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Saturday, July 14, 2007

Chicago Tribune Editorial - Spying and politics

Chicago Tribune Editorial - Spying and politics
Copyright © 2007, Chicago Tribune
Published July 14, 2007

You may have thought that the whole complicated legal and political brouhaha surrounding the Bush administration's secret domestic eavesdropping was largely resolved. It sure seemed that way.

In January, the administration ceded ground to critics. Atty. Gen. Alberto Gonzales declared the Justice Department had reached a deal for court oversight of the program, which allows the feds to intercept communications between people in the U.S. and individuals abroad who are suspected of terrorism links without first getting a warrant.

But case closed? Hardly.

The administration says that oversight by a special court has limited the intelligence that agencies can collect. It has proposed new eavesdropping powers, and it has stonewalled demands from Congress for more information on the existing program.

"We are actually missing a significant portion of what we should be getting," Michael McConnell, the director of national intelligence, said in congressional testimony. McConnell asserted that the law should be revamped to respond to dramatic changes in communications technology used by intelligence targets in this country. The White House has proposed to expand the power to spy on foreigners in the U.S. who are suspected of having links to terrorist activities. It also wants to provide retroactive legal cover to telecommunications companies that aided the government with such information as phone and e-mail records.

Many in Congress have been skeptical or downright hostile to changes. Last month, a Senate committee investigating the wiretapping program subpoenaed the White House and the Justice Department, seeking their legal justification for the program. The administration has so far stiff-armed Congress.

Meanwhile, in the courts, opponents of the program have suffered a setback.

A federal judge in Detroit ruled last year that the spying program violated federal law and the Constitution. She bluntly rebuked President Bush, declaring that "there are no hereditary kings in America."

The appellate court tossed that decision, though. The higher court said the plaintiffs in that case, including lawyers and journalists, could not sue because they couldn't show that they had been directly harmed by the wiretapping program.

They couldn't show harm because they couldn't produce any hard evidence that any of their communications had ever been intercepted by the National Security Agency, which runs the surveillance program. There is a weird Catch-22 logic to this: You can't sue unless you can show you've been wiretapped. But you can't prove it because that information is protected by law as a government secret. That ruling suggests ongoing court challenges face a steep climb.

So the future of the program is likely to be resolved in Congress.

Such surveillance programs are vital to national security in the murky age of terrorism. But it is essential to retain court oversight of domestic spying efforts that could, if left unchecked, infringe on civil liberties. That will be the key to any changes sought by the administration. If oversight has hampered the program, the Bush administration needs to make that case convincingly to Congress. The administration won't get far in that regard by withholding information from the people it needs to convince.

Giuliani leads GOP fundraising

Giuliani leads GOP fundraising
By Mike Dorning
Copyright © 2007, Chicago Tribune
Published July 14, 2007

WASHINGTON -- Republican presidential candidate Rudolph Giuliani established a financial advantage over his GOP rivals during the past three months, amassing a campaign treasury of $14.6 million for use during primaries.

Currently leading in national polling of Republicans, the former New York mayor both accelerated his fundraising to $17.5 million during the April-June quarter and distinguished his campaign by limiting expenses to $11 million, according to campaign disclosure documents filed Friday.

Republican Mitt Romney, the former governor of Massachusetts, reported $12.1 million in cash on hand.

Romney, a former businessman, spent more money than he raised during the second quarter, giving his campaign a $6.5 million loan from his personal fortune to cover the difference. He reported raising $14.1 million during the quarter and spending $20.5 million.

His biggest expense was an early advertising campaign mounted on national cable and on television and radio in such key early battleground states as Iowa and New Hampshire. He spent $4.9 million on the media campaign from April to June, up from $1.8 million during the first three months of the year.

Romney entered the campaign with considerably less name recognition than his major rivals. But his performance in the polls has crept up in Iowa and New Hampshire since the advertising campaign began.

Other presidential candidates have not established major broadcast advertising campaigns, although Democratic Sen. Barack Obama of Illinois began airing ads in late June.

Presidential candidates must file detailed disclosures of their contributions and expenses during the second quarter by midnight Sunday.


2 GOP senators press Bush for Iraq backup plan

2 GOP senators press Bush for Iraq backup plan
By Aamer Madhani and Mark Silva
Copyright © 2007, Chicago Tribune
Published July 14, 2007

WASHINGTON -- Two senior Senate Republicans on Friday introduced legislation that calls for President Bush to devise a contingency plan to scale down U.S. military involvement in Iraq by the end of the year.

The legislation, drafted by Sens. John Warner (R-Va.) and Richard Lugar (R-Ind.), two longtime foreign affairs experts who have grown disillusioned with the war, perhaps marks the most significant challenge yet of Bush's war policy from within his own party.

Both men have been frustrated with progress on the ground in Iraq and expressed wariness over the president's decision earlier this year to send nearly 30,000 more U.S. troops into combat to help Iraq find a semblance of normality. At the same time, both senators refrained from joining Democratic leaders pushing to stop the war.

Their measure, which is expected to be considered next week when the Iraq war debate resumes, calls for Bush to draft a plan that would keep U.S. forces from "policing the civil strife or sectarian violence in Iraq." It also calls for Bush to "redeploy or reallocate those forces in a responsible manner as conditions permit."

Bush would be required to submit the plan to Congress by Oct. 16, and the legislation requests that the president propose a renewal of Congress' 2002 authorization of the use of force in Iraq.

"The [troop] surge must not be an excuse for failing to prepare for the next phase of our involvement in Iraq, whether that is withdrawal, redeployment or some other option," Lugar said in a statement. "We saw in 2003 after the initial invasion of Iraq, the disastrous results of failing to plan adequately for contingencies."

In response to the Warner-Lugar legislation, the administration reiterated its call to Congress to show patience. Gen. David Petraeus, the top U.S. commander in Iraq, and Ambassador Ryan Crocker are scheduled to give Congress an update on how the so-called troop surge is working by Sept. 15, and the administration has argued that Democrats should wait until then before cementing their judgments.

"We respect Sens. Warner and Lugar and will review carefully the language they have proposed," said White House spokeswoman Dana Perino, "but we believe the new way-forward strategy -- which became fully operational less than a month ago -- deserves the time to succeed. We look forward to hearing from Gen. Petraeus and Ambassador Crocker in September."

Democratic support unclear

The senators' proposal was introduced a day after the administration released a sobering interim report on the troop buildup that indicated uneven progress has been made in Iraq since Bush ordered the additional troops more than six months ago. The report indicated that the Iraqis had made satisfactory progress on only eight of 18 benchmarks on political, security and economic goals set by Congress.

It is unclear how much bipartisan support the Warner-Lugar proposal will receive as Democratic leaders have been pushing for stronger legislation. Sens. Harry Reid (D-Nev.) and Carl Levin (D-Mich.) have sponsored a measure that calls for a drawdown of U.S. forces to start within 120 days and be completed April 30. A similar measure passed in the House, almost entirely along party lines, earlier this week.

The Democrats, however, are well short of the votes they would need to overcome a certain veto by the president.

Realistically, withdrawing completely or even significantly reducing the number of U.S. combat troops in Iraq could take much longer. Defense Secretary Robert Gates told reporters Friday that reducing U.S. forces "postsurge" would be a complicated task.

"When we pulled out of Kuwait in 1991, '92, it took about a year to get out of there, in a completely permissive environment, where we had some of the best ports and some of the best airports in the world to help us with the logistics," Gates said. "You're talking about not just U.S. soldiers but millions of tons of contractor equipment that belongs to the United States government and a variety of other things. This is a massive logistical undertaking whenever it takes place."

Rating Iraqi forces

The assessment released Thursday acknowledged that Iraqi security forces haven't made the necessary strides toward operating independently of U.S. forces -- a notion that was bolstered by news from the Pentagon on Friday that fewer Iraqi army troops are currently operating on their own than just a few months ago.

Gen. Peter Pace, the chairman of the Joint Chiefs of Staff, said the number of Iraqi army battalions operating independently of U.S. forces is down to six from 10 in March. Pace said the apparent reduction in the Iraqi army's readiness is the result of Iraqis engaging at a higher combat tempo.

"As units operate in the field, they have casualties, they consume vehicles and equipment," Pace said.

Still, top administration officials continued to downplay the bleak analysis that came from the interim report card and question whether the benchmarks properly measure the progress being made.

"But we shouldn't just dismiss as inconsequential the progress that they have made," Secretary of State Condoleezza Rice said in an appearance on Fox News' "Fox & Friends" show.

Another senior administration official said Friday that he believes Bush hopes U.S. involvement in Iraq will continue beyond his remaining 18 months in office.

Stephen Hadley, Bush's national security adviser, said in a radio interview Friday that the president is intent on leaving Iraq "in a place that's sustainable for Iraqis, sustainable for Americans." But Hadley added that a certain amount of violence in Iraq would continue for the foreseeable future.

"Will we be engaged in Iraq after January 2009?" Hadley rhetorically asked in an interview on National Public Radio's "All Things Considered." "I think the president hopes so."

The president has been cautious not to overstate what the next, mid-September assessment might show, refusing this week to speculate.

Nonetheless, the administration, which just a few weeks ago seemed to be playing down the importance of September as a pivotal moment in the war debate, now appears to be placing renewed emphasis on it.

"The president is simply not going to prejudge what those recommendations are going to be or what the decisions are," Perino said. "I think the reason that he was pointing to September was to remind people that this is an interim report" that was released this week.


Iraq PM: Country Can Manage Without U.S.

Iraq PM: Country Can Manage Without U.S.
Copyright © 2007, The Associated Press
Published July 14, 2007, 8:24 AM CDT

BAGHDAD -- Prime Minister Nouri al-Maliki said Saturday that the Iraqi army and police are capable of keeping security in the country when American troops leave "any time they want," though he acknowledged the forces need further weapons and training.

The embattled prime minister sought to show confidence at a time when congressional pressure is growing for a withdrawal and the Bush administration reported little progress had been made on the most vital of a series of political benchmarks it wants al-Maliki to carry out.

Al-Maliki said difficulty in enacting the measures was "natural" given Iraq's turmoil.

But one of his top aides, Hassan al-Suneid, rankled at the assessment, saying the U.S. was treating Iraq like "an experiment in an American laboratory." He sharply criticised the U.S. military, saying it was committing human rights violations, embarassing the Iraqi government with its tactics and cooperating with "gangs of killers" in its campaign against al-Qaida in Iraq.

Al-Suneid's comments were a rare show of frustration toward the Americans from within al-Maliki's inner circle as the prime minister struggles to overcome deep divisions between Shiite, Sunni and Kurdish members of his coalition and enact the American-drawn list of benchmarks.

In new violence in Baghdad on Saturday, a car bomb leveled a two-story apartment building, and a suicide bomber plowed his explosives-packed vehicle into a line of cars at a gas station. The two attacks killed at least eight people, police officials said on condition of anonymity because they were not authorize to release details of the attacks.

Thursday's White House assessment of progress on the benchmarks fueled calls among congressional critics of the Iraqi policy for a change in strategy, including a withdrawal of American forces.

Iraqi Foreign Minister Hoshyar Zebari warned earlier this week of civil war and the government's collapse if the Americans leave. But al-Maliki told reporters Saturday, "We say in full confidence that we are able, God willing, to take the responsibility completely in running the security file if the international forces withdraw at any time they want."

But he added that Iraqi forces are "still in need of more weapons and rehabilitation" to be ready in the case of a withdrawal.

On Friday, the Pentagon conceded that the Iraqi army has become more reliant on the U.S. military. The chairman of the Joint Chiefs of Staff, Gen. Peter Pace, said the number of Iraqi batallions able to operate on their own without U.S. support has dropped in recent months from 10 to six, though he said the fall was in part due to attrition from stepped-up offensives.

Al-Maliki told a Baghdad press conference that his government needs "time and effort" to enact the political reforms that Washington seeks -- "particularly since the political process is facing security, economic and services pressures, as well as regional and international interference."

"These difficulties can be read as a big success, not negative points, when they are viewed under the shadow of the big challenges," he said.

In the White House strategy, beefed-up American forces have been waging intensified security crackdowns in Baghdad and areas to the north and south for nearly a month. The goal is to bring quiet to the capital while al-Maliki gives Sunni Arabs a greater role in the goverment and political process, lessening support for the insurgency.

But the benchmarks have been blocked by divisions among Shiite, Sunni and Kurdish leaders. In August, the parliament is taking a one month vacation -- a shorter break than the usual two months, but still enough to anger some in Congress who say lawmakers should push through the measures.

Al-Suneid, a Shiite lawmaker close to al-Maliki, bristled at the pressure. He called Thursday's report "objective," but added, "this bothers us a lot that the situation looks as if it is an experiment in an American laboratory (judging) whether we succeed or fail."

He also told The Associated Press that al-Maliki has problems with the top U.S. commander Gen. David Petraeus, who works along a "purely American vision."

He criticized U.S. overtures to Sunni groups in Anbar and Diyala, encouraging former insurgents to join the fight against al-Qaida in Iraq. "These are gangs of killers," he said.

"There are disagreements that the strategy that Petraeus is following might succeed in confronting al-Qaida in the early period but it will leave Iraq an armed nation, an armed society and militias," said al-Suneid.

He said that the U.S. authorities have embarrassed al-Maliki' government through acts such as constructing a wall around Baghdad's Sunni neighborhood of Azamiyah and repeated raids on suspected Shiite militiamen in the capital's eastern slum of Sadr City. He said the U.S. use of airstrikes to hit suspected insurgent positions also kills civilians.

"This embarrasses the government in front of its people," he said, calling the civilian deaths a "human rights violation."

An unhealthy use of power

An unhealthy use of power
By Christopher Caldwell
Copyright The Financial Times Limited 2007
Published: July 14 2007 03:00 | Last updated: July 14 2007 03:00

"Gagged", "muzzled" and "censored" are some of the words used to describe what the Bush administration did to its former surgeon-general, Richard Carmona. On the eve of confirmation hearings for his successor, Dr Carmona told a congressional committee this week that Mr Bush's people tried to "water down" a report he wrote on second-hand smoke. They were uninterested in his views on stem cell research. They pressured him to sing the administration's praises. His allegations are probably all true. But there is a larger problem with the surgeon-general's job than its politicisation, which did not begin with the Bush administration.

The surgeon-general, who works for the Department of Health and Human Services, publicises health risks. He is often called "America's family doctor" but the metaphor is misleading. Few family doctors infuriate half their patients, as surgeons-general have tended to do. Some shape the public mood: C. Everett Koop played a role in demonising tobacco in the Reagan administration. Others fail: Joycelyn Elders was fired early in the Clinton administration after telling a United Nations conference that masturbation was "part of something that perhaps should be taught".

The same pattern is repeated again and again: a doctor of some professional distinction, vetted for pro-administration sympathies, gets confirmed and quickly becomes a political "maverick". The problem is simple: the surgeon-general is both a political post, with a good deal of clout, and a "caring" post, which puts it above criticism. Naturally, the temptation of power without accountability arises.

A big risk of déformation professionnelle has always confronted doctors. Their day-to-day interactions place them in the position of oracle or saviour. Those they deal with are at their weakest and most desperate. Hubris can result. When the New York Times revealed that Dr Koop had collected commissions on products recommended by his health website, Dr Koop replied that other people might be bought, but not he. "I am an icon," he said. Today, medicine's prestige has grown along with its power to heal. The border between health and social science has been eroded, as has the border between social science and politics. Doctors increasingly pronounce on matters outside medicine.

Even the Clinton appointee David Satcher, Dr Carmona's upright and accomplished predecessor, had a wildly exaggerated conception of his remit. For Dr Satcher, violence against homosexuals and gun violence were not just crime problems but health problems. Dr Carmona, an experienced bureaucratic infighter, took this occupational imperialism a step further. The surgeon-general's role, he said during his confirmation hearings, "has broadened significantly from that of traditional public health responsibilities to now include the expanded leadership role of addressing homeland defence and domestic preparedness". Really? Who passed that law? Who gave an appointee in Health and Human Services the authority to pronounce on defence policy?

A broader conception of the job is not the only thing that surgeons-general want. They want to pursue their agenda of "science" without "political interference". Dr Koop told a reporter recently: "There should be a law that says this person would be apolitical and when he is appointed, he will not be answerable to the president for what he says about health or anything else." This sounds noble, but it is not. It amounts to a demand to have one's cake and eat it, too - to shape politics while professing oneself neutral.

This is a misrepresentation. For it is not "science" that people obey when health policies get implemented. It is power. The science in the 1964 surgeon-general's report linking smoking to lung cancer stopped relatively few people from smoking. Smoking rates began to fall steeply only in the 1980s. What brought the change was legislation and judicial decrees. State power enforced the surrender of a certain amount of liberty in exchange for a certain amount of cleanliness, health and longevity. Policies on sex education, abortion and cloning are similarly matters of politics, not science. The surgeon-general is not at the intellectual pinnacle of the medical profession. He is at the political pinnacle of the medical profession. None of the surgeons-general in the past generation has been among the country's authoritative scientists. Their authority derives only from the administration they represent.

Dr Carmona is confused about this. "I could get no traction whatsoever to move this agenda forward," he complained at one point. But in a democracy, "traction" is a synonym for constitutional authority. The surgeon-general has little of that. It is the president who pursues the national agenda, not his appointees. Dr Carmona's observation that "anything that doesn't fit into the political appointee's ideological, theological or political agenda is ignored, marginalised or simply buried" is probably correct, but it is true of most issues in most administrations. The Bush administration "interfered" with Dr Carmona in the way the Truman administration interfered with General Douglas MacArthur's plans to use the army to wage freelance war on China in the 1950s: it impeded an individual's use of public power by asserting its duly constituted authority.

In a political struggle between the presidency and the surgeon-general, the presidency prevails. What was revealed in testimony last week was not the politicisation of the surgeon-general's office but its de-politicisation. Dr Carmona's superiors, by reasserting their control over health policy, made it more accountable. That does not mean they made it more competent. If it is competence you want, you have your vote for that.

The writer is a senior editor at The Weekly Standard

S&P 500 closes at record high

S&P 500 closes at record high
By MIchael Mackenzie in New York
Copyright The Financial Times Limited 2007
Published: July 13 2007 14:00 | Last updated: July 13 2007 21:45

Wall Street shrugged aside a tremor in the credit market this week as leading benchmarks broke free from more than a month of consolidation and entered record territory.

After sharp losses on Tuesday, stocks soared on Thursday and rose further on Friday. For the second straight day, both the S&P 500 index and Dow Jones Industrial Average closed at record highs.

The S&P’s energy, materials and industrials sectors led gains. In contrast, consumer discretionary, and telecoms groups slipped this week.

Amid sharp swings in trading, equity volatility, as measured by the Chicago Board Options Exchange’s Vix index, was 2.6 per cent higher over the week.

For now, equity investors believe the problems in the subprime mortgage market will not hurt the wider economy. In spite of weaker-than forecast national retail sales for June on Friday, much better-than-expected same-store sales at major retailers on Thursday lifted some of the gloom that has pervaded the sector.

“Fear and greed are what drives the market over the short term, but earnings and dividends ultimately matter,” said Anthony Conroy, managing director at BNYConvergEx.

He added that the market was still trading near the low end of its historic earnings multiple and earnings were the catalyst that could take equities higher.

On Friday, the S&P 500 closed up 0.3 per cent at 1,552.50 and also set a new intra-day record high of 1,555.10, a gain of 1.4 per cent this week.

After early weakness, the Nasdaq Composite rose 0.2 per cent to close at 2,707 on Friday, and gained 1.5 per cent this week.

Tech titans, Google and Apple both set new all-time highs on Friday. Google closed up 1.3 per cent at $552.16, after setting a peak of $552.67, while Apple rose 2.7 per cent to $137.73, after making a new high of $137.85.

Setting the pace this week was the Dow with a gain of 2.2 per cent. The Dow closed 0.3 per cent higher on Friday at 13,907.25, after setting an intra-day record high of 13,932.29.

Mr Conroy said now that the market had broken its recent shackles, investors who were not positioned for that move face having to buy back stocks, that could push the market higher.

With the pace of the second-quarter earnings season set to pick up sharply next week, two blue chips, Alcoa and General Electric, have delivered results in line with estimates.

Along with Exxon Mobil, boosted by higher oil prices at 11-month highs, these three Dow stocks set record and 52-week highs on Friday. Exxon rose 4.5 per cent to $90.33 this week and set an all-time high of $90.80, as the company’s market capitalisation exceeded $500bn.

Alcoa gained 13.7 per cent to $47.35 this week and set a high of $47.69 on Friday. Alcoa withdrew its bid for Alcan late on Thursday and announced the resumption of a stock buy-back program that had been halted when the bid for Alcan was made on May 7. Analysts also believe that BHP Billiton may soon launch a bid for Alcoa now that Rio Tinto has made an agreed $44bn bid for Alcan. Alcan rallied 12.7 per cent to $97.50 this week and has more than doubled in value this year.

In earnings, General Electric reported that second-quarter net income rose 9.6 per cent to $5.42bn on Friday, in line with analysts’ estimates. The conglomerate said it would exit its US mortgage business and increase its share repurchase programme this year to $14bn. GE closed 1.3 per cent higher at $39.50, and had earlier set a 52-week high of $40.17.

In other deal news, Gerdau Ameristeel said it was buying Chaparral Steel for $4.22bn. Chaparral rose 10.6 per cent to $83.73.

Huntsman, the chemicals maker, agreed to be bought for $6.5bn by Apollo Management’s Hexion Specialty Chemicals. That trumped a $5.6bn bid by Basell. Huntsman fell 5.4 per cent to $26.49.

On Friday, Energizer agreed to buy Playtex, the maker of feminine care and infant products, for about $1.2bn. Energizer rose 7.5 per cent to $107.67, while Playtex surged 20.8 per cent to $17.97 this week.

In contrast, GE and Abbott Laboratories announced that they were unable to agree on “final terms and conditions” of GE’s proposed $8.13bn deal to buy Abbott’s primary in-vitro and point-of-care diagnostics units. Abbott fell 1 per cent to $53.24.

There was also uncertainty over the planned $25bn buy-out of Sallie Mae. Shares in the student lender plunged nearly 10 per cent on Wednesday, when some of the Wall Street firms involved in the deal said they might back out due to proposed legislation regulating student loans. Sallie was down 7.4 per cent for the week at $53.64.

Profit warnings from retailers such as Home Depot and Sears, down 9.6 per cent to $157.40, sparked worries that the US consumer was starting to slow.Among the better performing retailers, Wal-Mart reported sales growth of 2.4 per cent, against an expected 0.8 per cent, and its stock rose 1.6 per cent to $49.15. Alnylam Pharmaceuticals surged 52.9 per cent to $23.24 this week, after the biotechnology company licensed some of its therapeutic research to Roche, the Swiss drug maker.

NYSE Group rose 9.9 per cent to $83.22 after Lehman upgraded the exchange from “market weight” to “overweight”.

GE signals disposals in financial services

GE signals disposals in financial services
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2007
Published: July 13 2007 12:20 | Last updated: July 13 2007 18:19

General Electric is to sell parts of its sprawling financial services business in a further attempt to restructure its portfolio following the decision to divest its troubled subprime mortgage unit.

The moves - announced on Friday alongside second quarter results in line with Wall Street expectations - came as the US industrial conglomerate said it would double its share buyback to $14bn.

The increased buyback is partly designed to compensate shareholders for this week’s surprise collapse of GE’s $8bn takeover of the diagnostics unit of Abbott Laboratories.

The decision to trim its financial services unit is part of GE’s drive to convince investors that its disparate collection of businesses, ranging from jet engines to movies, can keep delivering strong earnings growth.

Jeffrey Immelt, GE’s chairman and chief executive, has taken radical action to reshape the company with acquisitions in fast-growing areas such as aerospace and energy and disposals of low-margin units such as plastics.

After years in the doldrums, GE shares have responded, rising more than 7 per cent this year. The shares were up 2.4 per cent to $39.94 - closing in on their five-year high - in New York midday trading.

Mr Immelt said GE would be “tough-minded and investor-friendly” in its review of disposal targets and signalled that it would refrain from large acquisitions over the next few months after a $7bn takeover spree this year.

GE recently decided against trumping News Corp’s offer for the media group Dow Jones, after discussing a joint bid with Pearson, the owner of the Financial Times.

Keith Sherin, chief financial officer, told the FT the company would consider disposals of parts of its commercial and consumer finance units but would not sell whole businesses or spin off the entire consumer finance division as suggested by some analysts.

Any disposal would come on top of the sale of WMC, GE’s subprime mortgage unit, which has been hard hit by the sector’s crisis.

The unit, which GE acquired for an undisclosed sum in 2004, reported a loss of $182m in the second quarter in addition to the $370m loss recorded three months ago. This quarter’s loss was largely due to the sale of more than $3.7bn in troubled mortgage loans, which left WMC with $1.1bn in loans.

GE on Friday reported a 10 per cent rise in net earnings to $5.4bn in the three months to June 30 on revenues of $42.3bn - 12 per cent higher than in the same period a year ago. Earnings per share, excluding discontinued businesses like plastics, were 13 per cent higher at $0.53.

Europe warns US over visa plans

Europe warns US over visa plans
By George Parker and Sarah Laitner in Brussels and Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: July 13 2007 22:03 | Last updated: July 13 2007 22:03

American plans that could force Europeans to give two-days’ notice before flying to the US would hinder last-minute business travel, the EU’s security chief has warned.

Franco Frattini wants to ensure that US moves possibly to extend visa-free travel arrangements to all 27 EU member states do not create new hurdles to transatlantic business.

A scheme under consideration by US Congress proposes that the current US visa waiver programme be extended to former communist countries in central and eastern Europe, easing tensions with allies such as Poland and the Czech Republic.

But new security checks would be carried out on all Europeans before travel on a system based on the Australian model of electronic travel authorisations.

Under the proposals, European travellers would give passport and other details to the US authorities electronically, either personally or through travel agents.

A green light would rapidly confirm visa-free travel was permitted, while a yellow light would require the traveller to attend interviews at a US consulate. Frequent business flyers might enjoy an extended green- light permit.

But US authorities have so far failed to assuage European concerns that processing this information will in practice mean 48-hours’ notice could be required.

Mr Frattini said the system – which would also extend to South Korea – could disrupt “last minute business travel”. The commissioner has raised his concerns directly with Michael Chertoff, US secretary of homeland security.

The new system would be less onerous on eastern Europeans – who have to pay a $100 visa application fee – but it would impose new pre-travel checks on citizens of countries such as Britain, which has been the target of recent Islamist terror attacks.

European officials admitted that they do not know what criteria the US authorities would use to determine which travellers receive a “yellow light”, and hoped it would not be a crude system that was based on ethnic origin.

The US Congress is considering excluding those countries where a high proportion of visa requests are turned down. That could include Poland, where 26 per cent of applications are rejected.

Black guilty of fraud, cleared of racketeering

Black guilty of fraud, cleared of racketeering
By Stephanie Kirchgaessner in Chicago
Copyright The Financial Times Limited 2007
Published: July 13 2007 16:57 | Last updated: July 13 2007 23:58

Conrad Black, the British peer who at the height of his power controlled one of the world’s biggest media empires, was on Friday night facing up to 35 years in jail after being convicted of fraud and obstruction of justice.

The Canada-born former publisher of the Telegraph titles in the UK and the Chicago Sun-Times, dressed in a beige linen suit and flanked by his wife Barbara Amiel Black and daughter Alana, sat stonefaced as the verdict was read out. He did not look at his daughter or wife, but passed a note to Lady Black, minutes after he learned of his fate. Lord Black later left the courthouse holding hands with his wife and daughter.

Although he was acquitted on nine of the 13 charges, including the most serious one of racketeering, Lord Black faces a prison sentence and forfeiture of most of his assets, including his home in Palm Beach, Florida, for his part in the theft of millions of dollars from Hollinger International, the company he built and controlled.

Edward Greenspan, Lord Black’s lawyer, said they would appeal, adding: “We vehemently disagree with [prosecution’s estimates for sentencing].”

Lord Black personally stole $2.9m from Hollinger and millions more were directed to the other defendants through a complex scheme in which they were paid “non-competition fees” following a sale of some of the company’s newspaper properties to another company Lord Black controlled.

In another instance, he siphoned hundreds of thousands of dollars from Hollinger in a sham transaction. Lord Black was acquitted of allegations that he stole tens of millions more – possibly because the audit committee signed off on the transactions.

The ruling was reached on the 12th day of deliberations. After the jury was excused during a break in the proceedings, Lady Black huddled around her husband with her step-daughter.

He faces a bail hearing on Thursday after Eric Sussman, chief prosecutor, argued that Lord Black was a flight risk who had a history of flouting the court’s orders.

Lord Black’s three co-defendants – Jack Boultbee, former Hollinger International chief financial officer; Peter Atkinson, former vice-president and general counsel; and Mark Kipnis, a former Hollinger lawyer – were all found guilty of the same mail fraud charges.

Patrick Fitzgerald, the US attorney for the Northern District of Illinois whose office prosecuted the case, said he was ”very satisifed” with the outcome.

He also denied that class had played a role in the jury’s verdict, pointing out that the jurors had acquitted Lord Black on accusations involving “corporate perks”, including his use of company’s corporate jet for a vacation to Bora Bora.

Friday, July 13, 2007

International Herald Tribune Editorial - Schoolgirls under fire

International Herald Tribune Editorial - Schoolgirls under fire
Copyright by The International Herald Tribune
Published: July 12, 2007

Women again have legal rights in Afghanistan. But more than six years after American forces helped drive the Taliban from power, the women and girls there are still living with the threat of terror in their daily lives.

It was heartbreaking to read the other day about the shooting of six public school students - two fatally - by armed rebels out to discredit the government and intimidate other parents from sending their daughters to school. That attack, sadly, was no isolated incident. As Barry Bearak reported in The New York Times, shootings, beheadings, burnings and bombings have at least temporarily shut down hundreds of Afghanistan's public schools.

Schools and schoolgirls are now a target because they represent one of the new government's proudest achievements and a source of hope for Afghans. With only limited help from the United States and other foreign donors, thousands of new schools have been built or rebuilt and, according to government figures, more than 6 million children of both sexes are now enrolled in classes, roughly half the total school-age population.

Things could be a lot better. Because the Afghan government is poor and because Washington would rather spend its aid dollars on roads, power and security assistance, many of those classes must be taught outdoors, for lack of sturdy buildings, and taught poorly, for lack of trained teachers. Providing armed protection to every school may not be practical, but clearly there is a lot more that Washington could and should be doing to improve both security and educational quality.

The United States and other NATO countries now have more than 50,000 troops in Afghanistan. And next year Washington is expected to provide more than $1 billion in humanitarian and reconstruction aid.

That figure still pales when compared with Afghanistan's needs and the billions being spent each week to fight the disastrous Iraq war.

International Herald Tribune Editorial - Unhealthy interference

International Herald Tribune Editorial - Unhealthy interference
Copyright by The International Herald Tribune
Published: July 12, 2007

Even those who have grown cynical over the Bush administration's relentless manipulation of scientific views to fit its ideological agenda must have been surprised at the breadth of interference described by the former surgeon general, Richard Carmona.

The official job description calls for the surgeon general to serve as "America's chief health educator." But the Bush administration instead tried to turn Carmona into a propagandist, and when he refused to go along, it stopped him from speaking at all on a host of essential health issues.

Carmona told a House committee that the administration would not allow him to speak on the scientific and medical aspects of stem cell research, emergency contraception, comprehensive sex education and prison or mental health issues. He said a surgeon general's report on global health issues was quashed because he refused to insert glowing references to the efforts of the Bush administration. His report on prisoners' health care was held up for fear it would lead to demands for costly reforms.

Other disturbing improprieties included an order that Carmona insert President George W. Bush's name at least three times on every page of his speeches, requests that he make political speeches on behalf of Republican candidates and an admonition not to speak to a group affiliated with the Special Olympics because of the charity's longtime association with the Kennedy family.

Carmona declined to name his tormentors but made it clear that they included assistant secretaries in the Department of Health and Human Services as well as other top political appointees.

What to do about such interference should be high on the agenda of the Senate health committee's confirmation hearing this week on Dr. James Holsinger, the president's nominee to become the next surgeon general. The main subject to be probed, aside from Holsinger's professional qualifications, is whether he still holds the views he has expressed in the past that seem hostile to gays and lesbians. It will also be important to ask Holsinger what steps he would take to keep the office from being politicized.

The House and the Senate must look for ways to protect the position from future political interference. If this White House doesn't understand why that independence is so important to the nation's health, the American public certainly should.

Obama finds his stride at NAACP debate - He takes aim at race-poverty link and outshines Clinton, others

Obama finds his stride at NAACP debate - He takes aim at race-poverty link and outshines Clinton, others
Copyright by The Chicago Sun-Times
July 13, 2007

DETROIT -- Sen. Barack Obama is indeed a quick study. After looking surprisingly unpolished in a nationally televised forum targeting black audiences nearly two weeks ago, Obama held his own against his closest rival, Sen. Hillary Clinton, at the 98th NAACP National Convention at Cobo Hall in Detroit on Thursday morning.

Obama, who is pitting change against experience in the 2008 Democratic primary, got off more than a few crisp one-liners while crafting a message that at times elicited thunderous applause that drowned out some of his words, but obviously bolstered his confidence in the debate arena.

"If you are poor in this country, it is hazardous to your health. If you are black and poor, that's downright deadly," Obama said in response to a question about health care posed by a delegate and given to the candidates in advance of the forum.

"We will not close the gap until we create a system of universal health care. The way to do that is to ignore the insurance companies and drug companies. In negotiations, it's OK for them to have a seat at the table, but they can't buy every single chair."

It was the kind of retort that Obama, who tends to be long-winded when addressing policy questions even when the cameras are rolling, has had a difficult time firing off in past debates. On Thursday, Obama seemed to have found his stride.

The crowd erupted into shouts more common at a tent revival than a forum when Obama pointed out that though convicted, Scooter Libby didn't have to spend one day in prison, while poor people who are found guilty go to prison for years.

"We have to recognize the twin scourges of race and poverty in this country," Obama said during his three-minute remarks.

"We don't expect government to guarantee success in life, but when millions of children start out in the race of life so far behind only because of race, only because of class, that's not just an African-American problem. That's an American problem," Obama said.

Clinton, who drew the luck of the draw and was first to speak -- and, conversely, had the final word -- sparkled in a bright yellow suit and entered the stage to enthusiastic applause. But the crowd roared when Obama, No. 6 in line, appeared on stage.

Clinton didn't fail to remind the audience that she has been to several NAACP conventions, and she dropped the names of prominent African-Americans like Marian Wright Edelman, with whom she has worked on civil rights issues. And other candidates, particularly Rep. Michael Gravel -- who took more than one jab at the other candidates -- and Rep. Dennis Kucinich drew their share of applause for their "Perot-like" let's-just-throw-the-bums-out approach to politics.

But it was clearly Obama's moment.

Obama used the forum to highlight the 34 violent deaths of African-American young people in the Chicago area this past school year. At 11 a.m. on Sunday, Obama will call the community to action against the violence during an appearance at the Vernon Park Church of God at 90th and Stony Island.

An in-your-face Obama
"The massacre that happened at Virginia Tech was a terrible tragedy, and we were grief-stricken and shocked," Obama said. "But in this year alone in Chicago, we have had 34 Chicago Public School students gunned down, and for the most part there has been silence. We have to make sure that we change our politics so that we care just as much about those 34 kids in Chicago as we do about those kids at Virginia Tech."

Accused by critics of being too "skittish" to address black issues head on, Obama's spirited responses seemed crafted to put those critics to rest.

Despite raising a record-breaking amount of money, $32 million, for a reporting period during a primary, Obama still trails Clinton by nearly 20 points in a head-to-head race, according to a Newsweek poll released July 7. Any disconnect -- real or perceived -- between Obama and African-American voters could cause him a problem, as Clinton is working passionately to capture the same vote.

Gina Clayton, 24, a delegate from California who is on her way to Harvard Law School, illustrated the challenge.

"I have a lot of friends that are politically active who are definitely waiting to hear what is coming out of the candidates' mouths that relate to them. They are looking for solutions. We want to know what are they going to do about these problems because we have been here before," she said.

"Candidates have got to answer our questions specifically and directly," Clayton said. "We don't want to play that political game. And right now, so many of my friends have not decided between Hillary and Barack."

On Thursday, Obama was in-your-face. Hopefully, naysayers got the message.

Chicago Sun-Times Editorial - TIME FOR TRUTH

Chicago Sun-Times Editorial - TIME FOR TRUTH
Copyright by The Chicago Sun-Times
July 13, 2007

What is President Bush hiding? He insists he's acting on principle in defying a congressional subpoena for testimony and documents concerning the firing of eight U.S. attorneys. His defense: to maintain his office's ability to get good, candid advice from his aides. Claiming executive privilege for himself and former aides including Harriet Miers, he says he played no part in the firings.

But congressional investigators smell coverup: They think Bush is trying to avoid the political and legal fallout of having it revealed the firings were part of a plan concocted by top aide Karl Rove to politicize the federal criminal system. Under this plan, various attorneys were pressured to target potential Democratic candidates and stop investigating Republican officials for corruption.

If this were proved, Bush would not only look bad for having denied any role, he would also be party to obstruction of justice. It isn't illegal to fire U.S. attorneys, though presidents usually have that done when they assume office, not mid-term, with a specific agenda. It is illegal -- an obstruction of justice -- to have them fired to chill prosecutions.

Whatever is revealed in a dispute that appears headed to the courts, Bush is not doing a good job of hiding his basic contempt for the legal system and the democratic principles of openness and accountability. During these premature lame duck days of his presidency, when a number of Republicans are rising up against him, he is less concerned with advancing programs than protecting those close to him politically. That was driven home when he commuted the prison sentence of former top Cheney aide Scooter Libby -- and refused to explain why to Congress. Libby was convicted of obstructing justice in a federal probe of the leak of ex-CIA agent Valerie Plame's identity. Erasing his 2½-year prison sentence continues that obstruction by removing "any incentive for him to cooperate with the prosecutor," says Plame's husband Joseph Wilson.

Chicago area set to gain another area code - Existing 630 users to get 331 overlay, go to 11-digit dialing

Chicago area set to gain another area code - Existing 630 users to get 331 overlay, go to 11-digit dialing
By Gerry Smith
Copyright © 2007, Chicago Tribune
Published July 13, 2007
A large swath of west suburban Chicago will dial an extra four digits to make local phone calls when state regulators add a second area code this fall.

The 630 area code was "exhausted" at the end of June and will be supplemented by 331 for new phone customers effective Oct. 7, George Light, a telecommunications analyst for the Illinois Commerce Commission, said Thursday.

The additional area code will require local calls to include the full 11-digit number -- 1, the area code and seven-digit number. No current customers will have to change numbers, Light said.

In part, the additional area code underscores the growth in DuPage County since 630 was implemented in 1996. The county's population has grown about 8 percent, from 860,000 to 933,000 over that period, according to the U.S. Census Bureau.

But the four extra keystrokes also are due to the growth of the telecommunications industry and federal law promoting open competition, he said. As the proliferation of cell-phone users exhausted numbers, the Telecommunications Act of 1996 required state regulators to grant phone companies equal access to area codes, he said.

Light said the new code was inevitable despite efforts for "pooling" since 1999 to defer a prefix shortage by asking phone companies to return unused numbers.

"It was just a matter of time," Light said.

Local calls will cost the same, but the addition of a new prefix is an "unnecessary hassle," said David Kolata, executive director of the Citizens Utility Board.

Kolata said there are 7.8 million combinations of numbers for each area code and about 94 million available numbers in Illinois -- or seven for every person.

"The notion of area code exhaust is purely artificial," said Kolata, who believes the problem stems from bad policy by federal regulators and hoarding of numbers by the telephone industry.

Light acknowledged there are many numbers still out there, but said regulators have simply run out of "prefixes" -- the first three digits of a seven-digit phone number. Light said prefixes, which are allocated in blocks of 1,000, are unique to specific towns and carriers. In smaller towns, many are left unused, intensifying the shortage.

State regulators may have averted many headaches by implementing an "overlay" of the 331 code in the county, which retains all current phones numbers, rather than splitting the 630 area code and assigning new numbers to half the area. There are about 36 overlays of area codes in 16 states.

The 331 overlay will bring to nine the number of area codes in the Chicago area, joining the existing 312, 773, 708, 630, 815, 847, 224 and 779. Residents in the 815 area code went to 11-digit dialing in mid-February, just before the 779 overlay was introduced there in March.

In 1996, state regulators chose to split the 708 area code to create the additional 847 and 630 codes, forcing residents and businesses to reprogram security systems and update business cards and stationery. In 2002, phone customers in the 847 area code added the 224 code, becoming the first customers in Illinois to dial 11 digits for local calls.

Stephen Geiser, owner of Security Services Group in Wheaton, said area code splits have taken a toll on his technicians, who have been dispatched to homes to reprogram alarm systems. He has learned a lesson, he said, and now has most of his customers' alarm systems linked to toll-free numbers to avert the inconvenience of another area-code change.

"Most alarm dealers, if they're smart, have already gone to 800 numbers," he said. But for those that haven't, he said, "It's just a minor nuisance."

Dave Grote, owner of All Star Printing in Wheaton, said area code splits have slightly boosted business in the past, but said the overlay would have little impact on letterhead and business-card sales.

Chicagoans have struggled with the implementation of new area codes in the past. In 1989, when Chicagoland added its third area code, 708, only 14 percent of calls from the 312 region to the 708 region and 7.5 percent of calls from the suburbs to the city were dialed correctly, according to Illinois Bell surveys.

In 1996, when phone service provider Ameritech implemented the 847 area code for Chicago's north and northwest suburbs, many customers had an office number with an 847 area code, a residential phone number with a 630 area code and a car phone with a 312 area code, the Tribune reported.

Subprime loans stoking litigation - Mortgage market woes trigger lawsuits

Subprime loans stoking litigation - Mortgage market woes trigger lawsuits
Copyright © 2007, Chicago Tribune and The Associated Press
Published July 13, 2007

WASHINGTON -- Lawsuits blossomed after Enron Corp.'s collapse, with many targeting the energy giant's bankers. Wall Street firms could again become the bull's-eye for investors seeking recourse from the subprime mortgage debacle.

Billions of dollars are at stake, depending on how many of the mortgages made to borrowers with shaky credit default. Credit Suisse Group estimates losses to investors between $26 billion and $52 billion, while Deutsche Bank AG says losses could total $70 billion to $90 billion.

Investors "are going to be looking for deep pockets where they can maximize their recoveries," said Rick Antonoff, a New York-based lawyer with Pillsbury Winthrop Shaw Pittman, which has a group of lawyers assigned to subprime mortgage litigation.

Homeowners are suing lenders. Shareholders are suing collapsed mortgage companies. Investors in complex mortgage securities are starting to sue big Wall Street banks. Those investment banks are turning around and suing the mortgage firms.

Court filings show numerous recent cases related to the troubled mortgage market. The NAACP sued a dozen mortgage lenders Wednesday in U.S. District Court in Los Angeles, claiming the firms discriminated against blacks by steering them into higher-interest subprime loans while giving more favorable rates to white borrowers. The defendants include Ameriquest Mortgage Co., Citigroup Inc., Prospect Heights-based HSBC Finance Corp. and Washington Mutual Inc. Ameriquest, Citigroup and HSBC defended their lending practices as fair. Washington Mutual declined to comment, saying it needed to review the lawsuit.

Meanwhile, a subsidiary of Deutsche Bank filed at least 15 lawsuits in May seeking as much as $14 million from mortgage companies. Similar suits have been filed by subsidiaries of Credit Suisse and UBS AG.

Bankers Life Insurance Co. filed suit in April in a Florida federal court against Credit Suisse and other defendants, alleging the risks of mortgages pooled in securities were misrepresented.

The flurry of litigation comes amid evidence that the mortgage market's problems are worsening.

In a report last month, Banc of America Securities warned of a "broader fallout from subprime mortgage deterioration" when homeowners with about $515 billion in adjustable-rate home loans, more than 70 percent of whom are subprime borrowers, get higher monthly mortgage bills as rates reset before year's end. Another $680 billion worth of mortgages will reset in 2008, the report said.

Joseph Mason, a finance professor at Drexel University, said it could be an uphill battle for investors to prove that financial institutions were negligent or committed fraud. Still, he agreed the housing market crisis could result in more lawsuits and a more severe financial impact than Enron and other market meltdowns.

"There are so many more investors and there are so many more levels of investment exposure to the sector," Mason said. "These are widely held investments."

Walgreens to settle lawsuit on racial bias - $20 million to be paid to black personnel

Walgreens to settle lawsuit on racial bias - $20 million to be paid to black personnel
By Barbara Rose
Copyright © 2007, Chicago Tribune
Published July 13, 2007

Walgreen Co. has agreed to pay $20 million to as many as 10,000 African-American store managers and others to settle a federal civil-rights lawsuit charging they were denied promotions based on race.

The agreement, filed Thursday in U.S. District Court in East St. Louis, brings to a close a class-action suit by the U.S. Equal Employment Opportunity Commission, which charged that the nation's biggest drugstore chain discriminated against black managers, pharmacists and others by assigning them to poorer-performing stores in neighborhoods where they had fewer opportunities to advance.

The Deerfield-based company admitted no wrongdoing.

"As a company with zero tolerance for discrimination against any employee, we were disappointed by this lawsuit and are glad to have it behind us," a spokeswoman said in an e-mail. "From the beginning we have denied all allegations. We are a drugstore industry leader in the employment and promotion of African-American managers and pharmacists."

The proposed settlement, which must be approved by the court, prohibits store assignments based on race and calls for Walgreens to be monitored for at least four years.

Jean Kamp, associate regional attorney in the EEOC's Chicago district office, said the monetary award is lower than in some other discrimination cases against big firms because "these are not people who were denied jobs, they were managers who were promoted more slowly than their white peers."

"We feel that it's a fair settlement," she said. Negotiations began soon after the suit was filed March 7.

The impetus for the EEOC's action was a private suit filed in June 2005 alleging similar claims on behalf of 14 Walgreens employees. The EEOC suit and the private suit were later consolidated.

Walgreens Chief Executive Jeffrey Rein said in a statement Thursday, "We are pleased to reach a resolution that is consistent with our past and future diversity and equal-opportunity objectives."

More than 17 percent of its store and district managers are African-American, compared with an industry average of 9 percent, Walgreens said. Fifteen percent of Walgreens staff pharmacists are African-American, compared with the industry average of 10 percent.

Johnny Tucker, a 21-year employee who manages a store in Independence, Mo., said he is happy about the settlement although disappointed that Walgreens does not acknowledge the discrimination that he said he faced.

"I really have some great hope that Walgreen will uphold their commitment for fair and equal treatment," he said. "It's really going to provide a future of opportunities for the many talented African-American employees in the company."

His lawyer, Tiffany Klosener of Kansas City, Mo., whose firm brought the private suit, said the settlement is "not a band-aid."

"It will mean sweeping changes," she said. "I think it will transform the company so that decisions will be based on qualifications and not on skin color."


The Short View By John Authers - Credit and Markets

The Short View By John Authers - Credit and Markets
Copyright The Financial Times Limited 2007
Published: July 13 2007 03:00 | Last updated: July 13 2007 03:00
A Minsky Moment has been averted for now. Can it be postponed indefinitely?

Yesterday saw credit markets recover slightly from their precipitous falls of the past week, while stock markets rallied. By mid-session in New York, the Dow Jones Industrial Average was on course to close at an all-time record as, more significantly, were the MSCI emerging markets index, Brazil's Bovespa and Korea's Kospi.

So the sharp increase in the cost of credit has not yet brought down the stock market with it. Why not?

Enter Hyman Minsky. The late US economist offered a theory of the behaviour of lenders, which many have re-examined in recent weeks.

He said credit conditions became increasingly lax in times of good economic health. Then the credit supply would dry up (through such measures as the tightening of lending standards). Then liquidity dried up as lenders called in loans and borrowers sold liquid assets to comply. The final "moment" came when central banks cut rates to avert economic collapse.

The theory was drawn to fit a world where, as in 1929, the decision whether to extend credit rested with bankers. Now it rests with the markets. But its potential relevance to current circumstances is clear.

George Magnus of UBS suggests reasons to believe a Minsky Moment can be deferred. First, housing problems take a while to unfold. Second, companies have cleaned their balance sheets and are not heavily leveraged. Third, there is still much liquidity in the world system. High energy and commodity prices suggest petro-dollars will not go away.

Finally, there is still no clear evidence of economic weakness, as the most recent data underscore, or of a significant return by inflationary pressures.

All these factors could change quickly. But even with credit valuations back to earth, markets believe Minsky's Moment of reckoning can be deferred further.

A political awakening that recasts the global landscape

A political awakening that recasts the global landscape
By Philip Stephens
Copyright The Financial Times Limited 2007
Published: July 13 2007 03:00 | Last updated: July 13 2007 03:00

One of the reasons, probably the most important, why today's world is a confusing and chaotic place is our natural instinct to look at it through the prism of yesterday. The assumptions and preconceptions that made sense of the past century do not fit the present.

The world of the 20th century was defined by the power of states. The dissolution of empires and the rise of nationalisms saw the number of states quadruple. For most of the time, war and peace measured the rivalries or otherwise between them. Even as it sought to regulate better their relationships after the carnage of two world wars, the United Nations charter paid homage to the primacy of states. As long as they did not threaten their neighbours, governments, democratic or authoritarian, could do as they pleased within their own borders.

That was yesterday. The world of the 21st century is one in which states have been fast losing their monopoly of power - in part to a new cast of global actors and in part to a tumultuous awakening of a once passive citizenry beyond the west. Some of these actors are benign: think of, say, the companies whose operations - and employees - now span several continents. As many are malign: think of Islamist terrorists and human traffickers. Either way, the new landscape comes into focus only through a different set of lenses.

Among the shifts in global power we are now witnessing, some are consonant with historical experience. The re-emergence of China and India after their two lost centuries fits the old paradigm of a world described by the rise and fall of nations. So too do the transfers of relative economic power from north to south and from west to east. But it is the seepage of power from states, rather than changes in the balance between them, that defines the global disorder.

Here too, there is a mixture of the old and the new. International treaties and conventions began to erode the inviolability of national borders almost before the ink had dried on the UN charter. The globalisation of business and finance began with international moves to liberalise trade during the 1950s. What has changed has been the sheer speed of change.

The really big - the new - story is about what has been called a global political awakening. Two recent encounters - one with a veteran of American foreign policy-making, the other with one of Europe's youngest foreign ministers - have reminded me of the profound and irreversible nature of the change.

At the weekend I listened to Brent Scowcroft, the former national security adviser to President George H.W. Bush, deliver the annual Ditchley Foundation lecture.Mr Scowcroft, a general turned accomplished policy practitioner, was at the centre of events during the collapse of communism. The end of the cold war removed the existential threat of mutually assured destruction. But the disintegration of the Soviet empire was also a trigger for instability. Fracturing empires beget weak states. Most of the areas of greatest insecurity in today's world lie along an arc from the Balkans though the Middle East to central Asia. They also sit in what were once the Austro-Hungarian, the Ottoman and the Soviet empires.

Within these, often weak, states,Mr Scowcroft told his audience at Ditchley, we have newly empowered populations. Technology has transformed the most primitive societies. Ubiquitous and cheap telephony, the internet and satellite television have taken national and global controversy and conflict into the remotest villages - and out again.

Anger and grievances that were once contained within towns and regions now spill over state borders; so too do people. The politics of ethnic and religious identities threaten power structures that have endured for centuries.

My second encounter was with a politician who was barely out of university when Mr Scowcroft was navigating the geopolitical rapids in the White House.

David Miliband has become Britain's foreign secretary at the tender age of 41. A few days ago I joined my FT colleagues in cross-examining him about today's geopolitical challenges.

As befits one of his country's fastest-rising politicians, Mr Miliband has acquired quickly an easy grasp of the security issues of the day. The generational change, though, also matters. Politicians of Mr Miliband's age do not assume the permanent hegemony of the west. I was struck by his observation that it was impossible for politicians in the west to make sense of the world unless they also understood what it looked like through Indian eyes.

The point at which he became animated, though, was during a discussion of the threat from jihadi terrorists. For most of human history, he remarked, the power to control had been greater than the power to destroy. Now the power to destroy was greater than the power to control. That, Mr Miliband thought, was a "profound" point.

He did not claim the thought as his own, crediting it instead to another former US national security adviser, Zbigniew Brzezinski. Mr Brzezinski, who served President Jimmy Carter in the late 1970s, has one of the sharpest minds in Washington.

I mention Messrs Scowcroft and Brzezinski in the same column with slight hesitation because I suspect (without, it must be said, real evidence) that they are intellectual rivals. But, at the risk of libelling both, it seems to me they offer the same, important, insight.

In his latest book, Second Chance, Mr Brzezinski writes of the challenge to the existing global balance from the effective, if not the literal, enfranchisement of billions of people once locked out of any political process. This technology-driven awakening - most visible in the Middle East and Asia - is driving a global redistribution of power. In Mr Brzezinski's words: "The resentment, emotions and quest for status of billions are a qualitatively new factor of power." Add migration, porous borders and unconventional weapons to the mix and you describe the new collective vulnerability of the west.

To describe this great upheaval, of course, is not to answer the question as to how the west should respond. Those mentioned above have their own suggestions. If there is one that stands out for me it is that we need to understand that ideas and values are now as important a tool as economic, or indeed military, might, in the effort to guarantee our security. Mea culpa: the former US official referred to in last week's column as seeking to recast the US war on terror was Philip, not Robert, Zelikow

Baghdad ‘failing to follow through on promises’/Bush concedes US ‘tired of war’

Baghdad ‘failing to follow through on promises’
By Andrew Ward and Demetri Sevastopulo in Washington and Steve Negus, Iraq correspondent
Copyright The Financial Times Limited 2007
Published: July 12 2007 21:36 | Last updated: July 12 2007 21:36

When President George W. Bush announced plans in January to send an additional 30,000 US troops to Iraq, he warned that “America’s commitment is not open-ended”.

“If the Iraqi government does not follow through on its promises, it will lose the support of the American people – and it will lose the support of the Iraqi people,” he said.

Six months later, the Bush administration issued an interim progress report yesterday indicating that the Iraqi government had failed to heed his warning.

The report declared unsatisfactory progress towards all the political targets set for the government of Nouri al-Maliki, Iraq’s prime minister. But Mr Bush pleaded with Congress to give his strategy and the Iraqi government more time.

“The Iraqi government has not met a single political benchmark in its entirety,” said Harry Reid, the Senate majority leader.

Thursday’s report came amid a fresh push by the Democratic-controlled Congress to end the war, with a growing number of Republicans adding their voices to calls for a change of strategy.

Democrats have proposed legislation that would force Mr Bush to start withdrawing troops within four months and end combat operations by next April. Congress agreed in May to continue funding the war until the autumn but insisted that Mr Bush issue reports in July and September measuring progress.

While acknowledging the lack of progress towards political goals, Mr Bush said Thursday’s report did show signs of success on the security front.

“Our strategy is built on the premise that progress on security will pave the way for political progress,” he said.

“The real debate over Iraq is between those who think the fight is lost or not worth the cost and those who believe the fight can be won and that, as difficult as the fight is, the costs of defeat would be far higher.”

Hoshiar Zebari, the Iraqi foreign minister, told the FT that the report was “balanced and sober”.

Mr Zebari said his government would make more progress by September when General David Petraeus, the top US commander in Iraq, will report back to Congress on the troop surge.

“We have two months of time, and I think there will be some more progress on the political side,” Mr Zebari said.

Some Iraqis raised concerns that growing pressure from Washington would make it more difficult for the Iraqi government to pass legislation, including measures to allow former Ba’ath party members to hold government jobs, and to ensure the equitable distribution of oil revenues to all Iraqis.

The report noted that Iraq’s reconciliation process could be helped by a “general amnesty” for insurgents that had fought against the Iraqi government. But it concluded that the conditions were not ripe for such efforts.

The report also concluded that little progress was being made in disarming sectarian militias.

Democrats also seized on reports this week that the US intelligence community was alarmed by the resurgence in the al-Qaeda network in Pakistan and elsewhere.

“While Osama bin Laden is operating freely, we understand, on the Afghan-Pakistan border, the president wants to keep our troops in an open-ended war, a civil war in Iraq,” said Mr Reid. “It’s not surprising that al-Qaeda has been able to reorganise and rebuild.”

Bush concedes US ‘tired of war’
By Demetri Sevastopulo and Andrew Ward in Washington, and Steve Negus, Iraq correspondent
Copyright The Financial Times Limited 2007
Published: July 12 2007 15:28 | Last updated: July 13 2007 02:37

George W. Bush acknowledged on Thursday that America was “tired of war” but showed no sign of shifting policy on Iraq in spite of a White House report that presented a mostly negative assessment of the situation there.

The report said the Iraqi government had failed to bolster adequately its security forces, which were still prone to sectarianism.

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When and how should the US withdraw from Iraq? Join the debate
“I am disappointed that, after great sacrifice by US and Iraqi troops since the announcement of the surge, the Iraqi government has not met critical political benchmarks,” said John Warner, Republican senator. “That government is simply not providing leadership worthy of the considerable sacrifice of our forces and this has to change immediately.”

While the report on the troop surge concluded that the situation remained “complex and extremely challenging”, Mr Bush said the US could still succeed and vowed not to succumb to mounting pressure to pull out.

“I understand why the American people are...tired of the war,” Mr Bush said. But he added: “To begin withdrawing before our commanders tell us we’re ready would be dangerous for Iraq, for the region and for the United States.”

The report said Iraq had made very little progress developing security forces that could operate independently of US soldiers. It had also shown little success in preventing Iraqi commanders pursuing sectarian goals. “There continues to be evidence of sectarian bias in the appointment of senior military and police commanders,” the report said.

In a symbolic move, the Democratic-controlled House of Representatives on Thursday voted 223-201 to approve legislation to bring combat troops out of Iraq by April 1 2008.

Defying a veto threat from Mr Bush, House Democrats hope the vote will put pressure on the Senate to attach a similar troop withdrawal timetable to a military policy bill it is debating.

Two previous efforts either died in the Senate or were vetoed by the US president.

The White House has stressed that the troop surge was designed to give the Iraqi government time to implement key reforms. But Congress has become sceptical about the ability of Nouri al-Maliki, Iraqi premier, to make progress, as more than 3,600 US troops have been killed since the 2003 invasion.

Mr Bush said he would wait until after General David Petraeus, US commander in Iraq, issued a full report in September before deciding if “adjustments” to strategy were required.

Iraqis, the report said, had made insufficient progress in reversing a ban on former Ba’ath party members in government agencies. The Iraqi government had also not ensured equitable distribution of oil revenues.

Democrats also leapt on reports that intelligence had concluded that al-Qaeda had regrouped to levels last seen in 2001.

“Al-Qaeda was in Afghanistan when they attacked us on 9/11 and they fled to the lawless Afghan-Pakistan border region after the Taliban fell,” said Jay Rockefeller, the top Democrat on the Senate intelligence committee.

“Instead of pursuing them and finishing them off when we had the chance in 2002 and 2003, President Bush chose to invade Iraq thereby diverting our military and intelligence resources away from the real war on terrorism.”

US warns China over export safety

US warns China over export safety
By Krishna Guha in Washington and Reuters
Copyright The Financial Times Limited 2007
Published: July 13 2007 00:59 | Last updated: July 13 2007 06:16

The Bush administration urged China on Thursday to step up efforts to ensure the safety of its exports to the US, following a spate of Chinese product recalls and food scares.

Carlos Gutierrez, the commerce secretary, made the call as the US separately took a further step in its World Trade Organisation claim against China over what it alleges are illegal subsidies. Mexico said it would join the US claim.

Mr Gutierrez told Reuters the administration had called on China to get on top of the safety issue. His remarks reflect growing public disquiet in the US over scares associated with Chinese products.

On Friday, the Chinese government agency overseeing food and drug safety posted comments from Shao Mingli, its head, at a work meeting putting responsibility on manufacturers. ”Companies are the people with the first line of responsibility for food and drug safety, and must strengthen management, uphold the law in their operations, honestly follow regulations and guarantee safety,” he said. ”Food and drugs are special products, and manufacturers and sellers cannot only go after economic gain.”

”Food and drug safety is critical to the people’s health and lives, and is critical for social stability and harmony,” he added. ”This issue can easily morph into a much larger one and directly affect the image of local governments and the state, affect social stability and harmony as well as socio-economic development.”

Separately, the official China Daily newspaper reported that the military would conduct checks of its food suppliers. ”To strengthen food safety is to guarantee the People’s Liberation Army’s combat capacity,” a logistics officer said.

The high-profile execution of Mr Shao’s predecessor on bribery charges does not appear to have reassured US consumers.

While the issue of Chinese food and products has not yet become a big political issue inside the US, some members of Congress are beginning to demand more action from the government.

Charles Schumer, the Democratic senator from New York, blasted what he called “increasingly unsafe imports from China” and called for the appointment of an “import tsar” to protect US consumers.

US officials raised food and product safety at the May meeting of the US-China strategic economic dialogue but it is likely to be a much bigger issue at the next meeting, expected in Beijing in December.

The office of the US Trade Representative, meanwhile, announced the US had requested that the WTO establish a dispute settlement panel to evaluate its claim regarding what it says are subsidies provided by China that break WTO rules.

The move follows formal consultations with China. A USTR spokesman said: “Although our two rounds of WTO consultations with China have been constructive, they have not resolved our concerns about China’s apparent use of trade- distorting subsidies.”

Wall St stalls after weak retail sales

Wall St stalls after weak retail sales
By MIchael Mackenzie in New York
Copyright The Financial Times Limited 2007
Published: July 13 2007 14:00 | Last updated: July 13 2007 14:00

Wall Street’s drive into drive into record territory was set to cool on Friday after new data showed retail sales fell sharply last month.

The report cast doubt over whether the S&P 500 and bluechips would advance further after the opening bell after the benchmarks closed at record highs on Thursday.

Retail sales slumped 0.9 per cent in June, after a 1.5 per cent rise in May. Excluding cars and petrol, sales were down 0.3 per cent. It was the largest slide in headline sales since a decline of 1.5 per cent in August 2005, and was worse than a estimated fall of 0.1 per cent.

“After the spike in May, the June decline leaves the trend at a moderate pace,” said TJ Marta, strategist at RBC Capital Markets.

Equity index futures had edged above fair value just before the June retail sales report arrived and then subsequently slipped back.

Less than an hour before the opening bell, S&P 500 futures were unchanged at 1,555.70 and were trading below fair value of 1,556.97.

Nasdaq futures were up 1.5 points at 2,036.2, but were below a fair value reading of 2,039.47.

Futures for the Dow Jones Industrial Average were up 10 points at 13,9300, and had dropped from earlier highs after the data.

The yield on the 10-year bond edged lower after the retail sales number and was at 5.10 per cent, down from 5.12 per cent.

In earnings news, General Electric reported that second-quarter net income rose 9.6 per cent to $5.42bn, in line with analysts’ estimates. The conglomerate said it would exit its US mortgage business and increase its share repurchase programme this year to $14bn. In pre-market trade, GE was up 1.2 per cent at $39.45, just shy of its 52-week high of $39.77.

In deal news, Energizer agreed to buy Playtex, the maker of feminine care and infant products, for about $1.2bn. In pre-market trade, Playtex was up 17.7 at $18.27.

Earlier this week, profit warnings from retailers such as Home Depot and Sears sparked concern that US consumers are fading. That mood was sharply alleviated on Thursday, when same store sales in June from major retailers were better-than-expected at 2.4 per cent. Wal-Mart’s 2.4 per cent jump in same-store sales provided a major boost for sentiment.

Stocks surged on Thursday as the S&P 500 and blue chips entered record territory, boosted by a big deal in the mining sector and the Wal-Mart sales data. The S&P closed at a record high of 1,547.7, up 1.9 per cent for the day.

The Nasdaq Composite closed 1.9 per cent higher at 2,701.73. The Dow Jones Industrial Average closed up at a record high of 13,861.73, up 2.09 per cent for the day, representing its best one-day gain in two years.

ABN Amro can sell LaSalle, court rules

ABN Amro can sell LaSalle, court rules
By Peter Thal Larsen, Banking Editor
Copyright The Financial Times Limited 2007
Published: July 13 2007 10:16 | Last updated: July 13 2007 10:16

ABN Amro was on Friday given permission to sell its US subsidiary to Bank of America without shareholder approval, ending a 10-week legal tussle over the sale and setting the stage for a head-on bidding war for control of the Dutch bank.

In an eagerly awaited ruling, the Dutch Supreme Court dismissed a decision by the country’s Enterprise Chamber that ABN Amro could not be allowed to complete a sale of the business, called LaSalle, without a shareholder vote.

The ruling clears the way for ABN Amro to complete the LaSalle sale, and also allows Barclays, which had agreed an all-share takeover of the Dutch bank originally valued at €63bn, formally to launch its bid.

It is also a setback for the rival consortium, led by Royal Bank of Scotland, which had made a €71bn break-up bid for ABN Amro that was conditional on it being able to buy the whole business, including LaSalle.

However the consortium, which includes Santander of Spain and Fortis, the Belgo-Dutch group, is widely expected to press ahead with a revised offer for the rest of ABN Amro, setting the stage for a head-to-head bidding war with Barclays.

The Enterprise Chamber ruled in May that, while the sale of LaSalle did not require a shareholder vote under Dutch law, it could not be separated from ABN Amro’s broader discussions over a deal with Barclays.

However, the Supreme Court dismissed this ruling. ”The fact that the shareholders aim at selling their shares at the highest possible price involves no obligation for the board of directors of ABN Amro to obtain the shareholders’ approval of the sale of LaSalle, nor does such an obligation arise from the prevailing views of the law in The Netherlands,” it said in a summary of the ruling which was published on its website.

”There should not be any unnecessary uncertainty about the carrying out of [the LaSalle sale], into which the board of directors of ABN Amro was entitled to enter.”

The decision removes some of the uncertainty about the future of ABN Amro, which was at risk of increasing disruption due to continued legal wrangling.

If the Supreme Court had upheld the Enterprise Court’s decision, ABN Amro would have faced a multi-billion dollar claim for damages from Bank of America in a New York court.

The Supreme Court accelerated its usual timetable in order to limit the lingering uncertainty over ABN Amro’s future.

Both Barclays and the RBS consortium have until July 23 to publish their formal offers for ABN Amro, setting the stage for a showdown which could be decided by early September.

Barclays is widely expected to attempt to sweeten its all-share offer by replacing some equity with cash. It could also announce plans to sell some of ABN Amro’s businesses – or some of its own operations – to help fund the deal.

Meanwhile, the RBS consortium is expected to revise its offer so that it is substantially all in cash, thereby increasing its appeal to the arbitrage funds that account for a significant proportion of ABN Amro’s shareholder base.

Fortis, which has to raise about €24bn to fund its purchase of ABN Amro’s Dutch retail banking, private banking and asset management arms, this week issued an €2bn convertible bond and also sold its share of a Spanish insurance venture to La Caixa, the savings bank.

However, both Barclays and RBS are under pressure from large UK institutional investors not to get dragged into a bidding war.

In mid-morning Amsterdam trading, ABN shares were up 0.7 per cent at €35.57. In London, Barclays had climbed 0.8 per cent to 724½p and RBS had risen 0.7 per cent to 639p.

Thursday, July 12, 2007


(DETROIT) Last night the Saugatuck Township Board unanimously (5-0) passed a human rights ordinance that prohibits discrimination based on sexual orientation. This is significant because in the state of Michigan it is still legal to discriminate against people in housing, employment and public accommodations based on someone’s real or perceived sexual orientation or gender identity. The population of Saugatuck Township is approximately 3,500.
“This is a very exciting development,” said Sean Kosofsky, Director of Policy for Triangle Foundation. “State leaders in the legislature have failed to protect gay, lesbian, bisexual and transgender workers and other residents in our state, so any movement by a local government body is very welcome. The residents, business owners and workers in Saugatuck Township should be very happy about this development. We also hope the Board will consider offering protections based on gender identity or expression.”
“I am so proud of the Saugatuck Township Board recognizing the importance of non-discrimination policies to protect all people,” said Jon Helmrich, co-chair of the Stonewall Democrats of Saugatuck/Douglas. “As a township resident it makes me incredibly pleased to see Saugatuck Township join the city of Douglas to enshrine personal liberties in this way, and I now hope the city of Saugatuck will follow suit to fully recognize the importance of diversity and freedom in our great community.”
There are nearly 800 municipalities in Michigan, which makes the need for a statewide law critical.  Until that occurs, municipalities have been passing ordinances at a slow but steady pace. The action by the Saugatuck Township Board brings the number of municipalities in Michigan with such policies to fifteen. They are: Detroit, Ann Arbor, Ypsilanti, East Lansing, Lansing, Ferndale, Oak Park, Huntington Woods, Grand Ledge, Grand Rapids, Douglas, Saginaw, Flint, Birmingham, and Saugatuck Township.

This means war - Gloves are off in fight between old television rivals at NBC5, CBS2

This means war - Gloves are off in fight between old television rivals at NBC5, CBS2
Copyright by The Chicago Sun-Times
July 12, 2007

A six-minute piece of videotape shot over a backyard fence not only torpedoed the career of WMAQ-Channel 5 reporter Amy Jacobson.

It also was the opening shot in what could become all-out war between two television titans.

In choosing to air selected parts of a tape showing a swimsuit-clad Jacobson and her two kids around Craig Stebic's pool, WBBM-Channel 2 broke a longstanding tradition in Chicago.

With rare exception, stations have adhered to a gentleman's (and gentlewoman's) agreement not to report on the foibles and failings of one another.

So when a Diann Burns charges the builder of her multimillion-dollar manse with racism or a Marion Brooks is forced to testify in court about her affair with the former mayor of Atlanta, other TV newsrooms take a pass.

Not so on Monday when Joe Ahern, president and general manager of CBS-owned Channel 2, approved airing a misleading and innuendo-filled version of the tape that led to Jacobson's firing.

It was an unmistakable shot across the bow at NBC-owned Channel 5 and its president and general manager, Larry Wert.

Wert and Ahern have a personal history that goes back to their early careers together in the sales department of ABC-owned WLS-Channel 7. They've always been friendly rivals.

But after what was described as a contentious shouting match between them on the phone Tuesday, the "friendly" part could be inoperative for a while.

Now before you jump to the conclusion that this really is all about ratings, consider this: On Tuesday night, when Channel 2 led its newscast with an almost giddy report on Jacobson's ouster, the station still finished dead last with a paltry 2.2 rating.

• Dan McNeil's latest suspension for making "inappropriate comments" on his WMVP-AM (1000) afternoon show has been extended to July 25. He's been off the ESPN Radio sports/talk station since June 27.

The four-week time-out was punishment for McNeil calling Comcast SportsNet executive producer Lissa Druss Christman a "bitch" after she wouldn't answer a question he asked her.

"The suspension is not based solely on an inappropriate comment made on the air, but an inappropriate comment made by a person with a history of disciplinary problems," said Jim Pastor, president and general manager.

• Also on the ESPN beat, Dan Patrick, who's leaving the network after 18 years as one of its biggest stars, soon will announce his new deal: He'll continue in radio and launch a new nationally syndicated program via Chicago-based Content Factory.

Jimmy deCastro, the former radio czar who ran Evergreen Media, Chancellor Media, AMFM Inc. and America Online, heads the independent media venture.

• You can disregard rumors about Channel 2 making a run at Cheryl Burton.

Six months before the end of her contract at Channel 7, Burton has signed a long-term renewal with the ABC-owned station. She will continue to anchor the 5 p.m. newscast alongside Ron Magers and serve as contributing anchor to the 10 p.m. newscast with Magers and Kathy Brock.

Burton, a South Side native who graduated from Lindblom High School and the University of Illinois in Champaign/Urbana, joined Channel 7 in 1992.

• Rob Stafford, former Chicago-based correspondent for NBC's "Dateline," will be filling in for Rob Elgas as Saturday and Sunday morning news anchor at Channel 5.

Stafford will turn up alongside Zoraida Sambolin this weekend and next weekend.

International Herald Tribune Editorial - Myths spun by lax lenders

International Herald Tribune Editorial - Myths spun by lax lenders
Copyright by The International Herald Tribune
Published: July 11, 2007

Mortgage defaults are rising in the United States, and worse is yet to come. Between now and the end of next year, interest rates on $660 billion in adjustable-rate mortgages will increase for the first time. Over half of that is in subprime loans - those made to borrowers with weak credit - and is at high risk of default.

Regulators recently tightened standards, requiring what should be obvious: that banks have evidence of a borrower's ability to repay before making a loan. And yet lenders who hope to dodge even tougher oversight continue to defend reckless lending.

Lenders often claim that subprime loans have allowed millions of Americans to buy a first home. But most subprime loans were for refinancing, not first-time purchases. And as defaults rise, foreclosures are projected to outnumber first-home purchases - for a net loss of homeownership because of subprime lending - according to the nonpartisan Center for Responsible Lending.

Lenders also assert that borrowers with weak credit had no choice other than costly, adjustable-rate subprime loans. But testimony from congressional hearings suggests otherwise. During the housing boom, borrowers who could have qualified for higher quality, fixed-rate loans were too often steered into dodgier loans. As rising defaults attest, complex loans have not benefited the borrowers. Rather, they met the lenders' desire for upfront fees.

Subprime defenders also assert that it's a borrower's responsibility to repay. Fine. But lenders should not be able to offer loans that do not fit a borrower's credit profile.

International Herald Tribune Editorial - Overprivileged executive

International Herald Tribune Editorial - Overprivileged executive
Copyright by The International Herald Tribune
Published: July 11, 2007

It is hardly news that top officials in the current Justice Department flout the law and make false statements to Congress, but the latest instance may be the most egregious. When Attorney General Alberto Gonzales wanted the Patriot Act renewed in the spring of 2005, he told the Senate, "There has not been one verified case of civil liberties abuse." But The Washington Post reported Tuesday that just six days earlier, the FBI had sent Gonzales a report saying that it had obtained personal information it should not have.

This is hardly the first time Gonzales has played so loose with the facts. In the U.S. attorneys scandal - the controversy over the political purge of nine top prosecutors - Gonzales and his aides have twisted the truth beyond recognition.

Congress needs to know all that has gone on at the Justice Department. But President George W. Bush is blocking the truth, invoking executive privilege to prevent Harriet Miers, the former White House counsel, and Sara Taylor, a former top aide to Karl Rove, from telling Congress what they know about the purge of federal prosecutors.

Bush's claim is baseless. Executive privilege, which is not mentioned in the Constitution, is a judge-made right of limited scope, intended to create a sphere of privacy around the president so that he can have honest discussions with his advisers. The White House has insisted throughout the scandal that Bush - and even Gonzales - was not in the loop about the firings. If that is the case, the privilege should not apply.

Even if Bush was directly involved, Miers and Taylor would have no right to withhold their testimony. The Supreme Court made clear in the Watergate tapes case that the privilege does not apply if a president's privacy interests are outweighed by the need to investigate possible criminal activity.

Terrorism crisis has passed - Potential targets need vigilance, not ongoing panic

Terrorism crisis has passed - Potential targets need vigilance, not ongoing panic
By Steve Chapman
Copyright © 2007, Chicago Tribune
Published July 12, 2007

For anyone who has grown complacent about the danger of terrorism, the incidents in London and Glasgow were supposed to provide a jolt of reality. As former federal prosecutor Andrew McCarthy put it, "these foiled attacks are best understood as new rounds in a long, global war, provoked by the challenge of radical Islam." Here was proof that the jihadists are still out there, ready to strike at the moment of their choosing.

Homeland Security Secretary Michael Chertoff clearly agrees. On a visit Tuesday to the Tribune, he said he has a "gut feeling" an attack may be imminent. "The intent to attack us remains as strong as it was on Sept. 10, 2001," he declared.

Well, no one in that job is ever going to say the danger has been overstated. But the truth is that intent and ability are not the same thing. Though, Al Qaeda may -- emphasize "may" -- still have the capacity to mount the occasional major operation, that doesn't mean terrorism should be treated as an omnipresent, existential threat.

In reality, this fight bears only a faint resemblance to a real war. Only rarely can Al Qaeda and its imitators manage a strike against their prime enemies, Britain and the United States, and even more rarely can they succeed. Like the alleged terrorists who planned to attack Ft. Dix and JFK International Airport, the perpetrators in Britain were not trained professionals but bumbling amateurs.

On Sept. 12, 2001, it was easy to believe that we would suffer dozens of major attacks on U.S. soil over the next six years, and almost impossible to imagine we would suffer none. Instead of being the opening blitz of a "long, global war," 9/11 was a freak event that may never be replicated.

In a real war, such as the ones we are fighting in Iraq and Afghanistan, many people die, week in and week out. But John Mueller, a national security professor at Ohio State University, notes that in a typical year, no more than a few hundred people are killed worldwide in attacks by Al Qaeda and similar groups outside of war zones.

That's too many, but it's not a danger on the order of Nazi Germany or the Soviet Union or even Saddam Hussein. It's more like organized crime -- an ongoing problem demanding unceasing vigilance, a malady that can be contained but never eliminated. By framing the fight as a global war, we have helped Osama bin Laden and hurt ourselves. Had we treated him and his confederates as the moral equivalent of international drug lords or sex traffickers, the organization might not have the romantic image it has acquired. By exaggerating the potential impact, we also magnified the disruptive effect of any plots, which is just what the terrorists seek.

We do further harm to ourselves by accepting government actions we would never tolerate except in the context of war. Recently, a federal appeals court threw out a lawsuit challenging the National Security Agency's secret surveillance of phone calls made between the United States and foreign countries.

The judges' reasoning was right out of "Catch-22": You can't sue unless you can prove you've been wiretapped, but you can't prove it because the wiretappers won't tell you. The government abuses its power secretly, in the name of national security, and the secrecy protects it from having to end the abuse.

Crime is a serious national problem that used to be even worse. At the height of the mayhem back in 1991, more than 24,000 Americans were murdered annually -- a Sept. 11, 2001, attack every six weeks. Yet even when the toll was at its worst, we insisted that police respect the constitutional rights of suspected criminals. We maintained the limits on the power of the president and other law enforcement officials to investigate and imprison people. For the most part, we kept our perspective.

After the World Trade Center came down, by contrast, we let ourselves be convinced that many restrictions were an unaffordable luxury. Any concern for civil liberties was met with the retort: "We're at war." And in war, anything goes.

The Sept. 11 attack was a crisis that has largely passed, but no one in Washington wants to admit it. It's politically safer to depict the danger as undiminished no matter how long we go without an attack. But someday, we will look back and ask if we were acting out of sensible caution or unfounded panic.


Steve Chapman is a member of the Tribune's editorial board. E-mail: