If you leave Chicago and go to London or Berlin or Paris and you say you were from Chicago, people don't think about Capone," he said. "You know what they think about? What a clean, vibrant, energetic city Chicago is."

Last May, however, Gutierrez took the mayor to task, saying Daley has been "distracted" from the task of improving the school system by "less important priorities" such as the development of Millennium Park and the 2016 Olympics. He also took an apparent jab at Daley's longevity.

"Government suffers from having the same leadership too long," the congressman said last May. "That same leadership talks to the same people, hears the same ideas, trusts the same advisers. ... It is time to get a bigger table with new seats that lead to new ideas."

Dorothy Brown, who along with William "Dock" Walls is challenging Daley in the Feb. 27 election, said she was "very disappointed in [Gutierrez] and really baffled by his decision."

"Nothing has changed" since his critical assessment of Daley when Gutierrez was considering a run last year, Brown said. "There has not been any improvement in the education system, which was his No. 1 concern."

After the endorsement announcement at Daley's downtown campaign headquarters, Gutierrez said he decided against a mayoral run of his own after the Democrats won control of the House in November. But he acknowledged that polls showed the incumbent would have defeated him, with a second poll showing higher support for the mayor than an earlier one.

The only chance of forcing Daley into a run-off would have been if both he and U.S. Rep. Jesse Jackson Jr. (D-Ill.) waged vigorous campaigns that resulted in Daley receiving less than 50 percent of the vote, Gutierrez said.

But Jackson also decided not to run. He cited the November elections, which he said promised him more influence over important legislative matters. But veterans of Chicago politics believe that Jackson, too, saw poll results giving Daley a convincing win.

Gutierrez in the past was a strong opponent of the Hispanic Democratic Organization, a pro-Daley group whose members have benefited from city jobs and promotions for their political work, according to a federal probe of fraudulent City Hall personnel practices.

Gutierrez would not criticize Daley for his support of the organization but, "given its history, it should never have existed," he said. "I think they wanted to be godlike and omnipotent. Anybody who tries to acquire that much power and that much influence is going to go awry."

But in the wake of the investigation, "I don't know that it exists anymore," Gutierrez said.


Boston Globe Editorial - The march toward civil war

Boston Globe Editorial - The march toward civil war
Copyright by The Boston Globe
Published: February 12, 2007

It is almost a law of nature: Where states are enfeebled, power seeps out to more parochial units — the ethnic group, the religious sect, the clan, the armed militia. In disparate forms, this phenomenon is now unreeling in Iraq, in Lebanon, and in the occupied West Bank and the Gaza strip.

Civil war is the specter haunting the larger Middle East. In Iraq, several simultaneous conflicts take hundreds of lives every day. Lebanese, who retain vivid memories of the civil war of 1975-90, feel themselves being dragged toward a recurring nightmare. And in Gaza, civilians who favor different Palestinian factions share a desire to be rid of Hamas and Fatah gunmen who have turned neighborhoods into battlegrounds.

Writing from Gaza recently, Amira Hass of the Israeli daily Haaretz reported that after the recent suicide bombing in Eilat "residents of Gaza were hoping that the Israel Defense Forces would invade the Strip and detain some of the armed men and chase others out of the streets. The clear signals that the IDF does not intend to do so are additional proof for them that Israel wants this internal war to continue."

Hass concurs with Palestinians who place "overall blame for the present situation on the occupation." But she also agrees with those who blame their own leaders for fomenting "a war of the security organs and a civil war."

In Gaza, as in Lebanon and Iraq, the forces driving toward civil war come from within and from without. In each place, what looms ahead are unimaginable massacres of the innocent — unless last week's Fatah- Hamas agreement holds.

An all-out war between Fatah and Hamas in Gaza and the West Bank is not in Israel's interest. Nor is it in the interest of the Palestinians or of surrounding Arab states. The same holds true for Lebanon, where the Syrian regime of Bashar Assad has been backing efforts to bring down the government. Assad risks having the flames of a sectarian vendetta spread to his own country. His minority Alawite regime might not survive if Syria's overwhelming Sunni majority is inflamed by Shiite- Sunni conflicts to the east in Iraq and to the west in Lebanon.

The larger Middle East is approaching a point of no return. The Bush administration ought to be engaged in diplomatic conflict resolution with all the key players in the region, with Syria and Iran as well as the Arab states, the Palestinians and Israel. The alternative is to watch the demonic forces of civil war devour peoples and cross borders.

Tentative nuclear deal is set with North Korea

Tentative nuclear deal is set with North Korea
By Jim Yardley
Copyright by the International Herald Tribune
Published: February 12, 2007

BEIJING: Negotiators for the six nations in the North Korean nuclear disarmament talks were poised to announce an agreement Tuesday but were awaiting approval from their respective national capitals, the chief American envoy said early Tuesday.

Christopher Hill said diplomatic teams from the United States, North Korea and the other four participating countries — China, Japan, Russia and South Korea — pushed negotiations past a self-imposed Monday deadline into early Tuesday before agreeing on a final text. The six chief envoys were scheduled to reconvene at 10:30 a.m. to learn if each nation has approved the deal.

Hill declined to offer any specifics about the agreement until approval was assured. But he suggested that the pending deal was essentially the same as the draft proposal that has been under discussion for five days — except for revisions in a single paragraph. That paragraph presumably has focused on the question of energy assistance for North Korea. The North's demand for huge, upfront shipments of fuel oil and electricity had threatened to scuttle the talks.

"Everybody had to make some changes to try to narrow the differences," Hill said as he returned to his hotel at 2:41 a.m. "One would hope that we can all agree on this tomorrow."

Hill said he had been in frequent contact with Secretary of State Condoleezza Rice during the late-night negotiations and signaled that the United States was satisfied with the tentative deal. "We feel it is an excellent draft," he said. "I don't think we are the problem."

Qin Gang, a spokesman for the Chinese Foreign Ministry, said early Tuesday that "active progress" had been made in the negotiations and confirmed that an agreement had been circulated to the national capitals.

The fate of the deal appears to rest with North Korea's delegation winning approval from the country's authoritarian leader, Kim Jong Il. The deal is expected to require North Korea to close and seal its main nuclear reactor within six weeks and allow international nuclear inspectors into the country for the first time in more than four years. The North would receive energy and economic assistance, as well as security guarantees, but the timetable for those rewards remained unclear.

Pyongyang had nearly scuttled the negotiations by insisting on a huge energy aid package, including front- loaded shipments of fuel oil. Different reports suggested that North Korea had demanded two million tons of heavy fuel oil and two million kilowatts of electricity in exchange for its approval of any agreement.

The deal, if approved, would give fresh momentum to a diplomatic process that on Sunday had teetered near collapse. But it also leaves many of the most difficult objectives yet to be achieved. North Korea still has not agreed to turn over its nuclear weapons or weapons fuel, a critical step that is the subject of future negotiations.

The closure of the country's main reactor at Yongbyon could serve to block the country from developing more new weapons. The agreement also is expected to establish working groups to address denuclearization, normalization of diplomatic relations, energy and economic assistance and a peace treaty formally ending the Korean War. The United States and North Korea never signed a peace treaty after the war and still have no full diplomatic relations.

Diplomats described a frenzied day of meetings as everyone raced to beat the Monday deadline. The United States and North Korea, after meeting privately Sunday, held another meeting Monday. Japan and North Korea also held talks. The two countries have been bitterly at odds over the North's past abductions of Japanese nationals. Kenichiro Sesae, the chief Japanese envoy, told North Korea that Japan would not pay for any of the North's aid package until progress was made on the abduction issue, the Japanese news agency Kyodo reported.

In Washington, hard-liners in the Bush administration have been deeply suspicious of taking a diplomatic approach and have argued that the North has no intention of abandoning its nuclear weapons. Hill, who has spent much of the past two months traveling the world to resuscitate the talks, has described the objective as a step-by-step process that would dismantle Pyongyang's nuclear arsenal rather than freeze it.

Pending approval, Hill said the working groups could be quickly established while chief negotiators could reconvene in Beijing as soon as next month. He said the tentative agreement would create a succession of deadlines that would need to be met as a precondition of the deal. "This is only one phase of denuclearization," he said. "We're not done."