parties

Cameron’s Failure to Top Clegg in Debate Polls Signals Minority Government

April 22, 2010

By Robert Hutton and Kitty Donaldson April 23 (Bloomberg) — Conservative David Cameron failed to derail Nick Clegg in the U.K. campaign’s second debate, four instant polls showed, pointing to a hung parliament with Prime Minister Gordon Brown ’s Labour Party as the largest bloc. In a 90-minute televised debate, Brown, 59, compared his 43-year-old opponents to children “squabbling at bathtime.” Cameron, who led polls until Clegg’s surge after last week’s debate, said a government without a majority would prevent “decisive action” to narrow a record budget deficit . Clegg dismissed such warnings as “ludicrous scare stories.” Of four surveys released immediately after the event, two showed Clegg won and a pair favored Cameron. That suggests the debate will produce little change in polls on the overall race in coming days. Most since last week show Labour winning a plurality of seats in the May 6 election. “It would have been a game-changer if Clegg had crashed and burned,” said Justin Fisher, professor of politics at Brunel University in London. “Clegg held up better than I thought he would. He won’t fall back to his pre-debate levels” — about 10 points below where he is now. A YouGov Plc daily poll before last night’s debate put the Conservatives at 34 percent and Labour at 29 percent, with the Liberal Democrats at 28 percent . That would leave Labour with 278 seats to 251 for the Conservatives and 88 for the Liberal Democrats, according to the standard calculations used by academics and pollsters. YouGov questioned 1,576 people April 21 and yesterday. No margin of error was given. Pound Weakens Such a result may roil markets because a divided government would be too weak to fix Britain’s finances, some economists say. The pound slumped 1 percent in the two days after the debate last week and weakened in early Asian trading, dropping 0.2 percent at 8:16 a.m. in Tokyo. It has lost 5.1 percent against the dollar this year. In last night’s debate, Brown, whose party has controlled the government since 1997, addressed his own unpopularity. “Like me or not, I can deliver,” he said. He later told his opponents: “David, you’re a risk to the economy, Nick is a risk to our security.” Brown told Clegg to “get real” and stop opposing nuclear weapons. He criticized Cameron over his European policy and Conservative proposals to cut spending this year as Britain emerges from recession . ‘Get Real’ “Iran, you’re saying, might be able to have a nuclear weapon and you wouldn’t take action against them, but you’re also saying give up our Trident submarines,” Brown told Clegg on the stage of an arts center in Bristol. “Get real about the danger we face if we have North Korea, Iran and other countries with nuclear weapons and we give up our own.” Clegg opposes updating Britain’s submarine-based Trident missile system. Brown said Cameron’s “ anti-Europeanism becomes more and more obvious as this debate goes on.” Cameron said he wanted to be “in Europe but not run by Europe.” Cameron made some direct attacks on Clegg, at one point taking on the Liberal Democrat leader’s claim that his party had escaped censure following disclosures that scores of lawmakers were reimbursed with taxpayer money for personal expenses. “Frankly, Nick, we all had problems with this,” the Conservative said. “Don’t let’s anyone put themselves on a pedestal.” Clegg criticized Cameron over his decision to end the Conservatives’ alliance in the European Parliament with the parties of German Chancellor Angela Merkel and French President Nicolas Sarkozy . EU Allies The Conservatives joined with eastern European parties that include Latvia’s For Fatherland and Freedom, which has come under fire from academics for its links to Latvians who fought with the Nazi SS in World War II. Clegg described the Conservatives’ allies as “a bunch of nutters, anti-Semites, people who deny climate change exists, homophobes.” All three changed their debating tactics, switching away from last week’s emphasis on anecdotes about voters they’d met in the campaign. Brown and Cameron both copied Clegg’s technique from the previous debate of addressing the camera directly, rather than the studio audience. “David Cameron made a really concerted attempt to highlight the differences between the three parties, and how hard it would be to reach agreement in a hung Parliament,” said Jane Green, a lecturer in politics at Manchester University. “But I was surprised he didn’t make more of the message that a vote for Clegg is a vote for Brown.” To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net ; Kitty Donaldson in Bristol at kdonaldson1@bloomberg.net

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Thai Government’s Crackdown Leaves 20 Dead; Troops, Protesters Pull Back

April 10, 2010

By Supunnabul Suwannakij and Suttinee Yuvejwattana April 11 (Bloomberg) — Thai troops and protesters maintained a cease-fire in Bangkok a day after clashes left 20 dead and 842 injured, as demonstrators extended their occupation of two areas of the capital to push for fresh elections. Soldiers used rubber bullets and tear gas to disperse crowds and protesters fought back with guns and bombs, army spokesman Sansern Kaewkamnerd said yesterday. Both sides agreed to pull back to avoid further bloodshed, he said. “I want to affirm to all Thais that my government and I still have a duty to resolve this situation,” Prime Minister Abhisit Vejjajiva said in a televised address late last night. “We will do everything to bring normality and peacefulness back to the country.” Abhisit declared a state of emergency in the capital last week after a month of mostly peaceful protests seeking his ouster. Yesterday’s clashes were the deadliest since 1992, when more than 40 demonstrators were killed during a four-day crackdown by security forces. “We will not retreat from protest areas,” Nattawut Saikuar, a protest leader, told a news conference today at a camp in the business district. “We will continue to fight here.” Many demonstrators support exiled former premier Thaksin Shinawatra , who won over the poor by giving them cheaper health care and loans before he was ousted in a 2006 coup. The protesters say Abhisit embodies a privileged class of military officers, judges, bureaucrats and royal advisers that sit above the law. Seeking Royal Intervention The protesters called on the nation’s King Bhumibol Adulyadej to intervene in the crisis to prevent further deaths, Agence France-Presse reported, citing protest leader Jatuporn Prompan. While the king has no formal political role, he is seen as a unifying figure. “With people dying, it will likely move the king to act sooner rather than later,” said Song Seng-Wun , an economist in Singapore at CIMB-GK Research Pte, today in a telephone interview. “The bottom line is that it will have a negative impact on the markets, and the next few hours will be critical whether the army steps up or the king intervenes.” The clashes occurred near Government House, in Bangkok’s historic district. The U.S. government urged “restraint by both protesters and security forces” in Thailand, National Security Council spokesman Michael Hammer said in an e-mailed statement. “We deplore this outbreak of political violence” and “urge good- faith negotiations by the parties to resolve outstanding issues through peaceful means,” Hammer said. Soldiers, Journalist Killed Singapore’s Ministry of Foreign Affairs said in a statement it is “deeply concerned about this development” and “urges all parties to exercise utmost restraint so as to avoid escalation of violence and find a peaceful resolution to their differences.” The 20 dead included five soldiers and a Japanese journalist, said Chatree Charoencheewakul, head of the government’s emergency medical center, talking by phone today. The number of injured climbed to 842 as of 6 a.m. local time, he said. The demonstrators also took five soldiers hostage, Agence France-Presse reported. The army resisted dispersing people who have been camped out in the heart of the city’s tourist and shopping district for the past week because of concerns about casualties. Abhisit called for an independent investigation into the deaths. Protesters Urge Government Protesters urged the government to dissolve the parliament immediately and asked Abhisit to leave the country, according to Nattawut. Abhisit’s opponents earlier this month rejected his offer to call an election within nine months, demanding he step down before this week’s Thai New Year holiday. Abhisit two days ago vowed to return the streets to the people after protesters defied the emergency decree and forced authorities to restore the signal of an anti-government satellite television station. The government had blocked People Channel on April 8, saying the station’s broadcasts were threatening national security. INN reported today that 500 protesters were sent to People Channel to try to resume broadcasting. The emergency decree, last used a year ago, bans gatherings of more than five people, allows detention without charge and gives soldiers immunity from prosecution. To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

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Brown Challenges Cameron for Undecided Suburban Voters in 23% of Districts

April 7, 2010

By Thomas Penny April 7 (Bloomberg) — Michael Paterson is one of the reasons why pollsters say British Prime Minister Gordon Brown still has a chance in the May 6 election. Paterson, who voted for the opposition Conservatives in the last two elections, says he’s undecided about backing David Cameron , the party’s leader. “I have a concern that Cameron is more style over substance,” said Paterson, head of human resources for a unit of German reinsurer Munich Re . “I need to know more about the policies. It’s easy to look impressive in opposition.” The 39-year-old father of three and wavering voters like him will probably be decisive in the most closely contested British election in a generation. The two main parties are targeting about 150 districts — out of a total of 650 — that they’ve identified as swing seats in an election that polls suggest will fail to give either one a governing majority. Residents of London’s commuter belt, where Paterson lives in the suburb of Tooting, were crucial to Labour when then-43- year-old Tony Blair won in 1997. Cameron, 43, who described himself in 2005 as Blair’s heir, needs to sway those voters. Even with a lead that swelled to 28 percentage points over Brown during the longest U.K. recession on record, Cameron, former director of corporate affairs at London-based media firm Carlton Communications Plc , hasn’t been able to close the sale. Thatcher’s Policies Undecided voters are concerned he may go back to policies adopted by Prime Minister Margaret Thatcher in the 1980s and slash services, said Stephen Driver , who teaches politics at Roehamption University in London. The Conservative have promised 6 billion pounds ($9.1 billion) in immediate cuts if they win. “ The Conservative Party still has to convince voters it has learned the lessons of the last decade,” said Driver. “Most people want a combination of a market economy and good public services.” The Conservative lead shrank to 2 percentage points in a YouGov Plc poll on March 24, an outcome that would result in no single party having a majority, a so-called hung parliament. An Ipsos-Mori poll of swing seats at the same time showed the Conservatives outperforming their national result, though not by enough to gain a majority in the House of Commons. The Ipsos-Mori poll , conducted between March 19 and March 22, reported that in marginal districts, 40 percent of Conservative supporters and 37 percent of Labour supporters said they may change their mind before the election. No margin of error was provided. ‘Make the Case’ “We’ve got to go out there and make the case,” said Greg Barker , a Conservative spokesman on climate change and adviser to Cameron. “At the end of three weeks of David Cameron, I think people who are minded to vote for us will have no doubt that he is the change that Britain needs.” Blair, who was succeeded by Brown in 2007, built a coalition across the political spectrum by promising higher spending without raising taxes. That might not be an option for Cameron because of a record budget deficit of about 12 percent of gross domestic product. “It’s much harder for Cameron to pull off a Blair-type campaign of leaving all the old divisions behind,” said Robert Ford, a political scientist at Manchester University. “Blair said we can keep taxes low and we can have better public services. No one can credibly say that in 2010.” Halal Butchers In Tooting, six miles south of Parliament, the Conservatives are trying to defeat Sadiq Khan , a minister in Brown’s government, concentrating their campaign on young parents and voters who live in areas where houses sell for more than 1 million pounds. Activists say they don’t expect to win over traditionally Labour voting areas where streets are lined with Halal butchers and Islamic bookshops. Mark Clarke , 32, the Conservative candidate who has knocked on doors in four elections in the district, said polls are tightening because residents who had said they didn’t plan to vote are now backing Labour or the Liberal Democrats, the number-three party. Clarke said the Conservative vote is solid. “People now want to ask two questions: ‘This David Cameron, is he for real? He seems to be a nice guy but I know it could all be PR and spin.’ The other question is, ‘he seems alright, what about you though, what about the rest of the Conservative Party?’” Clarke said. Playing on those doubts, Brown has said Conservatives’ proposed budget cuts risk a “double-dip” recession. Labour has clawed back support since the economy rebounded with growth of 0.4 percent in the fourth quarter of 2009 and better-than- expected jobless figures . Cameron’s Risk Cameron risks alienating swing voters should he play on the economy and the need for cuts, Ford said. “It’s much harder to make the case about broken Britain and the urgent need for austerity now people feel the situation is stabilizing,” he said. “People are less worried about the economic situation than they were six or seven months ago.” Paterson, who is married to an elementary school teacher and moved to London from Scotland, voted for Blair in 1997, though turned back to the Conservatives when they had little chance of winning in 2001 and 2005 elections. The cricket fan does have some comfort for Cameron. He says there’s no chance he will vote for Brown. He’s concerned about tax increases. “It comes down to perception and gut feeling that they’ll revert to type,” he said. “Labour will err on the side of high taxation and in as much as I’d want my parties to err, I’d want them to lean toward low taxation.” To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net

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U.K. Conservatives May Win 20-Seat Parliamentary Majority, Poll Indicates

April 4, 2010

By Kitty Donaldson April 4 (Bloomberg) — The U.K.’s main opposition Conservative Party extended its lead over Gordon Brown’s ruling Labour Party in two opinion polls amid reports the prime minister may call an election within days. A YouGov Plc poll for The Sunday Times put David Cameron’s Conservatives at 39 percent of the vote, Labour at 29 percent and the Liberal Democrats at 20 percent, which would give the Conservatives a 20-seat majority, the paper said. Another survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent. Briefing documents given by the Labour Party to its activists have suggested May 6 as the most likely date for an election. Polls earlier this year had shown Cameron’s lead over Labour waning. A YouGov/Sunday Times poll last weekend indicated the Conservatives would win a minority of the seats with 37 percent of the vote to Labour’s 32 percent, requiring other parties’ support to pass legislation. Newspapers including the Mail on Sunday and the Sunday Times today said Brown is expected to confirm the vote’s timing on April 6. An election must be held by June 3. Cameron, asked by the Mail on Sunday if he feared “doing a Kinnock,” a reference to former Labour leader Neil Kinnock , whose support eroded just before the 1992 election as polls suggested he would defeat John Major, replied “of course.” “When we were 20 points ahead, people were saying, ‘You haven’t quite sealed the deal’,” Cameron told the Mail in an interview. “They’re right, actually. You never quite seal the deal until the moment people put their cross in the box.” YouGov polled 1,503 voters online on April 1-2. Angus Reid surveyed 1,991 voters, and the Sunday Express didn’t say how or when the poll was conducted. No margin of error was given for either poll. To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net .

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Sudan’s Opposition Parties Announce Election Boycott Amid Rigging Charges

April 1, 2010

By Maram Mazen and Nicole Gaouette April 2 (Bloomberg) — Sudan’s opposition parties announced a boycott of Sudan’s elections this month, accusing Sudanese President Umar al-Bashir ’s government of rigging the first multiparty vote in 24 years. “The consensus today decided to boycott these elections,” which includes presidential, parliamentary and governors’ seats, the opposition parties’ spokesman, Farouq Abu Eissa, told reporters in Khartoum yesterday after a meeting of that various political groups. “The parties decided to reject and boycott this incomplete and distorted elections,” Mariam al-Mahdi, a spokeswoman for the Umma northern opposition parties, told reporters. The announcement followed days of discussions among the opposition parties on the April 11-13 elections. Earlier yesterday, most presidential challengers decided to withdraw from the race because of concerns the vote is rigged in Bashir’s favor, al-Mahdi said. The decision raised U.S. concerns about the vote’s credibility. “Nine presidential candidates met today, and most of them decided they will withdraw from the presidential election,” al- Mahdi said, without naming all their parties. Al Umma Reform and Renewal party presidential candidate Mubarak al-Fadil also said in a text message that most of the candidates were quitting the race. U.S. ‘Troubled’ “We’re troubled by any decision that reduces the competitiveness and credibility of these elections, but the situation is very fluid,” State Department spokesman Philip J. Crowley said in a briefing in Washington yesterday after the announcement that presidential opponents were withdrawing. The U.S. special envoy for Sudan, Scott Gration , is in the country meeting with officials and opposition parties and “actively working on these issues,” Crowley said. The elections for Sudan’s presidency, parliament and state governorships will take place this month, five years after the Sudan People’s Liberation Movement signed a peace deal with the government, ending a 20-year civil war between the Muslim north and the south, where Christianity and traditional religion dominate. Sudan pumps 480,000 barrels of oil per day and ranks as sub-Saharan Africa’s third-biggest crude producer, according to the BP Statistical Review of World Energy. Most of that is pumped in the south. The SPLM, which governs the semi-autonomous region of Southern Sudan , announced this week it was withdrawing its presidential candidate and boycotting the polls in the western region of Darfur. Elections Commission The opposition parties have accused the National Elections Commission of being biased in favor of Bashir’s National Congress Party. They have also called for a new commission to be set up and the voters’ list to be revamped. “Our parties until today have been and still are getting unlimited harassments from authorities,” Abu Eissa said. “We have decided to boycott the elections on all levels,” Neimat Malik, member of the Communist party’s political bureau, said by phone. Al-Mahdi of the Umma party said some of the parties will announce their final position within 24 hours after consultations within their ranks. She said the candidates could re-enter the presidential race if the government took steps to ensure a free and fair election. “They said they can review their position if there are steps taken to correct the current situation,” she said. Popular Congress Party leader Hassan al-Turabi , who helped Bashir seize power in a 1989 coup, said earlier yesterday that his party would participate in the election. The U.S., Britain and Norway yesterday called on Sudan’s government and political parties to address allegations of intimidation, harassment and other safety concerns to clear the way for the vote. “We urge all parties in Sudan to work urgently to ensure that elections can proceed peacefully and credibly in April,” the countries said in an e-mailed statement. To contact the reporter on this story: Maram Mazen in Khartoum via Cairo at mmazen@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net

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Iraq Election Gives Allawi Largest Bloc of Seats; No Group Has a Majority

March 26, 2010

By Kadhim Ajrash and Caroline Alexander March 27 (Bloomberg) — Former Iraqi Prime Minister Ayad Allawi’s secular alliance won the biggest bloc of seats in parliament as his rival, Prime Minister Nuri Al-Maliki, said his second-place Shiite slate won’t accept the results. Allawi’s secular Iraqiya alliance secured 91 seats in the March 7 election, the Independent High Electoral Commission said. Al-Maliki’s Shiite Muslim State of Law alliance won 89 seats. “There is no evidence of widespread or serious fraud,” State Department spokesman Philip J. Crowley told reporters in Washington. “This marks a significant milestone in the ongoing democratic development of Iraq.” No group came close to winning the majority of the 325 seats needed to form a government, forcing talks to start on building a coalition. Those negotiations may drag on for months, hampering the Obama administration as it prepares to pull combat troops out of the country by the end of August. Al-Qaeda has threatened a new campaign of attacks against all of the parties. “It doesn’t really matter who came first and who came second because it is basically a tie,” said Julien Barnes- Dacey, a Middle East analyst at the London-based Control Risks Group. “Everything is up for grabs now.” The Iraqi National Alliance, which is pro-Iranian and led by Shiite cleric Ammar al-Hakim , came in third with 70 seats. The Kurdsitan alliance won 43 seats. Candidates will have three days to appeal the results before they are certified by the Supreme Court. Disputes The ruling coalition that emerges from talks will have to resolve long-standing disputes over federalism versus centralism, the sharing oil revenue among regions and whether to include the oil-rich city of Kirkuk in the Kurdish autonomous region in the north. As election officials were preparing to announce the results, 42 people were killed and 65 wounded in twin bombings in Diyala, north of Baghdad. Al-Maliki said after the tally was announced that the results “aren’t final” and he won’t accept them. Speaking in a news conference aired live, he said Allawi’s win wasn’t expected by the Iraqi people or political parties, and he would try to form the biggest bloc in parliament. Al-Maliki has already started talks with potential partners. Safia al-Suhail, a member of State of Law, said on March 24 that the prime minister was close to reviving an alliance with INA that swept him to power in 2005. “There are important steps that the State of Law and the Iraqi National Alliance are taking on the road to integration and creating a big bloc in the next parliament,” Suhail said. New President Allawi has also held talks with several groups, including with supporters of anti-U.S. cleric Moqtada al-Sadr and the Kurdistan Alliance, according to an interview with Asharq al- Awsat newspaper published on March 25. The Kurds, who backed al-Maliki in 2005 and hold the presidency, have yet to give any clear indications about who they will support this time. Once the results are certified, current President Jalal Talabani will have 15 days to call for lawmakers to convene and elect a speaker and two deputy speakers. A new president must then be elected, who will invite the leader of the largest bloc to form a government. The prime-minister designate has 30 days to do this. Talabani has already signaled his willingness to stay in the post. “He is the major nominee to the post of the President of Iraq and he is approved by all,” State of Law member Hassan al-Sanid said on March 24. Prime Minister Question What is less clear is the candidate for prime minister. State of Law’s Suhail said the alliance is committed to al- Maliki serving another four years, while al-Sadr supporters, who dominate the INA, have said they are against the premier staying on. Al-Maliki led a crackdown against Sadrist militias in 2008, taking back control of the main oil exporting city of Basra. Al-Qaeda in Iraq leader Abu Omar al-Baghdadi said in an internet audio message on March 19 that Iraqi political leaders would be targeted as part of a new military campaign, the SITE monitoring Group reported. Attacks have dropped from a peak between 2005 and 2007, when Iraq tipped toward civil war, though violence continues, especially in Baghdad and the northern city of Mosul. Fraud The parliamentary vote was the second since Saddam Hussein’s ouster by U.S.-led forces in 2003. Sixty two percent of the 19 million Iraqis eligible to cast ballots turned out. The United Nations envoy to Iraq, Ad Melkert, said just before the results were announced that the vote met “all reasonable demands and standards.” He called on all parties to accept the results. Most parties have made complaints of fraud, with Talabani and al-Maliki demanding a manual recount. An ideal outcome would see a new government including both al-Maliki and Allawi, Barnes-Dacey said. Neither party seems ready to “embrace this solution because of personal animosity and ambitions,” and so the most likely outcome would be an alliance between al-Maliki, the INA, and the Kurdistan Alliance, he said. Sunni Muslims are likely to be angered if Allawi is excluded from the government. A minority in Iraq, they dominated under Hussein and formed the backbone of an insurgency against U.S.-led forces after the 2003 invasion. “How they negotiate through the coming months is a test of whether they can put the Iraqi state interests above their own partisan ambitions,” Barnes-Darcey said, referring to all of Iraq’s political parties. To contact the reporters on this story: Kadhim Ajrash in Baghdadt ; Caroline Alexander in London at calexander1@bloomberg.net ;

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Allawi’s Secular Bloc Wins Narrow Victory in Iraqi Vote, Commission Says

March 26, 2010

By Kadhim Ajrash and Caroline Alexander March 26 (Bloomberg) — Former Iraqi Prime Minister Ayad Allawi’s alliance won the biggest bloc of seats in parliament, beating his closest rival by two in a narrow victory that may intensify political tensions. Allawi’s secular Iraqiya alliance secured 91 seats in the March 7 election, the Independent High Electoral Commission said. Prime minister Nuri Al-Maliki’s Shiite Muslim State of Law alliance won 89 seats. No group came close to winning the majority of the 325 seats needed to form a government, forcing them to start talks to build a coalition. Those negotiations may drag on for months, hampering the Obama administration as it prepares to pull combat troops out of the country by the end of August. Al-Qaeda has threatened a new campaign of attacks against all of the parties. “It doesn’t really matter who came first and who came second because it is basically a tie,” said Julien Barnes- Dacey, a Middle East analyst at the London-based Control Risks Group. “Everything is up for grabs now.” The Iraqi National Alliance, which is pro-Iranian and led by Shiite cleric Ammar al-Hakim , came third with 70 seats. The Kurdsitan alliance won 43 seats. Candidates will have three days from tomorrow to appeal the results before they are certified by the Supreme Court. Disputes The ruling coalition that emerges from talks will have to resolve long standing disputes over federalism versus centralism, sharing oil revenue among regions and whether to include the oil-rich city of Kirkuk in the Kurdish autonomous region in the north. As election officials were preparing to announce the results, 42 people were killed and 65 wounded in twin bombings in Diyala, north of Baghdad. Al-Maliki said after the tally was announced that the results “aren’t final” and he won’t accept them. Speaking in a news conference aired live, he said Allawi’s win wasn’t expected by the Iraqi people or political parties and he would try to form the biggest bloc in parliament. Al-Maliki has already started talks with potential partners. Safia al-Suhail, a member of State of Law, said on March 24 that the prime minister was close to reviving an alliance with INA that swept him to power in 2005. “There are important steps that the State of Law and the Iraqi National Alliance are taking on the road to integration and creating a big bloc in the next parliament,” Suhail said. New President Allawi has also held talks with several groups, including with supporters of anti-U.S. cleric Moqtada al-Sadr , and the Kurdistan Alliance, according to an interview with Asharq al- Awsat newspaper published on March 25. The Kurds, who backed al-Maliki in 2005 and hold the presidency, have yet to give any clear indications about who they will support this time. Once today’s results are certified, current President Jalal Talabani will have 15 days to call for lawmakers to convene and elect a speaker and two deputy speakers. A new president must then be elected, who will invite the leader of the largest bloc to form a government. The prime-minister designate has 30 days to do this. Talabani has already signaled his willingness to stay on in the post. “He is the major nominee to the post of the President of Iraq and he is approved by all,” State of Law member Hassan al-Sanid said on March 24. Al-Qaeda What is less clear is the candidate for prime minister. State of Law’s Suhail said the alliance is committed to al- Maliki serving another four years, while al-Sadr supporters, who dominate the INA, have said they are against the premier staying on. Al-Maliki led a crackdown against Sadrist militias in 2008, taking back control of the main oil exporting city of Basra. As the horse-trading got under way, al-Qaeda in Iraq leader Abu Omar al-Baghdadi said in an internet audio message on March 19 that Iraqi political leaders would be targeted as part of a new military campaign, the SITE monitoring Group reported. Attacks have dropped from a peak between 2005 and 2007, when Iraq tipped toward civil war, though violence continues, especially in Baghdad and the northern city of Mosul. Fraud The parliamentary vote was the second since Saddam Hussein’s ouster by U.S.-led forces in 2003. Sixty two percent of the 19 million Iraqis eligible to cast ballots turned out. The United Nations envoy to Iraq, Ad Melkert, said just before the results were announced that the vote met “all reasonable demands and standards.” He called on all parties to accept the results. Most parties have made complaints of fraud, with Talabani and al-Maliki demanding a manual recount. An ideal outcome would see a new government including both al-Maliki and Allawi, Barnes-Dacey said. Neither party seems ready to “embrace this solution because of personal animosity and ambitions,” and so the most likely outcome would be an alliance between al-Maliki, the INA, and the Kurdistan Alliance, he said. Sunni Muslims are likely to be angered if Allawi is excluded from the government. A minority in Iraq, they dominated under Saddam Hussein and formed the backbone of an insurgency against U.S.-led forces after the 2003 invasion. “How they negotiate through the coming months is a test of whether they can put the Iraqi state interests above their own partisan ambitions,” Barnes-Darcey said, referring to all of Iraq’s political parties. To contact the reporters on this story: Kadhim Ajrash in Baghdadt ; Caroline Alexander in London at calexander1@bloomberg.net ; Henry Meyer in Dubait .

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British Airways Says Contingency Plans Working `Well’ in Cabin-Crew Strike

March 21, 2010

By Steven Rothwell and Beth Mellor March 21 (Bloomberg) — British Airways Plc entered the second day of a strike by 12,000 cabin crew attempting to force Chief Executive Officer Willie Walsh to drop cuts to pay and staffing levels after saying it made a “good start” at operating on the first day. All cabin crew reported for duty at Gatwick Airport yesterday and London City airport service operated as normal, the carrier said in an e-mailed statement yesterday. The Unite union said BA had managed to fly only a third of normal scheduled flights, with 85 planes grounded at Heathrow, and its main terminal there “a ghost town.” This weekend’s walkout, the first at London-based British Airways since 1997, will be followed by a four-day strike from March 27. The stoppages may cost more than the 63 million-pound ($95 million) saving Walsh is seeking in a labor deal. “We have to wait and see what the mood is like on both sides and who comes out of it better, if anyone comes out of it better at all,” said John Strickland , director of aviation specialist JLS Consulting Ltd. “At the minute we are in a situation where both sides are losing.” BA aims to fly about 65 percent of customers with bookings during the strike, helped by 6,000 volunteers from other parts of the company, including 1,000 stand-in flight attendants. About 49,000 passengers, representing 65 percent, had flown as of late afternoon yesterday, a spokeswoman for the carrier said. Union Support Unite said 80 percent of cabin crew were supporting the strike on the first day of the dispute, with only 10 flights leaving Heathrow between 12:20 p.m. and 2:30 p.m., compared with the normal 50. BA has scrapped about 50 percent of flights scheduled to carry about 30,000 people a day during the dispute, which began yesterday, and will concentrate on operating as many long-haul services as possible using rented planes and volunteer crews. “This is the first time in 10 years I haven’t flown with BA — I just couldn’t take the risk that they were going to be on strike” said Richard Bland, associate director of finance careers at a London business school, who was travelling to Heathrow to catch a Qantas Airways Ltd. flight to Hong Kong. “I invariably fly with BA — the strike was the only reason I changed my plans,” said Roger Jones, who had flown from Copenhagen to London, a journey he does every two to three weeks. “I will go back to BA as I’m an executive club member but I think it’s disastrous for the company really. People who are not loyal will switch pretty easily.” ‘No Difference’ BA has also hired 25 planes from other airlines and charter companies, together with pilots and crew, in an effort to operate about 30 percent of short-haul services from London’s Heathrow airport . “There was absolutely no difference at all,” said Gabauer Siegmund, a manager for Millennium Hotels, who flew on a business trip from Stuttgart to London on a jet2.com plane chartered by BA. “BA have kept us very well informed.” Talks with Unite union General Secretary Tony Woodley broke down after three days on March 19 when Walsh presented a proposal he acknowledged was less attractive than previous offers, saying it had been modified to take account of expenses from keeping planes flying during the strike. The plan was still “fair and sensible” and would be accepted if put to cabin crew, he said. Relations with Unite worsened in November, when Walsh used voluntary departures to cut crew levels without consulting the union. He’s also seeking to reduce pay for new recruits to help lower costs following a global slump in demand for travel. ‘Fit for Purpose’ British Airways will likely log a record pretax loss of 600 million pounds in the fiscal year to March 31, Chief Financial Officer Keith Williams said in the company’s internal newsletter on March 11. The seven-day walkout may cost 105 million pounds, according to Citigroup Inc. analyst Andrew Light . “The cupboard is bare as far as BA is concerned,” said Howard Wheeldon , a senior strategist at BGC Partners LP in London. “The airline has to change, and so far the staff aren’t changing enough. The outcome of this dispute will decide not only whether BA has a viable future but also whether in the eyes of the public it can ever be seen as truly fit for purpose.” BA , which agreed in November to merge with Iberia Lineas Aereas de Espana SA , has jumped 30 percent this year on the London exchange, and Iberia is up 37 percent in Madrid. The two carriers were the best performers in the Bloomberg European Airlines Index, which climbed 4 percent. Deutsche Lufthansa AG , whose pilots halted a four-day strike last month after their union agreed to resume talks on the first day of the walkout, is up 4.3 percent in Frankfurt this year. ‘Flag Flying’ Virgin Atlantic Airways Ltd., the carrier founded by U.K. billionaire Richard Branson , said this past week that bookings have increased as a result of the strife at BA, with traffic up 3 percent in December, the month cabin crew at its rival voted for a Christmas walkout that was later blocked by a U.K. court. Walsh said in advertisements in U.K. newspapers on March 19 that “a significant number” of cabin crew will reject the strike call. The ad, with the banner headline “We will keep our flag flying,” said Unite had misjudged the public mood. Allies of British Airways in the Oneworld alliance are also taking steps to help add capacity on services to the U.K. Finnair Oyj will fly larger aircraft on the Helsinki-London route, adding 20 seats per flight, spokesman Taneli Hassinen said in a phone interview. Iberia will also add bigger planes between Madrid and the U.K. capital, together with one extra flight, a spokeswoman said. AMR Corp. ’s American Airlines, the world’s second-largest carrier, is allowing passengers on Heathrow flights operated by it or BA through March 31 to make one change to tickets without penalty, or to request a full refund, spokesman Tim Smith said. ‘Hawks’ Unite’s Woodley said March 19 that BA’s management had ruined chances of a deal by refusing to resubmit its last pay offer. Walsh took the deal off the table on March 12 after the union announced the strike, and subsequently rejected an offer to suspend the walkout in return for the proposal being revived. “The hawks at BA who wanted a war have won the day,” Woodley said on exiting the talks at the Trades Union Congress headquarters in London. “They put an offer on the table that was worse than the one they took off. That makes it impossible for us to go back to our members and ballot them.” U.K. Prime Minister Gordon Brown said yesterday that the walkout should be called off and that the two sides should reconvene talks. Brown “believes that this strike is in no one’s interest and will cause unacceptable inconvenience,” according to a spokesman for the premier. Transport Secretary Andrew Adonis also urged BA and Unite to negotiate to find a settlement. Labour Party Conservative leader David Cameron said in a speech in London today that Brown hasn’t done enough to stop the strike, blaming the Labour Party’s dependence on union funding. Since he became PM in 2007, a quarter of donations have come from Unite. As the parties get ready to contest a general election in the coming weeks, Cameron is seeking to evoke in voters’ minds the difficulties the Labour government of the 1970s had in tackling the unions before the Conservatives took power under Margaret Thatcher in 1979. “This threatens the future of one of Britain’s greatest companies along with thousands of jobs,” Cameron said in a speech in London today. “But will the prime minister come out in support of those people who would cross the picket line? No – - because the Unite union is bankrolling the Labour Party.” The opposition launched a poster campaign today depicting Brown as an airline pilot, with the line “Gordon’s doing sweet BA. Is it because he’s taken 11 million pounds of Unite’s cash?” To contact the reporters on this story: Steven Rothwell in London at srothwell@bloomberg.net ; Beth Mellor at Heathrow airport via bmellor@bloomberg.net

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AMR Flight Attendants Take Step Toward First U.S. Carrier Strike Since ’05

March 16, 2010

By Mary Schlangenstein March 16 (Bloomberg) — American Airlines ’ flight attendants requested federal approval to end contract talks, a step toward the first strike at a major U.S. carrier in almost five years. The Association of Professional Flight Attendants asked the National Mediation Board to declare bargaining with AMR Corp. ’s American at an impasse, union President Laura Glading said. Only the board can approve a halt to negotiations, putting the parties into a 30-day “cooling-off” period before a walkout. Glading’s proposal to break off talks made the attendants union the second labor group at American to try to trigger a countdown toward a strike. The Transport Workers Union , which represents ground workers, asked permission last week to be freed from contract discussions. “I can’t imagine anyone really wants to strike,” William Swelbar , a research engineer at Massachusetts Institute of Technology’s International Center for Air Transportation, said before the attendants made their request. He said a walkout would disrupt cash flow in the busy U.S. summer travel season. Federal law sets out the mediators’ role in airline labor talks. No large U.S. carrier has suffered a strike since 2005, when 4,200 Northwest Airlines Corp. mechanics and aircraft cleaners walked off the job. Northwest, which was acquired by Delta Air Lines Inc. in 2008, responded by hiring replacements. A telephone message left with American’s media office for comment wasn’t immediately returned. Talks between American, the world’s second-biggest airline behind Delta, and the APFA began June 10, 2008. The union, which represents 16,550 active attendants and 1,450 on furlough, has said it will conduct a strike authorization vote. Three Unions Attendants, ground workers and American’s pilots union are all in contract negotiations, trying to recoup $1.6 billion in pay and benefits given up in 2003 to save the Fort Worth, Texas- based carrier from bankruptcy. American wants to reduce its industry-leading labor costs and raise productivity. Mediators haven’t decided on the TWU’s March 11 request to be freed from talks with American. The TWU represents ground workers including mechanics and bag handlers. Should the board conclude that further talks wouldn’t yield a contract, American and the attendants would be offered binding arbitration. Rejection by either side would start the “cooling- off” period, which would still allow for further discussions. The board also may order the airline and union to resume talks, or decree a recess in negotiations. Opposing Views American refused to “bargain in good faith,” Glading said in a March 12 statement. American said yesterday in a Web-site update about the talks that “we made progress and look forward to getting back to the table and back to work.” AMR fell 18 cents, or 1.8 percent, to $9.66 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 25 percent this year. American has told the Federal Aviation Administration that it was considering training managers and other employees as replacement attendants in the event of a strike. In 1993, American trained about 1,300 replacements to try to keep some planes flying during a five-day walkout. The strike ended when then-President Bill Clinton intervened. It cost American about $10 million a day. To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

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Al-Maliki’s Party Says It Wins Most Seats in Iraqi Parliament, Seeks Talks

March 14, 2010

By Kadhim Ajrash March 14 (Bloomberg) — Iraqi Prime Minister Nouri al- Maliki’s political bloc, predicting it won most seats in March 7 parliamentary elections, named a commission to hold talks with rival parties on forming a government, an official said today. Al-Maliki’s State of Law group is leading in five of 11 Iraqi provinces, including Baghdad, the Independent High Electoral Commission reported this weekend. Results are partial as no more than 30 per cent of ballots have been reported. Seven remaining provinces have yet to release any results. Al-Maliki’s bloc will win about one-third, “or more than 100,” seats out of the 325 at stake, Abbas al-Bayati, a State of Law candidate, said in a telephone interview in Baghdad. “We have formed a small committee to go into talks and we will make sure that we won’t close doors to anyone that wants to negotiate with us.” Osama al-Najafi, a member of former Prime Minister Ayad Allawi ’s Iraqiya alliance, said his group will win 80-90 seats. “We have started communicating with other parties,” he said by phone. “The doors of dialogue are open.” The statements track with analysts’ opinion that no party or bloc will win a majority when final votes are tallied. Contestants are generally winning in areas of core sectarian support, according to the first tallies. ‘Bargaining’ “The vote won’t produce a decisive winner and there will have to be bargaining for a ruling coalition,” Marina Ottaway , an analyst at Washington’s Carnegie Endowment for International Peace, said in a telephone interview. Such uncertainty challenges President Barack Obama’s plan to reduce U.S. troop strength in Iraq from 96,000 to 50,000 by August. Violence may increase if Shiites, Sunnis and Kurds aren’t all included in a governing coalition, said Ahmed Ali, an analyst at the Washington Institute for Near East Policy . Iraq pumped about 2.4 million barrels of crude oil a day last month, according to Bloomberg estimates. Its 115 billion- barrel reserves are behind only Saudi Arabia and Iran. The U.S., which led a 2003 invasion to topple Iraqi leader Saddam Hussein , is scheduled to pull out all its troops by the end of 2011. State of Law, dominated by al-Maliki’s Shiite Dawa Party, is winning in southern provinces populated mainly by Shiite Muslims. A rival Shiite-led group, the Iraqi National Alliance, is leading in two southern provinces. Iraqiya, whose candidates ran on a non-sectarian platform, is ahead in three Sunni Muslim provinces. The Kurdistan Alliance leads in a Kurdish province. Coalition negotiations could last months, analysts predicted. To contact the reporter on this story: Kadhim Ajrash in Baghdadt .

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Adam McKay: An Open Letter to the State of Alabama

March 10, 2010

Hey Alabama, first off, congrats on the stellar season the Crimson Tide had. Wow. That defense is nasty. I spent some time in Alabama when we shot Talladega Nights . We stayed in Birmingham. I had what may have been the best ribs ever and also found a great restaurant that made amazing mojitos. We shot during an actual race at Talladega and I’ll never forget that massive crowd and the crazy fun of the infield and the parties they had. So clearly you’re a state that loves America, believes in hard work and God. I got the sense that Alabama is a place where people don’t want handouts and don’t much care for people talking out of the side of their mouth. So here’s my question: why do you keep electing Senator Shelby? I know that with all the news being owned by big corporations it’s hard to get real information. And with having to work or look for work it’s even harder to search for the true story so that’s why I thought I’d let you know what Shelby’s been doing in the Senate Banking Committee. Currently he’s doing everything he can do to kill the creation of a Consumer Financial Protection Agency. This is a watchdog agency that would be created to make sure working people don’t get ripped off by big Wall Street Banks and credit card companies. So why would Senator Shelby fight against the interests of the people of Alabama? Simple. Cause those same banks and credit card companies are the ones who give him a ton of cash. Here’s a list of his biggest donors . I can’t imagine any person I met in Alabama being cool with their elected official doing the bidding of giant financial institutions over the working families he’s supposed to represent. Now I know some of you might think I’m some liberal Hollywood type but that’s also not true. I was born in Colorado and grew up in Pennsylvania with family in Texas and Oklahoma. The big banks and credit card companies, and health insurance companies have spent billions trying to get you to dismiss truths like this by dismissing it as liberal agitating. If you don’t believe me please call Shelby’s office and ask — (202) 224-5744. They might tell you he is supporting creation of a financial protection agency but they’re not being completely truthful. Shelby and Democrat Evan Bahy from Indiana both want the agency to be under the control of the Federal Reserve which is made up of…you guessed it, the very same private, for-profit banks the agency is supposed to regulate. Sneaky shit, eh? Ask them why they think that will work. At the point they will give you some answer about the Federal Reserve being an institution of integrity. Then you know they’ll BS’ing you. Tell them you’re from Alabama and for them not to treat you like a fool. Then say the magic words: if Senator Shelby doesn’t support an independent Financial Protection Agency I won’t vote for him. A few dozen calls will get his attention. The other problem is that we the people don’t have billions of dollars to fight for this. All we have is our vote. But it’s powerful. Without it Senators like Shelby and Bayh and Leiberman and McConnell have to go home. One other question you may have is “why do you care Mr. Hollywood?” Well once again, I’ve only lived in Los Angeles for five years and I care because I have kids and I love this country. If these banks and credit card companies keep raising rates and charging crazy fees our country will go into another great depression. That means people will be out of work and we as a whole will suffer. That’s why I care. Please forward this to other people in Alabama. America needs you. Or feel free to forward videos we made to get this message out with a few laughs attached. None of us were paid a dime to make this and several of the participants were Republicans as well as Democrats. This is a right vs. wrong not a right vs. left issue. And if we get Shelby to wake up on this issue, when we make Talladega Nights 2 , I’m buying the ribs and beer.

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Billionaire Blavatnik Said to Seek 15% Stake in Reorganized LyondellBasell

March 10, 2010

By Linda Sandler March 10 (Bloomberg) — Billionaire Len Blavatnik , who controlled LyondellBasell Industries AF before it went bankrupt, is seeking a 15 percent equity stake in the reorganized company, according to a person with knowledge of the transaction. Blavatnik, through his industrial holding company Access Industries Holdings LLC, is putting up $800 million to guarantee a rights offering that will add $2.8 billion in equity to Lyondell, according to the person, who declined to be identified because the deal isn’t public. Access may get between 5 and 15 percent of the stock, the person said. Additional sponsors of the offering are Apollo Management LP and Ares Corporate Opportunities Fund III. Lyondell, the Rotterdam-based chemical company, said earlier this week that it planned to exit bankruptcy April 30. Rejecting a $14.5 billion purchase offer by Reliance Industries Ltd. , the company said in a disclosure statement that its own reorganization plan would give it a so-called enterprise value of $15.2 billion. “Access has believed in the combination of Lyondell and Basell from the outset and has remained supportive of the company throughout the reorganization, both through its active involvement on the board and its recent commitment to invest up to $800 million,” Blavatnik said today in an e-mailed statement. Worth $7 Billion Ukrainian-born Blavatnik, 52, is now worth $7 billion, according to three people familiar with his finances. While his earlier $1.1 billion investment in Basell and Lyondell was erased by the bankruptcy, he had already recouped much of his money through fees, dividends and other payments, according to a lawsuit filed by unsecured creditors. Blavatnik was paid $333 million for Lyondell stock he owned when it merged with Basell, also taking $125 million in advisory and management fees, according to court documents. In addition, Basell separately paid him three dividends during 2007 totaling $430 million, they said in the lawsuit. The creditors seek to take back a $300 million loan that Lyondell repaid to Access, and other Lyondell assets transferred to shareholders, before the bankruptcy filing in Manhattan federal court, according to court papers. A U.S. citizen, Blavatnik built his wealth from real estate and interests in privatized Russian companies, he has said. He made $1 billion in January as a minority owner of Moscow-based aluminum producer United Co. Rusal, which conducted an initial public offering in Hong Kong, the people said. “We will not be able to say how many shares any holder will possess until after the rights offering,” David Harpole , a Lyondell spokesman, said in an interview. Restructuring Costs Lyondell, which estimated its restructuring costs at more than $700 million, said 2010 revenue may fall to $36.8 billion, after being as high as $50.7 billion in 2008. Its restructuring plan includes a settlement of litigation between unsecured creditors and secured lenders related to the 2007 buyout. The creditors alleged that the deal crippled one of the world’s largest polymers, petrochemicals and fuel companies, forcing it to seek bankruptcy protection. Blavatnik and his Access aren’t part of the settlement reached with lenders and other parties, according to the documents. The bankruptcy case is In re Lyondell Chemical Co., 09- 10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net .

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Biden Pushes Indirect Middle East Peace Process With Peres, Abbas Meetings

March 9, 2010

By Jonathan Ferziger and Gwen Ackerman March 9 (Bloomberg) — Indirect peace talks can help build trust between Israel and the Palestinians, Vice President Joe Biden said as he began meetings with leaders of both sides after they agreed to a U.S.-led format for negotiations. “I hope the indirect talks will be a vehicle by which we can allay that layer of mistrust that has built up over the past years,” Biden said in a Jerusalem meeting today with Israeli President Shimon Peres . Biden’s visit began yesterday with an announcement that Israel and the Palestinians had agreed to participate in a round of U.S.-mediated negotiations that would allow them to discuss peace without actually meeting face-to-face. Israeli-Palestinian talks have been frozen since the end of 2008, when Israel carried out an offensive in the Gaza Strip that it said was intended to stop Hamas from firing rockets at Israeli communities. Previous U.S.-led efforts to revive talks have foundered on the issue of West Bank settlement building, with Israeli Prime Minister Benjamin Netanyahu announcing a partial halt and Palestinian Authority President Mahmoud Abbas demanding a freeze on all construction. Hours before Biden’s arrival yesterday, Israel disclosed that it had approved the construction of 112 new homes in a West Bank settlement, drawing condemnation from the Palestinian Authority, which called the action “provocative.” U.S. envoy George Mitchell , who announced the sides’ acceptance of the indirect talks, called on “the parties, and all concerned, to refrain from any statements or actions which may inflame tensions or prejudice the outcome of these talks.” Return to Region “We’ve begun to discuss the structure and scope of these talks and I will return to the region next week to continue our discussions,” Mitchell said yesterday in a statement released in Washington. Biden is also meeting with Netanyahu today, and tomorrow travels to the West Bank city of Ramallah to meet Abbas. “I hope indirect talks will be quickly followed by direct talks,” Netanyahu said late yesterday in Jerusalem, according to a text message sent to reporters by his office. “The two principles guiding me are Palestinian recognition of Israel as a Jewish state and security arrangements that will guarantee Israel’s security in the future.” The format of indirect negotiations enables Palestinians to engage with Israel even though Abbas made a public commitment not to hold talks until all settlement construction is stopped. The foreign ministers of Arab states agreed in Cairo last week to give the “proximity talks” four months and call for an emergency United Nations Security Council meeting if they fail. President Barack Obama raised Arab hopes that the U.S. would apply pressure to Israel with a June 4 speech in Cairo in which he called for a total settlement freeze. Arab leaders expressed disappointment five months later when Secretary of State Hillary Clinton acknowledged that a complete construction halt is unrealistic and praised Netanyahu’s proposal for a limited 10-month freeze as “unprecedented.” Biden is also due to visit Jordan this week. To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net Jonathan Ferziger in Jerusalem at jferziger@bloomberg.net

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Biden Visits Middle East as Israel, Palestinians Agree to Indirect Talks

March 8, 2010

By Gwen Ackerman and Jonathan Ferziger March 8 (Bloomberg) — Vice President Joe Biden began a trip to the Middle East as the U.S. announced that Israel and the Palestinians accepted a plan to start indirect talks that analysts say are unlikely to lead to a breakthrough. Biden landed at Ben-Gurion International Airport as U.S envoy George Mitchell clinched understandings with Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas to participate in discussions aimed at reviving direct peace talks. “We’ve begun to discuss the structure and scope of these talks and I will return to the region next week to continue our discussions,” Mitchell said in a statement released in Washington today. Israeli-Palestinian peace negotiations have been frozen since the end of 2008, when Israel launched an offensive in the Gaza Strip that it said was to stop Hamas from firing rockets. Last week, Arab states endorsed a U.S. bid to break the ice by mediating a series of indirect talks that are designed to pave the way for direct negotiations. Hours before Biden’s arrival, Israel disclosed that it had approved the construction of 112 new homes in a West Bank settlement, drawing condemnation from the Palestinian Authority, which called the action “provocative.” Mitchell asked “the parties, and all concerned, to refrain from any statements or actions which may inflame tensions or prejudice the outcome of these talks.” ‘Dire’ Situation U.S.-led efforts to revive talks have foundered on the issue of West Bank settlement building, with Netanyahu announcing a partial halt and Abbas demanding a freeze of all construction. The fact that it has taken more than a year for Mitchell to arrange indirect talks indicates how “dire” the situation has become between the two sides, said Jonathan Spyer , a political scientist at the Interdisciplinary Center Herzliya, near Tel Aviv. The mediation effort is a “pleasant illusion” to avoid confronting the fact that the “positions are irreconcilable,” Spyer said. “It’s kicking the ball down the road for a few more years when someone else will have to deal with the problem.” President Barack Obama raised Arab hopes that the U.S. would apply pressure to Israel with a June 4 speech in Cairo in which he called for a total settlement freeze. Arab leaders expressed disappointment five months later when Secretary of State Hillary Clinton acknowledged that a complete construction halt is unrealistic and praised Netanyahu’s proposal for a limited 10-month freeze as “unprecedented.” ‘Proximity Talks’ The format of indirect negotiations enables Palestinians to engage with Israel even though Abbas made a public commitment not to hold talks until all settlement construction is stopped. The foreign ministers of Arab states agreed in Cairo last week to give the “proximity talks” four months and call for an emergency United Nations Security Council meeting if they fail. “The Americans, the Israelis and the Palestinians are afraid that a continuation of the stalemate might lead to a new round of violence in the near future,” said Mkhaimar Abusada, a political scientist at Gaza Strip’s Al-Azhar University. The indirect talks are a way “to keep things under control for the foreseeable future.” He said there was “no hope whatsoever that these proximity talks will be able to bridge differences or reach conclusive results.” Israel said it had approved construction of 112 new homes at the West Bank settlement of Beitar Illit. Defense Ministry spokesman Shlomo Dror said in a telephone interview that the building didn’t violate Netanyahu’s temporary construction freeze because “this is part of a project that had previously received approval.” Security Palestinian government spokesman Ghassan Khatib said the announcement of new settlement construction is “like putting a stick in the wheels of reviving the stalled peace process” and that “the Palestinian Authority considers the Israeli decision provocative.” “The diplomatic process is not a game, it’s the real thing, and it’s rooted first of all in security,” Netanyahu said in remarks broadcast on Army Radio. Abbas is willing to negotiate a West Bank land swap with Israel to set the borders of an independent state, chief Palestinian negotiator Saeb Erakat said today. In past negotiations, Israel proposed keeping areas of the West Bank close to the 1967 borders where there is a large concentration of settlements, and in exchange giving the Palestinians land inside Israel. Biden will also visit Jordan during his trip this week to the region, the White House said yesterday. To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net Jonathan Ferziger in Jerusalem at jferziger@bloomberg.net

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Iraqis Defy Bombs, Mortar Attacks in `Wide-Open’ Parliamentary Elections

March 7, 2010

By Kadhim Ajrash and Caroline Alexander March 7 (Bloomberg) — Bombings and mortars struck several Iraqi cities as voters cast ballots in parliamentary elections that are unlikely to produce a clear winner. At least 24 people were killed in the attacks in Baghdad alone, including 14 in the bombing of a building in the northeastern part of the capital, the Associated Press reported. In Mosul, the country’s second-largest city, five precinct stations were moved to avoid assaults. Al-Qaeda’s branch in Iraq warned yesterday it would use “military means” to prevent the poll and called on Sunni Muslims, once the bedrock support for deposed Iraqi leader Saddam Hussein , not to participate. The elections come at a time when U.S. troops are preparing to leave the country and are handing over security control to the Iraqis. Prime Minister Nouri al-Maliki , who said last week that no single party is likely to win an outright majority, predicted a large turnout despite the efforts at intimidation. “I know the Iraqi people,” he said after casting his ballot in Baghdad this morning. “When they are challenged, they persevere.” Even as bombs went off, across the country many voters were casting their ballots while carrying Iraqi flags. Authorities deployed 500,000 soldiers and police to provide security. “Despite the bombs that I heard on my way and the fact that I was stopped and searched three times, I insisted on voting,” said Ali Salim, a 32-year-old public school teacher in Baghdad and a Shiite Muslim, the country’s majority sect. “I even put on my best suit and tie.” It is important to have “new people” in power to tackle Iraq’s security and economic problems, Salim said at a voting station. U.S. Withdrawal The cities of Fallujah, Baquba and Samarra were also struck by mortars or bombs, many of them near polling stations, Agence France-Presse reported. The vote is the second since Saddam Hussein ’s overthrow by U.S. forces in 2003. More than 6,200 candidates from 86 political groupings are seeking seats in the 325-member legislature. The election comes less than six months before U.S. troop strength in Iraq, currently 96,000, is scheduled to be halved. Iraqi forces have taken over almost all security in the country. All U.S. forces are scheduled to leave Iraq by the end of 2011. The withdrawal is “strongly on track,” White House Press Secretary Robert Gibbs told reporters in Washington on March 4. Al-Maliki said last week that he expected his State of Law coalition to gain the most votes, although it would need to build a coalition to govern. Deadlock Political fragmentation may lead the parties to “do what they did in 2005 — go for the weakest compromise candidate to prevent a strong prime minister,” said Joost Hilterman , an analyst at the Brussels-based International Crisis Group . “These elections are wide open.” Other main election alliances include the Iraqiya movement of former Prime Minister Ayad Allawi , which is advocating non- sectarian politics. Sunnis are being wooed by an array of Islamic parties. Iraq’s Kurds, who enjoy semi-autonomy in the north , backed al-Maliki after the last election, although they’ve since feuded with him over sharing oil revenue and control of Kirkuk, an oil- rich northern city. The main Kurdish parties, the Kurdish Democratic Party and Patriotic Union of Kurdistan, have formed an election alliance that is being challenged by a new party called Change. U.S. ambitions to leave a peaceful and stable Iraq may be threatened by a post-election deadlock. If significant portions of Iraq’s main sectarian and ethnic groups — the majority Shiite Muslim and minority Sunni Muslim and Kurds — are not represented in the government coalition, violence could grow. Iranian Influence “If an inclusive coalition doesn’t emerge, the backlash could be very violent,” forcing the U.S. to reconsider its withdrawal plans, said Ahmed Ali , an analyst at the Washington Institute for Near East Policy . The election is the biggest in Iraq’s history. Almost 19 million people are registered to vote at 64,000 polling stations, according to the office of the United Nations High Commissioner for Refugees . Baghdad, a city where once the only portrait of a politician on view was that of Saddam Hussein, is festooned with thousands of posters plastered to walls and giant campaign ads draped from buildings. The growing influence of Iran has been evident in the run up to the vote. Shiite parties once aligned with al-Maliki formed the National Iraqi Alliance under the auspices of Iran, according to Reidar Visser , an Iraq analyst at the Norwegian Institute of International Affairs in Oslo. The U.S. has accused Iran of training militias that have attacked American troops in Iraq. Iran has denied the charge. Iran’s influence over Iraqi politics is inevitable, said Marina Ottaway , director of the Middle East program at Washington’s Carnegie Endowment for International Peace . “The U.S. presence is transitory, Iran is in Iraq to stay,” said Ottaway. “In the long run, Iran will be more influential.” To contact the reporters on this story: Caroline Alexander in London at calexander1@bloomberg.net ; Kadhim Ajrash in Baghdad at kajrash@bloomberg.net

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Iraqis Vote in `Wide-Open’ Parliamentary Election; 24 Killed in Bombings

March 7, 2010

By Caroline Alexander and Daniel Williams March 7 (Bloomberg) — Deadly attacks hit Baghdad as Iraqis voted today in a parliamentary poll that may produce months of political wrangling at a time when U.S. troops are preparing to leave the country. More than 6,200 candidates from 86 political groupings are seeking seats in the 325-member legislature. It is the second national election since the U.S.-led invasion that ousted Iraqi leader Saddam Hussein in 2003. Prime Minister Nouri al-Maliki , seeking re-election on a record of reducing sectarian violence, says he expects to win while acknowledging he won’t get enough support to govern alone. It took al-Maliki six months to form a government after the December 2005 election , and since then his Shiite Muslim alliance has splintered. The premier faces competition from rival Shiite parties backed by Iran, Kurds from the country’s north and parties appealing to secularist Iraqis and religious Sunni Muslims. “If an inclusive coalition doesn’t emerge, the backlash could be very violent,” forcing the U.S. to reconsider its withdrawal plans, said Ahmed Ali , an analyst at the Washington Institute for Near East Policy . Compromise Under a schedule set by President Barack Obama last year, about half the 96,000 U.S. troops currently in Iraq will leave by the end of August, and the rest will withdraw in 2011. The withdrawal is “strongly on track,” White House Press Secretary Robert Gibbs told reporters in Washington on March 4. Al-Maliki said in an interview posted last week on France 24 television’s Web site that “in late 2011, there must not be a single U.S. soldier left in Iraq,” and that the Iraqi army will be ready to take over. He said his State of the Law alliance will need coalition partners to govern Iraq, which holds the world’s third-largest reserves of oil. Political fragmentation may lead the parties to “do what they did in 2005 — go for the weakest compromise candidate to prevent a strong prime minister,” said Joost Hilterman , an analyst at the Brussels-based International Crisis Group . “These elections are wide open.” U.S. ambitions to leave a peaceful and stable Iraq may be threatened by a post-election deadlock, as well as by a recurrence of the sectarian violence that has been abating since 2007. In the run-up to elections, which insurgents vowed to disrupt, attacks increased. Mortar Attacks Three people were killed by mortar fire in northeastern Baghdad, the Associated Press reported today, citing officials it didn’t identify because they weren’t authorized to speak to the media. Twelve people were killed and eight wounded in a bomb attack in Baghdad, Agence France-Presse cited an Interior Ministry official as saying. After casting his vote in Baghdad, al-Maliki called for a heavy turnout. “Every vote will have an effect,” he said. “We want calm, we want stability, we want to build” Iraq. Authorities deployed 500,000 army and police to ensure security for the election. Across the country, many voters were seen casting their ballots while carrying Iraqi flags in their hands. Al-Qaeda’s branch in Iraq, which has warned it would use “military means” to prevent the poll, said two days ago it was imposing a curfew on election day. A car bomb near a Shiite Muslim shrine in Iraq’s holy city of Najaf killed seven people yesterday. On March 4, a roadside bomb and two suicide explosions killed at least 12 people at three separate polling stations where voters eligible for early balloting, including security forces due to be policing today’s vote, were casting ballots. ‘Decisive Vote’ The day before, suicide bombings in Baquba, a mixed Shiite and Sunni Muslim city, killed at least 29 people. Iraqi government figures show 352 people were killed in attacks in February, 80 percent more than the previous month. Polling stations in Iraq opened at 7 a.m. today and are due to close at 5 p.m., with initial results expected tomorrow and final results by the end of March. Iraqi President Jalal Talabani , a Kurd, called the vote “decisive” as he cast his ballot in the northern city of Sulaimaniyah. He said he expected to keep his post. The election will be the biggest in Iraq’s history, with 18.9 million people registered to vote at 64,000 polling stations, according to the office of the United Nations High Commissioner for Refugees . Baghdad is plastered with thousands of banners and posters, and candidates have also sought support via television and radio advertisements, Web sites and text messages. Iran Influence Politics are fragmented largely along ethnic and religious lines. Al-Maliki’s former Shiite allies have formed the National Iraqi Alliance, which also includes the cleric Moqtada al-Sadr , who is believed to be living in Iran. The group was set up in Iran with the Islamic republic’s backing, according to Reidar Visser , an Iraq analyst at the Norwegian Institute of International Affairs in Oslo. The U.S. has said it suspects Iran is trying to develop nuclear weapons, and has also accused it of training militias that have attacked American troops in Iraq. Iranian officials have denied both accusations. Iran’s influence over Iraqi politics is on the rise, said Marina Ottaway , director of the Middle East program at Washington’s Carnegie Endowment for International Peace . “The U.S. presence is transitory,” said Ottaway. “Iran is in Iraq to stay. In the long run, Iran will be more influential.” Other main election alliances include the Iraqiya movement of former Prime Minister Ayad Allawi , which is advocating non- sectarian politics. Sunni Muslims, who boycotted the 2005 election, are being wooed by an array of Islamic parties. Iraq’s Kurds, who enjoy semi-autonomy in the north , backed al-Maliki after the last election, although they’ve since feuded over sharing oil revenue and settling internal boundaries. The two main Kurdish parties, the Kurdish Democratic Party and Patriotic Union of Kurdistan, have formed an election alliance that is being challenged by a new party called Change. “I don’t think the candidates will be able to solve intractable crises unless they first agree to end the state of intolerance,” said Malak Hussein, 47, an eye doctor at a clinic in central Baghdad. To contact the reporters on this story: Daniel Williams in Cairo at dwilliams41@bloomberg.net . Caroline Alexander in London at calexander1@bloomberg.net

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Iraq’s `Wide-Open’ Election Could Pose Threat to Obama’s Withdrawal Plans

March 6, 2010

By Caroline Alexander and Daniel Williams March 7 (Bloomberg) — Iraq votes today in a parliamentary election that is likely to produce months of political wrangling over a new governing coalition, at a time Iraqis are taking over responsibility for security as U.S. troops leave the country. More than 6,200 candidates from 86 political groupings will seek seats in the 325-member legislature. It is the second national election since the U.S.-led invasion that ousted Iraqi leader Saddam Hussein in 2003. Prime Minister Nouri al-Maliki, seeking re-election on a record of reducing sectarian violence, says he expects to win while acknowledging he won’t get enough support to govern alone. It took al-Maliki six months to form a government after the December 2005 election , and since then his Shiite Muslim alliance has splintered. The premier faces competition from rival Shiite parties backed by Iran, Kurds from the country’s north and parties appealing to secularist Iraqis and religious Sunni Muslims. “If an inclusive coalition doesn’t emerge, the backlash could be very violent,” forcing the U.S. to reconsider its withdrawal plans, said Ahmed Ali , an analyst at the Washington Institute for Near East Policy . Under a schedule set by President Barack Obama last year, about half the 96,000 U.S. troops currently in Iraq will leave by the end of August, and the rest will withdraw in 2011. The withdrawal is “strongly on track,” White House Press Secretary Robert Gibbs told reporters in Washington on March 4. Compromise Al-Maliki said in an interview posted last week on France 24 television’s Web site that “in late 2011, there must not be a single U.S. soldier left in Iraq,” and that the Iraqi army will be ready to take over. He said his State of the Law alliance will need coalition partners to govern Iraq, which holds the world’s third-largest reserves of oil. Political fragmentation may lead the parties to “do what they did in 2005 — go for the weakest compromise candidate to prevent a strong prime minister,” said Joost Hilterman , an analyst at the Brussels-based International Crisis Group . “These elections are wide open.” U.S. ambitions to leave a peaceful and stable Iraq may be threatened by post-election deadlock, as well as by a recurrence of the sectarian violence that has been abating since 2007. In the run-up to elections, attacks increased. A car bomb near a Shiite Muslim shrine in Iraq’s holy city of Najaf killed seven people yesterday. On March 4, a roadside bomb and two suicide explosions killed at least 12 people at three separate polling stations where voters eligible for early balloting, including security forces due to be policing today’s vote, were casting ballots. Texting Voters The day before, suicide bombings in the central city of Baquba, a mixed Shiite and Sunni Muslim city, killed at least 29 people. Iraqi government figures show 352 people were killed in attacks in February, 80 percent more than the previous month. Polling stations in Iraq open at 7 a.m. today and are due to close at 5 p.m., with initial results expected tomorrow and final results by the end of March. The election will be the biggest in Iraq’s history, with 18.9 million people registered to vote at 64,000 polling stations, according to the United Nations High Commissioner for Refugees . Baghdad is plastered with thousands of banners and posters, and candidates have also sought support via television and radio advertisements, Web sites and text messages. Politics are fragmented largely along ethnic and religious lines. Al-Maliki’s former Shiite allies have formed the National Iraqi Alliance, which also includes the cleric Moqtada al-Sadr , who is believed to be living in Iran. The group was set up in Iran with the Islamic republic’s backing, according to Reidar Visser , an Iraq analyst at the Norwegian Institute of International Affairs in Oslo. Iran Influence The U.S. has said it suspects Iran is trying to develop nuclear weapons, and has also accused it of training militias that have attacked American troops in Iraq. Iranian officials have denied both accusations. Iran’s influence over Iraqi politics is on the rise, said Marina Ottaway , director of the Middle East program at Washington’s Carnegie Endowment for International Peace . “The U.S. presence is transitory,” said Ottaway. “Iran is in Iraq to stay. In the long run, Iran will be more influential.” Other main election alliances include the Iraqiya movement of former Prime Minister Ayad Allawi , which is advocating non- sectarian politics. Sunni Muslims, who boycotted the 2005 election, are being wooed by an array of Islamic parties. Iraq’s Kurds, who enjoy semi-autonomy in the north , backed al-Maliki after the last election though they’ve since feuded over sharing oil revenue and settling internal boundaries. The two main Kurdish parties, the Kurdish Democratic Party and Patriotic Union of Kurdistan, have formed an election alliance that is being challenged by a new party called Change. “I don’t think the candidates will be able to solve intractable crises unless they first agree to end the state of intolerance,” said Malak Hussein, 47, an eye doctor at a clinic in central Baghdad. To contact the reporters on this story: Daniel Williams in Cairo at dwilliams41@bloomberg.net . Caroline Alexander in London at calexander1@bloomberg.net

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Mukherjee Lacks `Magic Number’ in House For Carrefour, Wal-Mart Opening

March 1, 2010

By Kartik Goyal March 2 (Bloomberg) — Finance Minister Pranab Mukherjee said he lacks support from lawmakers to allow more foreign investment in retail and insurance, stymieing Carrefour SA and Wal-Mart Stores Inc. ’s expansion in India. “We haven’t reached the magic number” in parliament, Mukherjee said in an interview with Bloomberg-UTV news channel in New Delhi on Feb. 28. “We are lacking in areas where legislative support is needed,” Mukherjee said, adding there is no “common approach” among allies in the ruling coalition about easing overseas investment rules. More than three years after Wal-Mart formed a venture with billionaire Sunil Mittal , the world’s biggest retailer has just one wholesale outlet in India and is barred from selling directly to the nation’s 1.2 billion people. Legislation to allow insurers including New York Life Insurance Co. to increase investment has been languishing for at least six years. “India will certainly be an important market in a very long term…but its government is very protective of small businesses,” Walter Stackow , an analyst at Manning & Napier Advisors Inc., said in a telephone interview from Fairport, New York. “It will take a long, long time for the foreign retailers to get a real foothold there.” Mukherjee’s comments may damp speculation that Prime Minister Manmohan Singh’s government will allow overseas multi- brand stores including Paris-based Carrefour to open retail outlets during his five-year term ending 2014. The finance minister in his budget speech on Feb. 26 had said India needs to take a “firm view” on opening up the retail sector to bring down food prices that have fueled inflation to a 15-month high. Opposition Parties Singh’s Congress party best election win in 18 years last May increased its tally in parliament to 207 in the 543-member lower house of parliament from 147 in the previous five-year term. Mukherjee, 74, said “it’s surely an improvement” though the government needs “absolute majority of a single party” to make key policy changes. The fragility of the 12-party coalition was underscored in the reaction to Mukherjee’s budget speech, with his two biggest allies protesting at plans to raise excise tax on gasoline and diesel. Mamata Banerjee, the railways minister and leader of the Trinamool Congress Party, told reporters after the budget presentation that the excise on fuel must be “rolled back” because it’s inflationary . Dravida Munnetra Kazhagam, the government’s second-biggest ally, also opposed the levy. Opposition to economic changes “has happened in earlier coalitions, it is bound to happen,” Mukherjee said. “We shall have to resolve these issues.” He didn’t name the parties who are opposing the government’s insurance and retail policies. Foreign Capital Mukherjee didn’t give a time frame on when he would bring around his allies on loosening foreign investment regulations. Instead, he said he aims to cut bureaucracy to attract more investments from abroad. “Procedural simplification will facilitate foreign direct investments,” Mukherjee said. “India is an important destination for foreign capital. That’s why despite the slowdown in the world economy, our FDI flows remained almost at the same level.” India attracted $20.9 billion in the nine months to Dec. 31 compared with $21.1 billion in the same period last year, according to the finance ministry. China received $68.3 billion during the period, according to the nation’s commerce ministry. The Organization for Economic Cooperation and Development in December said India trails in getting higher FDI because the nation’s policies to attract overseas investors are “restrictive” in comparison with a majority of OECD countries. Loosen Policy In a report titled, “OECD Investment Policy Reviews: India,” the Paris-based organization said India must ease foreign investment rules in insurance, banking and retail to create more jobs and accelerate economic growth. India’s $1.2 trillion economy may expand 7.5 percent in 2010 while China’s $4.3 trillion economy may grow 9 percent this year, the World Bank said on Jan. 20. India wants to grow at a 10 percent pace for more than two decades to cut poverty in the country. The World Bank estimates 76 percent of Indians live on less than $2 a day, compared with 72 percent in the Sub-Saharan African nations. “India may be able to better achieve its objectives through non-discriminatory policies rather than sectoral restrictions on foreign investment,” OECD Secretary-General Angel Gurria said in the report. India’s plan to raise foreign-direct-investment ceiling in insurance to 49 percent from 26 percent has been stuck in parliament for more than three years and is currently being debated by a group of all political parties. Local Laws In retail, local laws are aimed at protecting small shops in Asia’s third-largest economy. India permits overseas chains such as Carrefour and Bentonville, Arkansas-based Wal-Mart to operate as wholesalers and sell groceries and other goods to businesses such as supermarkets, department stores and restaurants. They are barred from opening stores or buying stakes in supermarket chains. Carrefour Chief Executive Officer Lars Olofsson last week said the retailer intends to open a wholesale outlet in India by the middle of this year, according to a company spokeswoman who declined to be identified. Wal-Mart’s first wholesale store started operations in May. The U.S. retailer’s spokesman didn’t immediately respond to e-mail and mobile phone queries. “This is basically a political issue and in a multi-party coalition government, these problems come,” Mukherjee said. “There are a divergence of views and the best way to resolve these is through discussion.” To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net .

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U.S. Negotiator `Confident’ Six-Nation Talks With North Korea Will Resume

February 24, 2010

By Bloomberg News Feb. 25 (Bloomberg) — U.S. special envoy for North Korea Stephen Bosworth said he is “confident” that six-nation talks on the country’s nuclear program will resume following discussions yesterday with his Chinese counterpart. “I’m confident at some point we’ll have a resumption of talks,” Bosworth said in an interview late yesterday evening in Beijing. “I think the interests of all six countries converge to make that a very optimal outcome.” Bosworth met with Wu Dawei , his Chinese counterpart, in Beijing yesterday. The visit comes amid a surge in diplomatic activity aimed at restarting six-nation talks aimed at dismantling North Korea’s nuclear weapons program. Chinese President Hu Jintao met a North Korean delegation in Beijing on Feb. 23, and Bosworth’s visit coincided with a trip to the Chinese capital by Wi Sung Lac , South Korea’s top nuclear negotiator. Hu held “friendly talks” with Kim Yong Il , director of the international affairs department of the Workers’ Party, and others in the visiting group, North Korea’s official Korean Central News Agency reported yesterday. The report, and one by China’s state-controlled Xinhua News Agency, didn’t say whether the parties discussed North Korea’s nuclear program. North Korea has said it will return to talks only after sanctions by the United Nations Security Council are removed, a demand rejected by the U.S. The communist country has been under stricter UN sanctions, which ban arms trading and restrict financial transactions, since it detonated a second nuclear device in May 2009. Third Test Yan Xuetong , director of the Institute of International Studies at Tsinghua University in Beijing, said he doesn’t expect North Korea will return to the talks until after it detonates a third nuclear device. This would lead the U.S to view the country as a more immediate threat and mean that negotiations would take on greater importance, he said. “Resuming the six-party talks will benefit the regional security interests for everyone,” Yan said in an interview. “But unfortunately at this moment North Korea can’t see eye-to- eye with other countries on their shared interests.” The U.S. is still waiting for a “signal” from North Korea on how to resume the nuclear discussions, State Department spokesman Philip J. Crowley said this week. Bosworth’s trip to Asia comes after he traveled to Pyongyang in December. Sung Kim , the chief U.S. negotiator to the six-party talks, is traveling with Bosworth on this week’s trip that includes stops in Seoul and Tokyo. South Korea and Japan are participants in the talks, which also involve Russia. — Michael Forsythe , Stephen Engle . With assistance from Bomi Lim in Seoul. Editors: Ann Hughey , Bill Schmick To contact Bloomberg News staff on this story: Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net

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Republican Leads Race in Illinois for Obama’s U.S. Senate Seat, Poll Finds

February 4, 2010

By Jonathan D. Salant Feb. 4 (Bloomberg) — Republican Mark Kirk leads Democrat Alexi Giannoulias in the race for the Illinois U.S. Senate seat formerly held by President Barack Obama , a new poll finds. Kirk, a U.S. representative, led Giannoulias, the state treasurer by 46 percent to 42 percent in the Feb. 3 survey of 500 likely voters by Rasmussen Reports. The poll, taken one day after the Illinois primary in which both men won their parties’ nominations, had a margin of error of 4.5 percentage points. A Public Policy Polling survey of 1,062 likely voters taken Jan. 22-25 gave Giannoulias an 8 point lead, 42 percent to 34 percent, with a margin of error of 3 percentage points. A Dec. 9 Rasmussen poll of 500 likely voters showed Giannoulias leading Kirk by 42 percent to 39 percent. Both parties wasted little time in attacking the opposition candidate yesterday. Republicans posted an online video called “Making Tony Soprano Proud,” which cites loans that the Giannoulias family’s bank made to a bookmaker as well as to convicted Illinois influence peddler Antoin “Tony” Rezko. Democrats called Kirk, who supported President George W. Bush’s tax cuts that contributed to record federal deficits, “a Washington insider who wants to return to the failed policies that created the economic mess we now face.” The incumbent, Roland Burris , appointed to succeed Obama, is not seeking re-election. The race is considered one of the most competitive U.S. Senate contests this year by the three Washington-based publications that rate congressional races: Congressional Quarterly, the Cook Political Report and the Rothenberg Political Report. To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net .

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U.K. Risks `Greek-Style Crisis’ on Budget Deficit, Conservative Party Says

January 31, 2010

By Craig Stirling Jan. 31 (Bloomberg) — George Osborne , finance spokesman for Britain’s opposition Conservatives, said the U.K. risks a “Greek-style budget crisis,” as opinion polls showed his party may struggle to win sufficient electoral support to control the pace of debt-cutting measures. “Britain, with the largest debts, the largest borrowing of any major economy in the world, has to deal with this problem,” Osborne told the British Broadcasting Corp.’s Sunday AM show today. “If we don’t, we risk a Greek-style budget crisis that will put interest rates up.” With the election due by June, four polls published this weekend showed the Conservatives with less than a 10 percentage- point lead over Prime Minister Gordon Brown ’s ruling Labour Party. Analysts including Anthony Wells , a pollster at YouGov, say that’s the margin needed to be certain of a Parliamentary majority. Osborne’s call to prioritize budget cuts adds to the squabble between the parties in a campaign where the deficit has taken center stage. “We took action to protect businesses, to help people who became unemployed to get back in, now we’ve got to keep taking that action because we’re not out of the woods yet,” Harriet Harman , deputy Labour Party leader, said on the same program. “I really do shudder to think what would have happened” if the Conservatives had been in government, she said. Osborne’s statements follow investor concern that Greece won’t be able to meet its debt obligations. That prompted the euro’s biggest monthly drop against the yen in January. Opinion Polls Conservative Leader David Cameron , in an interview with the BBC’s Politics show broadcast today, also cited Greece as an example to avoid, and said that he wanted to begin curbing the budget deficit as soon as this year. “We’re not talking about swingeing cuts, we’re talking about making a start,” he said. Business Secretary Peter Mandelson , interviewed on the same program, described Osborne’s comparison with Greece as “ludicrous” and “unpatriotic” and said that the Conservatives were “talking down” Britain abroad. The Conservatives had 9-point leads in polls by BPIX in the Mail on Sunday and YouGov Plc in the People published today. Yesterday, an Ipsos-Mori poll in the Daily Mirror gave the party an 8-point lead, while another YouGov poll in the Daily Telegraph put it at 7 points. Contingency Plan Cameron’s aides believe he should call a second election within months if he wins by too small a margin in the vote expected to take place on May 6, the News of the World reported today, without saying how it obtained the information. Brown plans to stay on as Labour leader unless Cameron wins by a significant majority, the Sunday Times reported, citing an unidentified senior party official. “The polls at the moment give you no confidence that he will” win the coming election with a majority, former Conservative Defense Minister Michael Portillo said in an interview on Sky News today. The budget deficit , expected by the Treasury to reach a postwar high of 12.6 percent of gross domestic product in the fiscal year through March, may remain the battleground as the election approaches. Osborne, Chancellor of the Exchequer Alistair Darling and Liberal Democrat Treasury spokesman Vince Cable may clash on the economy in a televised debate, the Sunday Times reported today. ‘Albatross of Debt’ Osborne said today that Britain faces an “albatross of debt” and called for “early action.” “That means a credible plan to deal with Britain’s budget deficit so we can keep interest rates lower for longer,” Osborne said. “That’s the absolute key part of having a stronger recovery.” He said that fiscal tightening must be coordinated with the Bank of England’s monetary policy. Osborne also reiterated comments that he backs part of U.S. President Barack Obama ’s plans to curb the banking industry. “We need to stop our retail banks engaging in the riskiest end of investment banking, the large scale proprietary trading,” he said. “I agree we should have an international global banking levy, not the Tobin tax.” Osborne also added to calls for banks to prioritize rebuilding balance sheets and to increase lending, instead of paying out compensation. “The banking sector should be getting credit out to the small- and medium-sized businesses watching this program that are part of the recovery, instead of paying the very large bonuses to the bankers which I think are undeserved at the moment,” Osborne said. To contact the reporter on this story: Craig Stirling in London at cstirling1@bloomberg.net

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Goldman Parachute Awaits Geithner to Ease Fall: Caroline Baum

January 25, 2010

Commentary by Caroline Baum Jan. 26 (Bloomberg) — Treasury Secretary Timothy Geithner is scheduled to testify to the House Oversight and Government Reform Committee tomorrow. The hearing is certain to be good theater. Whether it reveals good government, or a government working for the few at the expense of the many, is another matter. If it turns out Geithner failed to act in the best interest of taxpayers in the bailout of American International Group, Inc ., he is unworthy of the public trust and should step down. That thought may have crossed President Barack Obama’s mind as well. When Obama proposed new limits on the size and scope of commercial banks last week, standing at his side was Paul Volcker , head of the president’s Economic Advisory Board, whose height (6 feet 7 inches) belies his diminished influence –until now. Volcker has long advocated banning commercial banks from speculating with federally insured deposits, but his voice was drowned out by the pro-Wall Street sympathies of Geithner and Larry Summers , another Obama economic adviser. The House Oversight Committee, chaired by Edolphus Towns , a Democrat from New York, subpoened documents from the Federal Reserve Bank of New York relating to the AIG bailout in September 2008, when Geithner was president of the New York Fed. The Fed turned over about 250,000 pages of documents, some of which have been leaked to the press. Lawmakers are particularly interested in the decision to pay AIG’s counterparties, including Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar to cancel, then and there, the credit default swaps the insurer sold them. They also want to know why the New York Fed pressured AIG to withhold that information in its regulatory filings. Secrecy’s Downside So do we. Secrecy surrounding the AIG bailout has worked to compound suspicions the New York Fed did something fishy, that it found a back-door way to pump money into the banks and, in the process, hosed the rest of us. Geithner has testified that the Fed’s hands were tied, that the bank could not “selectively default on contractual obligations without courting collapse.” If that’s the case, why hide the evidence? CDSs are customized, privately negotiated contracts. We have no idea how they were written. Only the parties to them do. Through a Treasury spokesman, Geithner has said he recused himself from “working on issues involving specific companies, including AIG,” after his Nov. 24 nomination as Treasury secretary. How likely is it Geithner was unaware or uninvolved in the negotiations? The New York Fed did not respond to multiple inquiries on the nature of the recusal. Body Language “It’s not necessary to speak words or render a decision to cause influence,” says Jacob Frenkel , a former federal prosecutor and Securities and Exchange Commission enforcement attorney now in private practice. “Mere presence can affect the outcome.” Geithner’s problems pre-date AIG. After Obama nominated him to the Treasury post, a job that put him atop the Internal Revenue Service, we learned he cheated on his taxes. He settled his 2003 and 2004 tax liability after a 2006 IRS audit but didn’t pay back taxes for 2001 and 2002 until Obama nominated him. Obama rushed Geithner’s confirmation process through the Senate on the grounds that he was the only man for the job. The main selling point? In his position at the helm of the New York Fed since 2003, he was familiar with the crisis story line and was involved in the various rescue efforts. He also fiddled while the biggest banks, most of which are in the New York Fed’s district, burned. Escape Clause Geithner has been a public servant his whole life, holding various positions at the Treasury, the International Monetary Fund and the Fed. Somehow he managed to shed the stigma of tax scofflaw, but now BOTH Democrats and Republicans in Congress want blood. His may be just the scalp Obama needs to pacify the populist outrage, especially since he’s perceived as being too cozy with bankers. Following the loss of the late Ted Kennedy’s Senate seat in Massachusetts, Obama is trying out his populist voice. By all rights, he should sacrifice one of his political advisers, who seem to have miscalculated the Massachusetts election and misjudged the public’s appetite for health-care reform when the chief concern is jobs . Axing Geithner might be good for president and Treasury secretary alike. Obama would be seen as an ally of the people. Geithner would be free to claim his just reward: that plum offer from Goldman Sachs. The circle would be squared. Obama would have his man on the inside. ( Caroline Baum , author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .

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American Broadband Amends Earlier Announcement Regarding Sales Hire

January 7, 2010

LEMONT FURNACE, PA–(Marketwire – January 7, 2010) – American Broadband, Inc. (“ABi”), a leading national private network service provider, previously announced the addition of Fred Shamon to its sales team. Subsequent to that announcement, the parties have been unable to come to terms and Shamon will not be employed by ABi. About the Company: ABi, founded in 2001, delivers high-capacity managed network solutions for customers in the financial, retail, healthcare, education, and logistic industries. ABi provides these services in partnership with strategic partners, and incumbent service providers, such as cable television operators, power companies and other utility providers. This translates to access to substantial excess network capacity, which ABi leverages to provide networking solutions for its customers. ABi partners with the country’s leading cable system operators to leverage their substantial investment in fiber and cable networks to reach non-traditional cable ta

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Fox, Time Warner Cable Continue Fee Negotiations Past Midnight Deadline

January 1, 2010

By Kelly Riddell Jan. 1 (Bloomberg) — News Corp. ’s Fox network kept its programming on Time Warner Cable Inc. as the companies worked to resolve a fee dispute, extending talks past a Dec. 31 deadline. The companies agreed to a “short extension,” Time Warner Cable spokesman Alex Dudley said today in a statement. Fox had threatened to turn off its signal if the two parties couldn’t reach a deal, which would prevent Time Warner Cable subscribers from watching some New Year’s Day football games. A blackout would affect about 6 million cable subscribers in cities including New York, Los Angeles, Orlando and Austin. Fox, whose profit declined 54 percent in its fiscal first quarter, loses advertising revenue if the programs go off the air, said Matthew Harrigan of Wunderlich Securities. “It’s mutually assured destruction if they don’t reach an agreement,” the Denver-based analyst said in an interview before the deadline. “The networks can’t really afford to pull their signal because then they shoot themselves with the advertising and conversely the other cable companies get hit by their customers.” Time Warner Cable also is negotiating on behalf of Bright House Networks, the seventh-largest U.S. cable operator. The closely held company, with two headquarters in Orlando and in Syracuse, New York, has more than 2 million subscribers, according to its Web site. Time Warner Cable dropped 44 cents, or 1.1 percent, to $41.39 on Dec. 31 in New York Stock Exchange composite trading . New York-based News Corp. fell 22 cents to $13.69 on the Nasdaq Stock Market. Falling Revenue U.S. TV industry revenue may decline 22 percent this year, station consultant BIA/Kelsey said Dec. 22. Broadcast networks are asking cable and satellite systems to pay retransmission fees in markets where they own stations, saying programmers deserve compensation for supplying TV’s most-watched shows. In the past, the networks traded those rights to gain distribution for new cable channels. “We need to receive fair compensation from Time Warner Cable to go forward,” News Corp. Chief Operating Officer Chase Carey said in a memo to employees Dec. 30. Time Warner Cable Chief Executive Officer Glenn Britt has said his company shouldn’t have to prop up broadcasters through rate increases that are higher than the rate of inflation. The cable operator had said it wanted to seek arbitration to resolve the dispute, and that it would agree to a 30-day cooling off period in negotiations if Fox would. Request Denied On Dec. 30, Carey rebuffed Britt’s request for arbitration and declined a proposed extension that would allow Time Warner Cable to air Fox programs while the parties negotiate. U.S. Senator John Kerry said in a letter to News Corp. dated Dec. 30 that he would ask the U.S. Federal Communications Commission to force Fox to keep its signal turned on if the issue wasn’t resolved. Programming cost disputes aren’t new to Time Warner Cable. A similar battle last year with Viacom Inc. was resolved before channels like MTV Network went black. In 2000, the cable operator pulled ABC-owned stations briefly from its lineup during a dispute with Walt Disney Co. over carriage of its cable networks. The FCC was last drawn into retransmission talks in 2007. The agency’s media bureau concluded it didn’t have the authority to require binding arbitration in the fee dispute between Sinclair Broadcast Group Inc. and cable provider Mediacom Communications Corp. Sinclair, based in Hunt Valley, Maryland, pulled its signals from Mediacom systems for almost a month before the sides agreed on a new contract. About 700,000 subscribers were affected. Time Warner Cable markets that would be affected by an outage include Los Angeles, Austin, Texas; Detroit, New York City, Orlando and Tampa Bay, Florida. The following table shows the games that may be blacked out, the date and the cities affected: To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net

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Video: Seaman Says `Good Chance’ Fox to Pull Time Warner Shows: Video

December 31, 2009

Dec. 31 (Bloomberg) — Don Seaman, vice president and director of communications analysis at MPG North American, talks with Bloomberg’s Matt Miller about the dispute over fees between News Corp.’s Fox broadcast television network and Time Warner Cable Inc. If the parties don’t reach an agreement by today, Fox has threatened to pull its shows from the cable company’s systems. (Source: Bloomberg)

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Mike Bonifer: Pat on the Back

December 29, 2009

I am at our local hardware store on Vermont Avenue in L.A. where I’ve recently been spending a lot of time and money on our fixer-upper, when I see one of the store’s employees give another one a pat on the back. It makes me smile because it’s something I don’t see too often in the workplace these days: generous, a gesture of appreciation — for what, exactly, I cannot tell. A favor returned? Encouragement? A conflict resolved? Good news? A joke? All I can tell for sure is that it’s a connection between two people who, in that instant, are enjoying their scene. We earn our money by learning from the Past and by being correct more often than not about the Future. But we do our living in the Now, and nothing says Now like a pat on the back. And yet, there’s a problem with this, at least where the workplace is concerned. Touching is a vital element of communication, but between the computer culture and the corporate playbook, it is being systematically eliminated from the game. To get the complete picture, I phone Martin Ett, an HR consultant with ObsessiCom Outsourcing Services , and ask him to interpret a pat on the back like the one I witnessed in the hardware store. “It depends,” says Ett. “On?” “A lot. Was it a display of affection? If so, was it sexual in nature? What was the duration of the gesture? We recommend a three-second limit on casual contact, including handshakes, conversational touching, hair or clothing adjustments, and lint-plucking. Back-patting falls under the three-second rule. “There’s also the nature of the contact itself to consider,” Ett went on. “Was there rubbing involved or was the contact static? Was it hand contact only, or was it of a hugging nature so that bodies were touching? This is an important distinction, because hugs are becoming increasingly problematic in the workplace. Many employers prohibit what we call ‘full frontal clutching’ while still allowing what we call ‘casual side-to-side linkage.’ We’re seeing strong anti-clutching trends across the corporate landscape. “I’d want to talk to each of the employees separately,” Ett continues, “to determine both intention and interpretation, an ‘ I-to-I Analysis,’ we call it.” “Eye-to-Eye? I ask. Misinterpreting. “Is that like a 360?” “You mean a 720? Uh, no. It means was there alignment between the patter’s Intention and the pattee’s Interpretation of the incident? (Incident?) I get where this is going but there’s no stopping him now. I put the phone on speaker and tend to my Farmville on Facebook as Ett continues: “Did the pat make the pattee defensive or uncomfortable, or imply some kind of future obligation? Also, what was the proximity of the parties? Was one of the parties backed into a corner, or was there space for the pattee to avoid the pat if it was unwelcome or unwarranted?” “It happened in the hose aisle,” I say. “It’s cramped in that store. Space is tight.” ” Hose aisle ,” repeats Ett, gravely. “That could be an issue. Context is key. I’d need to know more about what exactly goes on in the hose aisle. Is one of the parties the hose manager, or is that aisle considered neutral space? Was there actual hose involved? Because that’s a whole new kettle of worms… Kettle of worms? When did a pat on the back turn into a scene from a Wes Craven movie? “Also what, specifically, was ‘the back’ being patted? I’d want to know that. Was it in the region of the upper, or Cervical, vertebrae? If it was on the upper back it was probably okay, assuming of course, it didn’t last for longer than three seconds and no rubbing was involved. Middle, or Thoracic vertebrae, are a gray area, especially numbers T-One through T-Four. You find HR people very divided about this, and there are no clear guidelines, so my advice is to steer clear of the Thoracic region entirely, just to be safe. The lower, or Lumbar region, is a definite no-no. And a pat on the Sacrum will get you a visit from Security, no question. “Was one of the employees the other one’s superior?” continues Ett. “If so, the gesture could be taken as intimidation or harassment. Was the patting public or did it happen in private? Was this an isolated incident, or was it part of a pattern?” “I don’t know,” I say, feeling a bit harassed myself now, for even bringing it up. “They just seemed like a couple of guys enjoying a moment.” “Couple of guys, eh? We’re seeing a big increase in same-sex sexual harassment these days.” Ett says it with the ominous satisfaction of an exterminator describing a cockroach invasion in the building where you live. “What about giving myself a pat on the back?” I ask. “Do you have a rule against that?” “Are you making fun of me?” Ett replies. “If you are, you’re barking down the wrong well, buddy. There are rules about that .” Next time I see them, I’ll warn the guys over at the hardware store they’re skating on some very thin skin. The problem with rules of the game like those cited by (the fictional) Martin Ett is that they define workplace interactions in the context of the Past or the Future while minimizing the impact of the Now. Because of this they tend to suppress rather than expand our ability to communicate in a productive, meaningful way. In this kind of sanitized environment, we may be making our money and limiting our liability, but it has very little to do with how we’re living our lives. Mike Bonifer is the author of GameChangers–Improvisation for Business in the Networked World .

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Nufarm Sells Sumitomo 20% Stake After Rejecting $2.3 Billion Sinochem Bid

December 28, 2009

By Madelene Pearson Dec. 29 (Bloomberg) — Nufarm Ltd. said Sumitomo Chemical Co. agreed to buy a 20 percent stake in the company after Australia’s largest farm chemicals supplier rejected a A$2.6 billion ($2.3 billion) takeover offer from China’s Sinochem Corp. The Japanese company will acquire the stake at A$14 a share, Melbourne-based Nufarm said today in a statement. That values the holding at about A$611 million and is priced 17 percent higher than Sinochem’s revised proposal for the whole company. Sumitomo, the world’s ninth-biggest maker of agricultural chemicals, wants to expand sales in the industry and benefit from Nufarm’s sales network in Australia, Europe and the Americas. Sinochem’s revised bid was rejected by Nufarm after three months of talks, saying it undervalued the company. “Sumitomo turned out to be the white knight waiting in the wings,” Cameron Peacock , market analyst at IG Markets in Melbourne, said in an e-mailed statement. Nufarm’s shares faced “getting smashed all the way back to the A$8 range had the board rejected the bid with no other suitors in sight,” he said. Nufarm rose 4.2 percent to A$11 at 11:02 a.m. in Sydney, its biggest gain since Dec. 18. The stock, with a market valuation of A$2.4 billion, has risen 4.5 percent this year, compared with a 30 percent gain in the benchmark index. Second Attempt The proposal was China’s second attempt in as many years to buy Nufarm for its global distribution network for pesticides and herbicides. Nufarm signed an initial accord with Sinochem in September at A$13 a share, and the Chinese company cut the price to A$12 this month, without giving a reason. “Sinochem’s revised proposal is less attractive than the position which was agreed between the parties in September and does not provide certainty for Nufarm shareholders,” Nufarm Chairman Kerry Hoggard said in the statement. “Sumitomo’s proposal places an appropriate value on the company and provides all Nufarm shareholders with the opportunity to realize a fair price for some of their shares.” Sun Ding, a Beijing-based spokesman at Sinochem, wasn’t immediately available for comment when contacted by Bloomberg News today. Share Sale Nufarm also plans to raise A$250 million selling shares to holders, which will be underwritten by UBS AG, the company said in a statement. It has refinanced about A$1 billion of debt , scheduled to be renewed by year’s end, Nufarm said. Standard & Poor’s Ratings Service said on Nov. 24 it may lower its rating on Nufarm should the deal with Sinochem be scrapped. It maintained its BBB- on Nufarm that day. The sale of shares to Sumitomo, under an initial agreement, will be through a tender offer to holders, which will be subject to approval to be sought at a meeting in March, Nufarm said in the statement. The Sumitomo offer needs approval from its board, which is scheduled to meet Jan. 22, Nufarm said. Nufarm, whose sales have doubled to A$2.6 billion since the start of the decade, is the biggest supplier of crop protection chemicals in Australia with about 45 percent of the market, spokesman Robert Reis said Sept. 28. In North and South America and Europe, the company’s market share is in the range of 4 percent to 8 percent, according to Reis. Regulator Approval Sumitomo’s crop protection unit has annual sales of $1.3 billion, with more than 40 percent of sales relating to insecticides, Nufarm said. The Japanese company already has approval from Australia’s Foreign Investment Review Board for its proposed investment, Nufarm said. “Nufarm is a first-class company with strong growth prospects and Sumitomo looks forward to identifying additional opportunities for cooperation,” Sumitomo representative director and agriculture sector president Kenjiro Fukubayashi said in the statement. Sinochem, established in 1950, is China’s biggest integrated agricultural company selling fertilizer, pesticide and seed products. China National Chemical Corp., backed by buyout fund Blackstone Group LP, ended talks to buy Nufarm in December 2007 after a study of its accounts. Nufarm reported a 42 percent drop in profit in September after cutting its forecast three times during the year. Profit fell to A$79.9 million in the 12 months ended July 31, the lowest annual profit since 2004 according to Bloomberg data. To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Christopher Brauchli: Bank Presidents and the U.S. President

December 28, 2009

Surfeit begets insolence, when prosperity comes to a bad man. Theognis, c. 545b.c. I hope the President didn’t take it personally. I’m sure no offense was intended. Even though bank presidents have shown they can single handedly almost sink the economy, they can’t control the weather that prevented their making it to the meeting. Of course some people might wonder why they didn’t leave a day earlier. A lot of people who have a morning meeting scheduled with the President of the United States would be very anxious to make sure they were in town the night before so as not to miss the meeting. Such a meeting is heady stuff even for a bank president. My guess is that the men all had good reasons for not arriving in Washington D.C. the night before the meeting and it was not, as some might think, a lack of respect for the President of the United States. A number of factors explain their actions. One is that it was the middle of the holiday season and a Sunday night two weeks before Christmas is a time when there are lots of holiday parties. It is important for bank presidents to be in attendance to show that even though 12 months ago they were being bailed out by, among others, the people at the parties as well as lots of other people their cheerful demeanors prove that they are not the least bit nervous about the economy or the state of their banks. Another reason they may have waited until Monday to travel to see the President (if they were not partying) was to give them additional time to work for the benefit of customers, employees and shareholders. Lloyd Blankfein, president of Goldman Sachs (who missed the meeting), was very likely spending the evening doing rough calculations as to how to divide up $16 billion in bonuses among his thousands of employees. That is a complicated calculation. He may also have been working on the speech he would give to his employees to explain why some of them would get bonuses in stock instead of cash. Citigroup’s Vikram Pandit missed the meeting because Citigroup had a $17 billion stock offering on the same day as the meeting with the President took place. Mr. Pandit spent the day convincing investors they should buy some of the stock that was being offered. Thanks to those efforts Citigroup received $425 million in fees from the offering. In Mr. Pandit’s place Citigroup’s chairman, Richard Parsons was to attend, but having better things to do on Sunday night than spend the night in the capitol he waited until Monday morning to travel and because of weather had to miss the meeting. He may have spent some time Sunday night working on helping those struggling to pay their mortgages who were hoping to qualify under the “Making Home Affordable Program.” In November 2008 Citigroup said its intention was to reach out to 500,000 borrowers who needed help to avoid foreclosure. It said its program might result in $20 billion of mortgage refinancings. As of November 2009 it had fallen a bit shy of its goal. Of all mortgagees who were eligible for modification it had only entered into trial modifications with 100,126 homeowners instead of 500,000 homeowners and had only made permanent modifications with 271 borrowers out of the 231,000 who were estimated to be eligible. John Mack of Morgan Stanley was probably also spending Sunday night trying to figure out how to help those threatened with foreclosure who were in distress. Morgan Stanley’s subsidiary, Saxon Mortgage Services, Inc. had an estimated 80,000 eligible loans and had 35,565 trial modifications going on but as of the end of November had only made 42 of the loan modifications permanent. The rest were still awaiting approval. Of course he might have been toasting the fact that although those numbers are not impressive, when its permanent loans modifications are added to its trial modifications it turns out that 44% of its loans have been modified or are in the trial stage and that, percentage wise, places it at the top of all the Servicers in the program. The “Making Home Affordable Program” has been in place for slightly over a year. The Treasury Department estimates there are 3,299,780 people eligible to participate in the program. As of the end of November only 31,382 have received permanent modifications. The three bank presidents who missed the meeting are probably keenly ware of the failure of their institutions to do more for those in trouble. They may even feel a bit of guilt about it. Not enough, however, to have made sure they’d get to the meeting with the President on time. And not enough to cause them to forego their large bonuses. Christopher Brauchli can be e-mailed at brauchli.56@post.harvard.edu. For political commentary see his web page at http://humanraceandothersports.com

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Commercial Mortgage | Miami Real Estate Properties

December 28, 2009

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Bear Stearns Alumni Stage Holiday Parties as Goldman Sachs Cancels Again

December 24, 2009

By Matt Townsend and Courtney Dentch Dec. 24 (Bloomberg) — While Goldman Sachs Group Inc. scrapped its holiday party for a second straight year and some JPMorgan Chase & Co. bankers had their yuletide gathering in a cafeteria, staffers of Bear Stearns Cos. reunited at a velvet- roped bar that sells bottles of Cristal champagne for $450. About 100 alumni from the defunct securities firm that JPMorgan acquired in March 2008 assembled Dec. 18 at the Dream Hotel’s Rm. Fifty5 on West 55th Street, described on its Web site as neo-Gothic “surreal luxury.” Courtney Dickson, a 25-year-old former Bear Stearns employee who organized the event, said the mood was “nostalgic.” Dozens more former Bear Stearns employees met a few weeks earlier in the upstairs bar at Connolly’s Pub , the watering hole on East 47th Street a few blocks from Bear Stearns’ old headquarters on Madison Avenue, said Justin Brannan, who worked in the firm’s wealth management unit for three years. The affair brought together about 100 people who paid for their own drinks at the Irish pub’s long, wooden bars. “That’s where we went after we got sold, so it was a pretty fitting place to get together,” said Brannan, 31, who now raises money for the Bnai Zion Foundation, a charity that funds humanitarian projects in Israel and the U.S. “It was cool. It was like a high-school reunion.” By contrast, “holiday trimmings” took on new meaning at banks that survived the credit crunch as they cut back or eliminated parties. Goldman Sachs, Citigroup Inc., Morgan Stanley and Bank of America Corp. , didn’t host official events this year, after a public outcry over perks and bonuses awarded to bankers whose firms accepted taxpayer bailouts. No ‘Lavish Parties’ At JPMorgan, which didn’t host a companywide party at its New York headquarters, about 200 people from the investment banking unit shared wine and beer for a few hours after work last week in the cafeteria at the JPMorgan Chase Tower on Park Avenue, said two bank employees. They spoke anonymously because they weren’t authorized to speak about the matter. Spokesman Joseph Evangelisti declined to comment. The bank bought Bear Stearns last year as the securities firm collapsed amid the global credit crisis. “They should not be trying to broadcast to America how successful they are right now by having lavish parties,” said Richard Dukas , president and founder of New York-based Dukas Public Relations Inc., whose clients include Mario Gabelli’s Gamco Investors Inc. “It’s absolutely the right thing to do.” Two-thirds of Americans say they have an unfavorable view of financial firm executives, making them less popular than Congress and lawyers, according to a Bloomberg National Poll conducted Dec. 3-7. Obama’s Opinion President Barack Obama recently joined the criticism, saying in a Dec. 13 interview with CBS’s “60 Minutes” program that he was frustrated that “fat-cat bankers” continue to take large bonuses and fight his effort to revamp financial regulation. “Given the environment, the firm does not believe it’s appropriate to host or sponsor holiday parties,” Goldman Sachs spokeswoman Gia Moron said. Two years ago, Morgan Stanley held a holiday party at Lotus, a three-level nightclub in New York’s Meatpacking District and Goldman Sachs hosted one at BLVD, an 18,000-square- foot venue on the Bowery in downtown Manhattan, according to The Business Insider, a Web site started by former Merrill Lynch equity analyst Henry Blodget who follows the business and social happenings of Wall Street. Charity Drives Citigroup didn’t sponsor any events this year, said Stephen Cohen , a spokesman for the New York-based company, whose biggest stakeholder is the U.S. Treasury. Kelly Sapp , a spokeswoman for Charlotte, North Carolina-based Bank of America, said the lender doesn’t host or fund holiday parties on the corporate or regional level. Individual lines of business might organize initiatives to benefit a local charity, such as a clothing drive, she said. The Royal Bank of Scotland Group Plc, recipient of the world’s biggest banking bailout, is among British lenders limiting entertainment budgets this year to avoid fueling public anger after taxpayers provided more than 1 trillion pounds ($1.6 trillion) to bail out lenders including RBS and Lloyds Banking Group Plc. RBS is contributing $16 a head toward employee Christmas parties this year, enough to buy two pints of lager and a packet of potato chips. In New York, 65 percent of companies were likely to either cancel or significantly scale back holiday events, according to a survey by online grocery store Fresh Direct Holdings Inc. and event industry tracker BizBash Media. Plastic Substitutes Russ Sonnier, president of Sonnier & Castle, a Manhattan event planner, said his clients, which include financial firms, cut back on food, flowers and entertainment. One law firm removed desserts from the menu and switched to plastic cups from glass stemware, Sonnier said. Across the U.S., companies also planned smaller holiday celebrations than they’ve held in the past, even as the number of parties is about the same, said Dale Winston , chairwoman and chief executive officer of Battalia Winston Amrop, a New York- based executive search firm. The firm’s annual survey found that 81 percent of companies planned to hold parties, the same number as last year, and 43 percent of those celebrations were expected to be less lavish, Winston said in a Dec. 18 interview. “The country isn’t in a big celebratory mood,” Winston said. To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net ; Courtney Dentch in New York at cdentch1@bloomberg.net ;

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`Famous Comma’ Again Slows Climate Talks as Punctuation Tiff Splits Envoys

December 17, 2009

By Alex Morales and Kim Chipman Dec. 17 (Bloomberg) — A single contentious comma inserted into a paragraph of a United Nations climate deal two years ago is again causing squabbles among delegates from 193 nations in Copenhagen devising a method to fight global warming. The comma was inserted on the first page, section b (ii), of the so-called Bali Action Plan at the meeting on the Indonesian island in 2007 at the insistence of the U.S. It caused a debate that ran for two hours as the punctuation mark left open to interpretation the responsibilities of rich and poor nations to cut greenhouse-gas emissions. “The famous comma! It allowed both sides to read the text the way they wanted to,” said Jennifer Havercamp , managing director of policy and negotiations at the Washington-based Environmental Defense Fund . Havercamp was in the room during the punctuation debate in Bali. The Bali Action Plan set parameters for two weeks of talks in Copenhagen that should conclude tomorrow when U.S. President Barack Obama and Chinese Premier Wen Jiabao arrive in the Danish capital, joining more than 100 other world leaders. They will take over the debate from envoys who have bickered and walked out over provisions for a climate deal since Dec. 7. Issues dividing delegates include the size of cuts in greenhouse gases by developed nations, verifying emission reductions by developing countries, and possible climate aid worth $100 billion a year from rich to poor nations. The Bali Comma The Bali paragraph says treaty talks should yield “nationally appropriate” actions by developing countries to curb emissions “in the context of sustainable development, supported and enabled by technology, financing and capacity- building, in a measurable, reportable and verifiable manner.” The comma after “building” was dropped and then reinserted at the Bush administration’s insistence. Delegates from the U.S. argued for the comma to be inserted so that “actions” by developing countries and not just support from industrialized nations, would be measurable, reportable and verifiable, or MRV in UN jargon. “It took almost two hours to debate the comma,” Quamrul Chowdhury , a Bangladeshi envoy who’s negotiated climate issues since before the Rio Earth summit in 1992, said in an interview in Copenhagen. “One comma creates a lot of trouble.” Even with the comma, the clause is still argued over. The U.S. considers the Bali plan clear in saying that all emissions-reducing actions by developing nations should be subject to MRV, not just those that receive financing, according to a senior Obama administration official who spoke on the condition of anonymity. Devil in the Details “That is definitely not what the Bali Action Plan provided for,” China’s climate change ambassador, Yu Qingtai , said in an interview in Copenhagen. Mexican Environment Minister Juan Rafael Elvira Quesada agrees. “The actions we take, for example, the capture of methane from a garbage dump can be measurable, reportable and verifiable for international purposes if they’re going to give us financing,” Elvira said in an interview. “They can’t impose MRV on my developing country if they’re not giving us any aid.” Such details can disrupt UN treaty-making. Text on deforestation was held up for years over whether to use the plural “indigenous peoples,” said Andrew Deutz , director of international government relations at the Nature Conservancy, an environmental advocacy group in Arlington, Virginia. The U.S. has a history of opposing references to the rights of “peoples” because of the impact it could have on U.S. domestic law and the rights of Native Americans, said Deutz. Senator John Kerry , a Massachusetts Democrat who traveled this week to Copenhagen to push for an agreement, said in an interview that when it comes to what the U.S. wants from China, verification is the “single most important ingredient.” Tale of Two Treaties The U.S. Senate’s view of China is crucial because it is the only U.S. body authorized to approve treaties. The chamber rejected the current Kyoto Protocol in 1998 because it required rich nations to cut carbon-dioxide pollution from factories, power plants and other sources, yet not China and other major developing countries. “The comma is a manifestation of a massive area of disagreement still among the parties,” Havercamp of the Environmental Defense Fund said. As delegates struggled to agree on one treaty, they also discussed having two instead. With host country Denmark trying to break an impasse in the talks yesterday, envoys were at one point considering four drafts of potential treaties. Envoys “lost a lot of negotiating time” yesterday as they debated whether to work on two texts proposed by Denmark, or continue to debate the UN’s two official texts, Selwin Hart , a Barbadian delegate who speaks for 43 island and low-lying states, said today in a telephone interview. “We’re prepared to work throughout the night to get a deal,” Hart said. Verbs, Modifiers Even U.S. Secretary of State Hillary Clinton didn’t escape questions on word usage when she held a press conference today in Copenhagen. Asked about the proposed climate treaty text, she noted that officials at her level are spared the headache of agonizing over every word in the negotiations. “The advantage of being secretary of state is I’m up here at the large macro-level and they (negotiators) have to get down into the nitty gritty and determine exactly what verb and modifier needs to be used.” Later asked how the U.S. interpreted the words “should” and “shall” in a treaty, she said it depended on the context. “If you are referring to transparency, there shall be a transparency,” she said. To contact the reporter on this story: Alex Morales in Copenhagen via amorales2@bloomberg.net .

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Obama Can Earn His Nobel Prize at Climate Talks, Environmental Groups Say

December 11, 2009

By Kim Chipman Dec. 11 (Bloomberg) — President Barack Obama had not even accepted his Nobel Prize in Oslo yesterday before environmental advocates began calling on him to earn it when he attends climate talks in Copenhagen next week. “Obama, in part, has been awarded the Nobel Prize with the expectation that he will deliver the kind of leadership necessary to get a climate treaty,” Greenpeace USA’s Damon Moglen said on Dec. 9, a day before Obama won the same prestigious award given to Al Gore two years ago for his work on climate change. “He won it, and now is the time to earn it.” The U.S. president, during his speech yesterday in Norway, warned about the dangers of climate change and called on countries to work together to confront the problem. Obama will attend the treaty negotiations in Copenhagen on Dec. 18, the last day of the meetings that started this week. He initially planned to make an appearance nine days earlier on Dec. 9. Many developing countries considered the earlier date a “thumb in the eye” to other leaders coming in the second week during the “high level” portion of the talks for a new global accord to control greenhouse-gas emissions, according to Kevin Conrad , Papua New Guinea’s special envoy for climate change. “I’m a lot more positive about a positive outcome since Obama changed his arrival date,” Conrad said in an interview yesterday. Yesterday in Oslo, at least one protester held a sign reading “Our Climate. Your Decision.” ‘Earn It’ In Copenhagen, where the United Nations is holding its 15th annual “conference of the parties,” or COP15, an international meeting on climate change, environmental groups handed out stickers reading “Obama: Win it in Oslo. Earn it at COP15.” The president’s new itinerary shows a “stepping up” of the level of seriousness in which the U.S. administration is taking the negotiations, said Jennifer Morgan , program director for climate and energy at the Washington-based World Resources Institute. “He now will be here during the time when the final decisions will be made,” she said, adding that Obama can’t merely just show up. “It’s clear he has to come to Copenhagen ready to negotiate,” Morgan said. “Heads of state do in the end negotiate when there are outstanding issues.” The Obama administration is drawing criticism at the Copenhagen gathering of 192 countries over issues including an offer to cut its heat-trapping pollution from power plants, factories and other sources about 17 percent by 2020 from 2005 levels. Chinese Criticism The U.S. goal can’t be regarded as “a remarkable or notable figure,” Chinese envoy Su Wei said Dec. 8 in Copenhagen. China, the world’s biggest greenhouse-gas emitter, has said the rich industrialized countries most responsible for the heat-trapping carbon dioxide in the atmosphere should cut emissions 40 percent by 2020. Obama’s negotiators are hindered in Copenhagen by a lack of U.S. laws that would require a national cap on greenhouse gases. Inaction in the Senate, the only U.S. body authorized to ratify treaties, leaves U.S. officials without firm guidelines about how to proceed. Todd Stern , the lead U.S. climate negotiator, said Dec. 9 that he’s hopeful lawmakers will pass a bill enabling the U.S. to boost its emissions-reduction goal. “God willing, in the spring” the U.S. will be able to report to the UN “that our target is even higher,” he said. To contact the reporter on this story: Kim Chipman in Copenhagen at KChipman@bloomberg.net .

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Cowboy Banks Get Big Bucks as Indians Get Little: Ann Woolner

December 10, 2009

Commentary by Ann Woolner Dec. 11 (Bloomberg) — Over here you have the bazillions of U.S. bucks doled out to Wall Street’s cowboys for reckless conduct that wrecked the world’s economy. Over there you have a $3.4 billion federal settlement with people from whom the U.S. had been essentially stealing for more than 100 years. To seek what was owed them, American Indians spent 13 years in court where judge after judge decried the government’s gross mismanagement of their funds and “mendacity” in litigation. And yet it took that long for the Justice Department to step up to the plate and agree to pay more than a pittance. If the Indians had been AIG, the $3.4 billion settlement announced this week would have been many times larger. The real AIG — insurance giant American International Group Inc. — sopped up $180 billion in government aid after helping to create the economic havoc felt around the world. The Indians sought no bailout, no handout when they filed suit in 1996 to claim royalties due them for oil, gas, timber, mining and grazing rights to lands allotted them under an 1887 agreement with the federal government. The Department of Interior would collect revenue the leases generated and give it to the U.S. treasury. Some of it went back through Interior for distribution to the Indians. Some of it didn’t. Sloppy Record-Keeping How much money each person was owed, no one really knows, so sloppy was the record-keeping. Thousands of critical documents were lost or destroyed. Josephine Wildgun had 7,000 acres of land the government leased out for oil drilling, Elouise Cobell, a banker friend of hers and the lead plaintiff in the case, told me a few years back. For that, Wildgun was getting roughly $1,000 a year, or about 14.3 cents an acre, a sum obviously short, said Cobell, a member of the Blackfeet Nation who lives in Montana. But how short? The leases covered some 56 million acres of land belonging to hundreds of thousands of people. Eventually the U.S. came up with a total of $455.6 million. The Indians claimed they were due 100 times that. With so many records missing, the correct figure is unknowable. Instead of seeking a reasonable settlement, the government fought the Indians in court through three presidential administrations. Little Ground The case grew convoluted, the accounting impossible, and the parties bitter. After 13 years, seven trials and almost two dozen published court opinions, the most recent ruling showed little ground has been gained. The trial judge should “enforce the best accounting that Interior can provide with the resources it receives,” an appeals court said. Oh. Why didn’t someone think of that sooner? The ruling in July by the U.S. Circuit Court of Appeals for the District of Columbia threw out the $455.6 million verdict the trial judge had awarded. So what was the trial judge to do? The stack of appellate rulings “do not clearly point to any exit from this complicated legal morass,” the appeals court conceded. It had to be resolved through settlement. And it should have been resolved that way long before now. Some two decades before the suit was filed, government investigators were issuing report after scathing report excoriating the government’s mishandling of funds, as the appeals court pointed out. The government officially acknowledged its books were a disgrace when Congress in 1994 passed the American Indian Trust Fund Management Reform Act . Fighting Indians Interior attempted to sort out the mess, cranking up computer programs and reorganizing staff. Still, the Indians saw little result and sued. And the government starting pouring money into a legal fight. True, it is one thing to say the U.S. owes a huge group of people a lot of money, and another thing to figure out how much it owes whom. Complicating the matter is the fact that so many generations have been born since the land was allotted that the number of owners of each parcel has multiplied, while the size of each interest has shrunk. Yes, it’s a hard thing to figure out. So what? The government didn’t need precision when it doled out $180 billion to AIG and did it in a matter of days. Whether it was wise or foolish is beside the point. The government had no obligation to do that. Or to bail out Chrysler or General Motors. It had no legal responsibility to rescue Wall Street’s hot-shot risk-takers. Fraction of Goldman The $3.4 billion the Indians got amounts to roughly a third of Goldman Sachs’s government bailout. It’s little more than one-tenth the loss the government expects to suffer from its AIG bailout. Executives balk at the idea of capping pay at $500,000 in firms that haven’t repaid the government. The Indian settlement will come to $1,500 to $2,500 for most of the beneficiaries. A few with larger tracts that generate lots of revenue will receive hundreds of thousands of dollars. The U.S. had a legal obligation to give hundreds of thousands of Indians money promised a long, long time ago, and a fiduciary duty to keep track of it. The government owed plenty to the Indians. Their problem was that they were too small to matter. ( Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net

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Andrew Reinbach: More Pain For You And Me: The Economy’s About To Stumble

November 23, 2009

It’s semi-official: The economy is about to take the second leg down in a so-called W-shaped recession — down, up, then down again — and delicious as it may be to reflect that this disaster has its roots in the administration of George W. Bush, the result for you and me won’t be much fun. Warnings are popping up all over the place. But here’s some of what Fed Chairman Ben Bernanke had to say November 16th to the Economics Club of New York: “Significant economic challenges remain. The flow of credit remains constrained, economic activity weak and unemployment much too high. Future setbacks are possible.” “Banks’ reluctance to lend will limit the ability of some businesses to expand and hire,” “Jobs are likely to remain scarce for some time, keeping households cautious about spending,” “The unemployment rate likely will decline only slowly if economic growth remains moderate, as I expect.” “The fallout for banks from commercial real estate could slow that progress, however.” Translation: Seventy-two percent of America’s economy is consumer-based, and since a lot of people are out of work and not buying stuff, and banks aren’t lending to businesses that want to hire, the economy will remain slow, unemployment will remain high, corporate earnings will remain weak, and the best we can hope for is that nothing bad will happen. But good luck with that. People aren’t buying stuff, so the companies that sell it don’t need all the office space, warehouses, and glitzy mall stores they rented when times were good. This is making life hell for the owners of America’s commercial real estate, and in fact, the most prestigious real estate trade group, the Urban Land Institute, predicts the sector is heading for a “bloodbath.” That is why Mr. Bernanke’s last caveat about commercial real estate throws cold water over any hopes we’ll muddle through; a recent report from CalPERS (the California Public Employees’ Retirement System) says that about half — some $750 billion — of the nation’s commercial mortgage debt will default over the next four years. That debt, says the report, is already worth only fifty cents on the dollar and is simply not fully recoverable. But left out of that projection is that there’s another $750 billion dollar’s worth of credit default swaps associated with that debt; when the defaults kick in, separate, full-value payments — over and above the mortgage debt — will be made from one party to another. So the real losses are more like $1.5 trillion. This is amount similar to the commercial real estate losses in the early 1990s, when like today, the defaults almost drove us off a cliff. The difference is that the 1990s property was financed with conventional, mortgage-based debt, so that when push came to shove, taking control — and liquidating — the property was a fairly straightforward matter. Not today. Like the home loans that almost destroyed us last year, most of the commercial mortgages now facing default were sold off and turned into bonds. As a result, the liquidation of these debts will drag on for years. There are all sorts of unpleasant reasons for that. For one thing, commercial real estate ain’t beanbag; all the parties have plenty of lawyers, lots of money, and in negotiations, don’t worry much about hurting somebody’s feelings. Even better: In a bankruptcy, any bondholder can derail any settlement, meaning the the most unreasonable party has the whip hand. To illustrate the problems, consider the $559 million mortgage bond issue connected to the redevelopment of New York’s Drake Hotel, formerly one of the glories of Manhattan hospitality, but now a vacant lot on the corner of Park Avenue and 56th Street. That mortgage was sliced into 21 separate pieces and sold to eight institutional investors. And in the bare-knuckle world of New York real estate Harry Macklowe, the developer, is not widely known for his sensitive, retiring nature; among the many lawsuits associated with the failed development are his allegations of fraud against the lender. No serious observers would say that this cage fight has any prospects of a quick, tidy ending. But it should be considered that the country’s other developers, lenders, and bondholders are as unlikely as Mr. Macklowe to fold at the first harsh words. The result will be prolonged wars that will drag down the earnings of the banks, big or small, connected to them. That in turn will do nothing to encourage said banks to lend to businesses for, for instance, expanded payrolls. Already, big banks have cut back on their commercial lending–a trend that’s accelerating; total loan originations in September at Bank of America fell 6 percent, or $53.6 billion, from a month earlier, according to a Treasury Department, while new loans at Wells Fargo & Co. dropped 14 percent to $47.4 billion. And this is a well-established trend. In other words, business may live on credit, but so what? Banks aren’t making loans. So businesses can’t hire, the unemployment rate rises, and the consumer-driven economy falls. Meanwhile, the Fed’s most recent Senior Loan Officer’s Survey indicates that what loans are being made are being made by smaller banks–the very ones that underwrote many of the commercial mortgages we’ve been talking about. These are the banks that on the one hand, are least able to withstand a sudden flood of bad loans, and on the other, are the least likely to be bailed out by the government if, in fact, the government — or the public — had any appetite for bailing them out. And it doesn’t. The obvious result will be a new spate of bank failures on Main Street. This has already been widely predicted, and estimated by some observers to eventually total another 400, or about 8 percent of America’s banks. And it’s these smaller banks that make loans to your local hardware store, since the top ten banks can’t be bothered with that side of the business. Even if this wonderful scenario was completely untrue, the fact remains that you and I are just not using our houses as ATMs anymore, need $300 jeans, or in general, expect our careers, the economy, or the stock market to rise forever. We accept now that the bubble burst; it was a real shock, but Americans have since grown up some and are acting more rationally than they did in 2006, when the Fed statistics said we were spending more than we had. The consumer economy, in other words, is a thing of the past. But if the consumer economy is kaput, the American economy has to switch to a more solid and sensible model in order to stabilize for the long term. What that means exactly is for smarter people than I am to say; but it will obviously mean less whimsical spending, and, probably selling more stuff to other countries instead of to ourselves. That will mean plenty of change in our daily lives, and even more dislocation in the jobs picture. Since the likelihood of more federal stimulus packages is low — unless they’re called something like a “jobs bill” — this will mean more pain and an even slower economy. Anybody waiting for things to get back to “normal” — meaning 2005-2006 — had better change to sweats and rent a bunch of movies; they’ve got a wait in their hands.

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Brown, Cameron to Set Out U.K. Spending Plans as Conservative Lead Narrows

November 22, 2009

By Robert Hutton Nov. 23 (Bloomberg) — Gordon Brown and David Cameron will offer business leaders rival views of how to return the U.K. to economic growth after a poll showed the gap between their parties at its narrowest this year. The prime minister and his Conservative Party rival will both address the Confederation of British Industry’s annual conference, starting at about 11 a.m. today in London. While Cameron said yesterday that the government needs to cut spending to avoid losing the confidence of bond investors, Brown will argue that such a course would put any recovery in danger. “Choking off recovery by turning off the life support for our economies prematurely would be fatal to British jobs , British growth and British prosperity for years,” Brown will say, according to extracts released in advance by his office. “That’s why we will continue with our current plans to support our economy until the private sector recovery is established.” With an election six months away at most and the country facing the biggest budget deficit since World War II, the question of when to cut spending is dominating political debate. Last month, the Conservatives pledged to freeze most public sector pay and make voters wait a year longer before they retire. Yesterday, an Ipsos-Mori poll showed their lead at six percent, putting them on course for a minority government. Cameron told the BBC yesterday he was “working night and day” for a majority government. “We’ve got to take some tough and difficult decisions and I’d rather have a government that could do that,” he said on the Andrew Marr show. ‘Emergency Budget’ Cameron pledged to deliver an “emergency budget” which “goes for growth” within 50 days of winning the election. The Organization for Economic Cooperation and Development last week urged Britain to do more to mend public finances as data showed the deficit in October was the worst for the month since records began in 1993. While Brown will repeat the suggestion of a Tobin tax on banking that he aired at the Group of 20 finance ministers’ meeting earlier this month, he will say the idea could only work if adopted globally. The U.S. has rejected the proposal. Brown will still tell bankers they must expect to pay for the costs of rescuing them. “Make no mistake, we must agree international action to redress the balance of risk and reward between the public and the financial sector so that it reflects fully the potential damage of financial failure and the cost of preventing it,” the prime minister will say. To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net

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Clinton Detours to Cairo to Calm Arab Concerns, Press for Mideast Peace

November 3, 2009

By Indira A.R. Lakshmanan Nov. 4 (Bloomberg) — Secretary of State Hillary Clinton will seek to give a push to the Middle East peace process and allay Arab concerns about the U.S. role in talks today with Egyptian President Hosni Mubarak . “Mubarak is a very adroit reader of the parties” who has “a very good working relationship” with Israeli Prime Minister Benjamin Netanyahu , State Department spokesman P.J. Crowley told reporters traveling with Clinton, who arrived in Cairo yesterday after four days of intensive discussions with leaders in the region. She wants to see Mubarak “face to face” to discuss pushing the stalled peace process forward, Crowley said. Clinton’s detour to Egypt before returning to Washington reflects President Barack Obama’s push to engage all parties to press Israel and the Palestinians back to the bargaining table. While Obama has made a two-state solution a priority, the gap between the two sides requires energy to keep the process alive and expectations are low for a breakthrough anytime soon, officials say. “Without this effort, it’s likely that things would go from difficult to worse,” Crowley said of Clinton’s consultations since Oct. 31 with Palestinian Authority President Mahmoud Abbas in Abu Dhabi, Netanyahu in Jerusalem and Arab leaders at a conference in Marrakech, Morocco. Pitfalls of Waiting Waiting for perfect conditions “is never a good thing,” Crowley said. “Sometimes the effort has an impact in and of itself.” Clinton met with Egyptian intelligence chief Omar Suleiman in Cairo last night to discuss his efforts to encourage a unity government between rival Palestinian factions, Fatah and Hamas, and with Foreign Minister Ahmed Aboul Gheit . She also conferred in Cairo with U.S. special envoy George Mitchell , who has been meeting with Israeli and Palestinian leaders and King Abdullah of Jordan, the only Arab state aside from Egypt to recognize Israel. Clinton suggested yesterday in Morocco that she “could have been clearer” when she hailed as “unprecedented” a proposal from Netanyahu to limit, not freeze, the expansion of Israeli settlements on the West Bank. The comments, during her Oct. 31 visit to Jerusalem, sparked an outcry from Arab leaders. “President Obama was absolutely clear,” she said in an interview taped with Al Jazeera before she left Marrakech. “He wanted a halt to all settlement activity. And perhaps those of us who work with him and for him could have been clearer in communicating that that is his policy, that is what we’re committed to doing.” Palestinian State Clinton said she “was the first American associated with any administration to call for the establishment of a Palestinian state” 10 years ago. “A lot of people thought that was very radical; now there is consensus.” Tempering her earlier praise for Netanyahu’s offer, Clinton said at a Nov. 2 gathering of Arab and Group of Eight foreign ministers in Morocco that it “falls far short” of U.S. calls for a total settlement freeze. Steps to improve West Bank security by Palestinian Authority President Abbas and Prime Minister Salam Fayyad were also “unprecedented” and Israel “should reciprocate,” Clinton said. The decision to clarify her remarks underscores the Obama administration’s balancing act in nudging Israelis and Palestinians back to talks. Last May, Clinton said only a complete construction halt in the West Bank would be acceptable. In September after meeting Abbas and Netanyahu at the United Nations, Obama referred only to a “restraint” in settlements. Libyan Meeting Before leaving the Marrakech conference yesterday, Clinton met with Libyan Foreign Minister Musa Kusa, a former intelligence chief when the U.S. classified Libya as a state sponsor of terrorism. The countries normalized relations in 2003, and the U.S. has credited Kusa and Libyan intelligence with cooperating against al-Qaeda. Clinton and Kusa discussed Sudan, Darfur and counterterrorism, said Crowley, who attended the meeting. He said they didn’t raise the case of Abdel Basset al-Megrahi , the Lockerbie bomber whose August release from a Scottish prison to Libya angered families of the 270 airline-crash victims. “While the issue of Megrahi did not come up, our views on that have not changed and the Libyans understand” that “very well,” Crowley said. Before Clinton walked back her settlement remarks, Amre Moussa, secretary-general of the 22-member Arab League and a senior Egyptian diplomat, said he feared the peace process had been crippled. Arab Criticism “Failure is in the atmosphere all over,” he said. Clinton’s words left the impression that “Israel can get away with anything.” Clinton’s clarification didn’t allay the Arab League’s frustration over the apparent U.S. retreat from demanding a settlement freeze, Hisham Youssef, Moussa’s spokesman, said in a telephone interview yesterday. As recently as the 2007 peace conference in Annapolis, Maryland, Israel committed to stopping settlements under the Bush administration’s 2003 “road map” for peace and must do so before talks can start, he said. Clinton’s revised remarks satisfied Palestinian Foreign Minister Riad Malki , who told reporters in Marrakech his government was “happy that such a position was highlighted and brought back to the right line.” Clinton corrected herself in her Al Jazeera interview after aides pointed out she misspoke by saying the Camp David accords under her husband Bill Clinton’s administration would have achieved an Israeli capital in East Jerusalem. She meant a Palestinian capital. To contact the reporters on this story: Indira Lakshmanan in Cairo at ilakshmanan@bloomberg.net

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Pfizer Gets New Trial on Prempro Damages; Court Upholds Breast Cancer Link

November 2, 2009

By Jef Feeley and Sophia Pearson Nov. 2 (Bloomberg) — Pfizer Inc. doesn’t have to pay more than $27 million in punitive damages to an Arkansas woman who blamed her breast cancer on the company’s menopause drugs, an appeals court ruled in ordering a new trial on the award. The U.S. Court of Appeals in St. Louis today upheld a jury’s March 2008 finding that the hormone-replacement drugs helped cause Donna Scroggin’s cancer and its award of actual damages. The three-judge panel also backed a judge’s decision to throw out the punitive award to Scroggin, who alleged two Pfizer units ignored or downplayed the risks of the drugs. “Scroggin presented sufficient evidence to submit the question of punitive damages to the jury,” the appeals court said in its 41-page ruling. “The evidence presented could allow a jury to find or infer that Wyeth was guilty of malicious conduct within the meaning of Arkansas law.” Scroggin was among 6 million women who took the pills to treat menopause symptoms such as hot flashes, night sweats and mood swings. Pfizer’s Wyeth unit has said in U.S. Securities and Exchange Commission filings that it faces more than 9,000 lawsuits over its menopause drugs, which are still on the market. New York-based Pfizer completed the $68 billion purchase of Wyeth on Oct. 15. Liability Decision “We are pleased with the appeals court’s decision to set aside the punitive verdict, but disappointed that the court upheld the jury’s liability decision,” Pfizer spokesman Christopher Loder said in an e-mailed statement. “We are evaluating our legal options about next steps in this case.” Jurors awarded Scroggin about $2.7 million in actual damages over her claims the drugs helped cause her breast cancer. The appellate panel rebuffed Pfizer’s challenge to that award. It was the first review by an appeals court of a verdict favoring plaintiffs in a Prempro case, said Jim Morris, one of Scroggin’s lawyers. “Finally, we have an appellate court who has found it’s reasonable to conclude that Prempro causes breast cancer,” Morris said, adding that he’s looking forward to a new trial. “This jury could come back with $100 million for us this time. We don’t see this as a loss at all.” Pfizer’s lawyers argued that Scroggin received ample warning about the cancer risks tied to the company’s Prempro and Premarin drugs and chose to continue using them. They contended the entire jury verdict should be thrown out. Hormones Combined Wyeth’s sales of the drugs topped $2 billion before a 2002 study found women using the medicines had a 24 percent higher risk of breast cancer. Provera, on the market since 1959, was developed by Pfizer’s Upjohn unit, acquired in 2003 along with Pharmacia Corp. Until 1996, many menopausal women combined Premarin, Wyeth’s estrogen-based drug, with progestin-laden Provera to relieve their symptoms. That year, Wyeth combined the two hormones in its Prempro pill. Scroggin and other women contend executives at the Pfizer units turned a blind eye to studies raising questions about the link between hormone-replacement drugs and breast cancer to pump up sales of their drugs. U.S. District Judge William Wilson in Little Rock, Arkansas, found Scroggin’s lawyers couldn’t make a “clear and convincing case” that the company’s mishandling of the drugs warranted a punitive award. Still, Wilson upheld the jury’s finding that Pfizer’s drugs were one of the causes of Scroggin’s breast cancer. Tests Negative The 8th U.S. Circuit Court of Appeals panel rejected Pfizer’s claims that Scroggin’s cancer was tied to genetics. Testing on the woman “came back negative for the most common breast cancer genes,” Circuit Judge Roger Wollman wrote. On the punitive damage issue, the appeals court found there was “sufficient evidence upon which a jury could conclude that Wyeth acted with reckless disregard to the risk of injury,” Wollman wrote. Because of procedural issues with some of the evidence Wilson allowed jurors to hear in the punitive phase, “a new trial may be had on punitive damages alone without injustice to the parties,” the judge said. The ruling comes a week after a Philadelphia jury ordered Wyeth to pay an undisclosed amount of punitive damages to an Illinois woman who developed breast cancer after taking Prempro. In September, the same jury awarded Connie Barton $3.7 million in compensatory damages over her cancer linked to Prempro. A judge sealed her punitive award until another Prempro trial in the same courthouse is completed. The case is Donna Scroggin v. Wyeth, 08-2555, 08-2711, 08- 2713, 8th U.S. Circuit Court of Appeals (St. Louis). To contact the reporters on this story: Jef Feeley in Wilmington at jfeeley@bloomberg.net ; Sophia Pearson in Wilmington at spearson3@bloomberg.net .

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Clinton Seeks to Prod Israelis, Palestinians to Table During Mideast Trip

October 30, 2009

By Indira A.R. Lakshmanan and Jonathan Ferziger Oct. 31 (Bloomberg) — Secretary of State Hillary Clinton has returned to the Middle East in a bid to prod Israelis and Palestinians to the negotiating table five weeks after President Barack Obama failed to kick-start peace talks. Clinton flew from Pakistan late yesterday to Abu Dhabi on the Persian Gulf, where she plans to meet Palestinian Authority President Mahmoud Abbas . Late today, she will head to Israel for consultations with Prime Minister Benjamin Netanyahu , who has resisted U.S. pressure to halt settlement construction in the West Bank as a gesture toward peacemaking with the Palestinians. The Mideast swing comes a week after Clinton reported to Obama that it is premature to resume formal Israeli-Palestinian peace negotiations. The Palestinians need to do more to stop incitement and prevent terror, and Israel needs to do more to improve the lives of the Palestinians, an administration official said Clinton told Obama. Obama had ordered a review of the peace effort after holding a three-way meeting with Abbas and Netanyahu Sept. 22 in New York. “We are going to continue down this road and do everything we can to clear away whatever concerns that the parties have, to actually get them into negotiations where they then can thrash out all of these difficult issues,” Clinton said in an interview with CNN before she left Pakistan. In Jerusalem, Netanyahu met yesterday with U.S. envoy George Mitchell to prepare for the Clinton meeting and said he hoped the secretary of state would enable Israelis and Palestinians to restart peace talks “as soon as possible.” Extended Diplomacy Still, Clinton may be anticipating extended diplomacy before the U.S. can show results. Abbas has said he won’t return to the negotiating table until Netanyahu backs a settlement freeze. “From the very beginning, the Obama administration set a goal of demonstrating progress in a Palestinian-Israeli peace track,” Gerald Steinberg , a Bar-Ilan University political scientist, said in a telephone interview. “If there can’t be progress, there can at least be lots of effort, which means more visits and more photo opportunities.” Palestinians have been losing faith in Obama’s peacemaking ability and in U.S. policies in the Mideast, according to a survey released Oct. 18 by the Jerusalem Media & Communications Center. Slightly less than 24 percent of those questioned said Obama could boost chances of peace, down from 35.4 percent who in June said they were optimistic about U.S. participation in the Mideast effort, according to the poll. ‘Some Kind of Gesture’ “I don’t think that Abbas will go back to the table without at least satisfying the issue of settlement expansion,” said Mkhaimar Abusada, a political scientist at Al-Azhar University in the Gaza Strip. “There has to be some kind of gesture from Netanyahu, even if it’s just temporary.” Israelis and Palestinians are still fighting over the same issues since peace talks began through the 1993 Oslo accords at a White House ceremony presided over by former President Bill Clinton , Hillary Clinton’s husband. The agenda includes the future of Jerusalem, the fate of Palestinian refugees and the borders of a future Palestinian state. “I watched in the ‘90s as my husband just kept pushing and pushing and pushing and good things happened,” Hillary Clinton said in the CNN interview. “There wasn’t a final agreement but fewer people died, there were more opportunities for economic development, for trade, for exchanges. It had positive effects, even though it didn’t cross the finish line.” Iran Deal Clinton’s stopover in the Persian Gulf emirate of Abu Dhabi comes after Iran demanded changes to a United Nations-brokered deal that would send Iranian enriched uranium to Russia for processing into nuclear fuel for a Tehran research reactor. The Iranian reaction cast doubts over wider talks to allay suspicions Iran is seeking the means to build a nuclear weapon. Netanyahu praised the offer made to Iran, according to an e-mailed statement from his office. The proposal “is a positive first step,” Netanyahu told Mitchell yesterday in Jerusalem. The United Arab Emirates, an oil-producing U.S. ally that hosts American military bases, is a trading partner for Iran, which ships three-quarters of its refined fuel imports through Emirati ports. The U.S. Congress is considering legislation aimed at cutting off gasoline deliveries to Iran, which relies on imports to meet a third of its refined fuel needs. Clinton plans to meet with Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan during her visit. The crown prince, who is also deputy supreme commander of the U.A.E. armed forces, conferred with Obama at the White House in September. ‘No Coincidence’ “Clinton’s trip is no coincidence,” said Christopher Davidson , a Middle Eastern studies professor at Durham University in the U.K. “The U.A.E. has now become a major element in U.S. foreign policy because of Iran.” Dubai, the second-largest of the seven emirates in the U.A.E. after Abu Dhabi, also is a destination for Iranian investment and maintains trade and financial links. “Dubai is Iran’s main window to the global economy, and the U.S. is likely to press the U.A.E. to control Dubai’s relations with Iran,” said Davidson, author of “Dubai: The Vulnerability of Success,” published last year. To contact the reporters on this story: Indira Lakshmanan in Abu Dhabi at ilakshmanan@bloomberg.net ; Jonathan Ferziger in Jerusalem at jferziger@bloomberg.net

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Dan Collins: The Smartest Guy in the Room

October 27, 2009

If New York was mother to many of the evildoers in the financial disaster that sent the economy into a tailspin, it’s also home to an avenging angel for the millions of ordinary Americans who lost billions of dollars in the meltdown. The guy with the wings and the sword also wears robes: He’s federal Judge Jed Rakoff. The shock waves from Rakoff’s scathing denunciation last month of a proposed settlement between the Securities and Exchange Commission and the Bank of America are still rippling through Wall Street and Washington. Bank of America CEO Ken Lewis is on his way out, and New York Attorney General Andrew Cuomo is pressing an investigation into the deal in which the bank purchased ailing Merrill Lynch last December without telling its shareholders that executives of the tottering brokerage were paid $3.6 billion in bonuses shortly before the takeover was announced. A congressional panel is also probing the deal. The common-sense wisdom of Rakoff’s ruling resonated with a public infuriated with billion-dollar bonuses and bailouts. The SEC signed off on an agreement in which the bank agreed to pay $33 million (in shareholder money) for concealing the bonus payments from the shareholders. In effect, the victims were being punished, a topsy-turvy outcome fairly typical of the SEC’s handling of wrongdoing by large corporations in cases like these. “Oscar Wilde once famously said that a cynic is someone ‘who knows the price of everything and the value of nothing,’” Rakoff wrote. The proposed consent judgment in this case suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth. Rakoff’s ruling may well mark the dawn of a new era in corporate accountability, since the judge has pressed for the names of the bank executives responsible for hiding the bonus payments. “I think Judge Rakoff resented the degree to which a government agency was seeking to pull the wool over his eyes, and just blandly stating it was his duty to rubber-stamp their settlement,” said Columbia Law School professor John Coffee, who teaches a seminar on white-collar crime at Columbia with Rakoff. The federal jurist who overturned the Wall Street applecart is a 66-year-old workaholic who neither smokes nor drinks, according to friends and colleagues. In keeping with that New York theme, Rakoff enjoys Broadway show tunes and once dreamed of becoming a lyricist. The judge and his wife of 35 years, Ann, have three daughters. The couple enjoys ballroom dancing. He admires the writing of Kafka and Arthur Miller, and is himself admired for legal opinions filled with sharp writing and laced with wit. His legal hero is Benjamin Cardozo, the Supreme Court justice from New York whose lofty reputation rests partly on his writing skill. Lawyers who know Rakoff mention three qualities that mark his style as a jurist: intelligence, independence and a thoroughness that can turn the resolution of an apparently routine legal question into a day-long hearing. “He is one of the best federal judges that I have ever seen,” said criminal defense lawyer Gerald Shargel, “because he’s the smartest guy in the room, he’s painstakingly fair, and he never kowtows to the government.” Last summer, Rakoff imposed a 20-year-sentence on Shargel’s client, Marc Dreier. (Dreier, a prominent Manhattan lawyer, financed a Gilded Age lifestyle for himself by selling fake promissory notes to hedge funds and other investors. He stole about $400 million before he was caught impersonating a lawyer for a Canadian retirement fund he hoped to loot.) Given the temper of the times, and the irritability of the public, Shargel found himself treated like a winner by other lawyers after the sentence was announced. Bernard Madoff had gotten 150 years for his $50 billion fraud and the government had urged Judge Rakoff to send Dreier to prison for 145 years, apparently calculating that the shady barrister was only slightly less evil that the Prince of Financial Darkness himself. But Rakoff refused, “Mr. Dreier’s crimes, despicable though they may be, pale in comparison to Mr. Madoff’s,” he said. “What I said to the lawyers who contacted me was that we’ve come to a very strange place if I’m getting congratulated for ‘winning’ a 20-year sentence for a 59-year-old white collar offender,” Shargel recalled. Since he was named to the federal bench by President Clinton in 1995, Rakoff has built a judicial resume that includes overturning the federal death penalty (reversed on appeal), thumbing his judicial nose at federal sentencing guidelines and forcing the Pentagon to reveal the names and nationalities of hundreds of detainees held at Guantánamo Bay. Some of Rakoff’s more interesting opinions have come in cases that are less than earth-shattering. In 2005, for example, New York City put the kibosh on a block party in Chelsea because the organizer planned to let artists spray graffiti on mock-ups of subway cars. Mayor Michael Bloomberg argued that such activity would encourage vandals to deface real subway cars with graffiti. Judge Rakoff disagreed. “By the same token, presumably, a street performance of ‘Hamlet’ would be tantamount to encouraging revenge murder,” Rakoff wrote. “As for a street performance of ‘Oedipus Rex,’ don’t even think about it.” “He has an extremely droll sense of humor. One might almost call it puckish,” said Ron Kuby, the lawyer ( and HuffPost blogger ) who represented the party-thrower. Rakoff’s strong suit is securities law. He was born in Philadelphia and, after graduating from Swarthmore in 1964, attended Oxford and Harvard Law School. According to friends and colleagues, he arrived in New York City in 1970 with a dual dream: He would work as a lawyer by day and by night write the book for a musical that would take Broadway by storm. Despite Rakoff’s love of lyrics, the law won out. He soon joined the prestigious U.S. Attorney’s office in Manhattan, where he worked as a prosecutor for seven years, including two as chief of the securities fraud unit. That paved the way for a career in private practice that made him one of the top securities lawyers in the U.S. (He has written a number of books and more than 100 articles). “He was a great, great securities litigator. He’s forgotten more about securities law than some of the top lawyers in the country have ever known,” said Anthony Sabino, a professor of law and business at St. John’s University. “His knowledge of securities law is such that if he asks you a question, you’d better have the answer. The SEC and the Bank of America didn’t have the answers, and that’s why they’re in the pickle that they’re in.” The bank and the government agency are scheduled to go to trial in Judge Rakoff’s courtroom in March. Not surprisingly, given Rakoff’s harsh criticism of the $33 million deal, both sides have opted for a jury trial.

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Harvard Bet on Interest-Rate Swaps Backfires, Costing School $500 Million

October 17, 2009

By John Lauerman and Michael McDonald Oct. 17 (Bloomberg) — Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired. Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps. The transactions began losing value last year as central banks slashed benchmark lending rates, forcing the university to post collateral with lenders, said Daniel Shore , Harvard’s chief financial officer. Some agreements require that the parties post collateral if there are significant changes in interest rates. “When we went into the fall, we had some serious liquidity management issues we were dealing with and the collateral postings on the swaps was one,” Shore said in an interview yesterday. “In evaluating our liquidity position, we wanted to get some stability and some safety.” Harvard sold $2.5 billion in bonds in the fiscal year, in part to pay for the swap exit, even as the school’s endowment recorded its biggest loss in 40 years, the report released yesterday said. This is the first time the university has detailed the cost of exiting its swaps. Further Pressure “Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report. Harvard has typically invested a large portion of this operating account alongside the endowment, generating “significant positive investment results,” the report said. This year, the endowment’s losses hurt Harvard’s cash, according to the report. Swaps are a type of derivative where two parties agree to exchange payments tied to a financing, typically receiving a variable-rate for a fixed-rate payment. The terminated contracts include three tied to $431.7 million of bonds the university sold in 2005 and 2007, the annual report said. Unwinding Swaps From New York to San Francisco Bay, tax-exempt issuers have paid hundreds of millions of dollars to unwind bond-and-swap transactions officials initially said would cut borrowing costs. The deals fell apart when municipal-bond insurers, who backed much of the underlying debt, lost their AAA ratings in 2008 and interest rates, instead of climbing, plunged to record lows in the worst credit crisis since the Great Depression. The swaps are often pegged to Securities Industry and Financial Markets Association lending benchmarks or the three- month dollar London-Interbank Offered Rate, known as Libor . Libor closed yesterday at 0.28 percent, from a 10-year high of 6.89 percent on June 1, 2000. Yale University in New Haven, Connecticut; Georgetown University in Washington and Rockefeller University in New York have reported losses related to interest-rate swaps, in some cases prompting the schools to pay termination fees to end the contracts. Lawrence Summers The annual report provides new details on Harvard’s derivative-related losses. Many were entered into in 2004, said Harvard spokeswoman Christine Heenan . Lawrence Summers , director of President Barack Obama’s National Economic Council, was the university’s president at the time. White House spokesman Matthew Vogel declined to comment. Harvard Management Co., which administers the endowment, has been run since July 2008 by Jane Mendillo , former chief investment officer of nearby Wellesley College. She took over from Mohamed El-Erian , now chief executive officer of Pacific Investment Management Co., which oversees the world’s largest bond fund from Newport Beach, California. He succeeded Jack Meyer , who ran it for 15 years, in February 2006. Harvard’s loss “says that people don’t understand the complexity of the products they are buying and selling and that doesn’t begin and end with mortgage securities,” said Robert Doty , a municipal finance adviser at American Governmental Services in Sacramento, California. “It shows that with these products that are so highly complex, people are a long way from knowing as much about these products as they think they do,” he said. Financing Construction The Harvard swaps involved bonds sold to finance a medical research building, graduate housing, parking and a Center for Government and International Studies , according to reports from Moody’s Investors Service. They were also used to lock in rates for future bond sales for an expansion of the campus across the Charles River in Boston that has since been scaled back. Harvard had 19 swap contracts with New York-based Goldman Sachs; JPMorgan Chase & Co.; Morgan Stanley; Charlotte, North Carolina-based Bank of America Corp. and other large banks, according to a bond-ratings report by Standard & Poor’s released on Jan. 18, 2008. Harvard paid “a large termination fee, but within the range that we’ve heard about over the last year,” Matt Fabian , the senior analyst and managing director of Municipal Market Advisors in Westport, Connecticut, said in an e-mail. “There is a reason why, regardless of the issuer’s sophistication, there should be limits to their exposure to derivatives and variable rate bonds.” Harvard has frozen employee salaries, slowed hiring, cut staff and offered other workers early retirement as part of a cost-cutting program to compensate for losses in its endowment. The fund, which dropped to $26 billion in value over the fiscal year from $36.9 billion, paid 38 percent of the school’s bills during that time, the report said. Alumni Request The Faculty of Arts and Sciences, Harvard’s biggest unit, which includes its undergraduate school, is asking alumni and donors for more funds that can be used immediately and without restrictions to help close a projected $110-million deficit in its 2011 budget, Dean Michael Smith said in a recent speech. Current-use gifts rose 23 percent to $291 million from $237 million in fiscal 2008, the report said. Harvard might have paid less to escape the swaps if it held out for better terms, Fabian said. “A lot of issuers don’t have that kind of cash, and so they waited, and relied on their dealers’ patience and largesse to hold off terminating,” Fabian said. “If Harvard had waited, the cost of terminating may well have been lower, but they weren’t willing to take that risk.” To contact the reporters on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net ; John Lauerman in Boston at jlauerman@bloomberg.net .

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Clinton to Urge Northern Ireland to Push Ahead With Peace in Belfast Visit

October 11, 2009

By Janine Zacharia and Colm Heatley Oct. 12 (Bloomberg) — Secretary of State Hillary Clinton wades into the Northern Ireland peace process today during a visit to Belfast meant to push for implementation of a peace deal negotiated during her husband’s presidency. Clinton will be the first senior foreign dignitary to address the regional Stormont assembly, which is battling a recession that has seen property prices slump and unemployment soar amid the worst upsurge in terrorist violence in a decade. A row over policing between the pro-U.K. Democratic Unionist Party and the Irish nationalist Sinn Fein party has recently threatened the accord, negotiated in 1998 by former U.S. Senator George Mitchell , now President Barack Obama’s Middle East peace envoy. Clinton’s visit follows one by U.K. Prime Minister Gordon Brown , who a week ago met with Northern Ireland’s political leaders in an attempt to resolve a dispute over the appointment of a policing minister for the U.K. region. Brown pushed for agreement between First Minister Peter Robinson of the DUP and Deputy First Minister Martin McGuinness , of the pro-united Ireland Sinn Fein party, to agree to a timeframe for the devolution of powers. The two parties are the biggest in the power-sharing assembly. Sinn Fein insists the policing and justice powers need to be devolved to the assembly before the end of the year, while the DUP has refused to set a timeframe for the transfer. In June 2008, Sinn Fein exercised a veto on the assembly over the issue, causing the suspension of the ruling executive for five months. ‘Essential Milestone’ “The step of devolution for policing and justice is an absolutely essential milestone,” Clinton said yesterday in Dublin in a preview of her remarks. “Clearly, there are questions and some apprehensions, but I believe that due to the concerted effort of the British government, the Irish government, the support of friends like us in the United States, that the parties understand that this is a step they must take together.” Northern Ireland’s Irish National Liberation Army said yesterday it rejected violence and pledged to achieve its objectives peacefully, following the lead of the U.K. region’s other main terrorist groups who fought in the four-decade long conflict known as “The Troubles.” The violence claimed more than 3,500 lives. The INLA, which killed 113 people during its 30-year campaign to unite Ireland, “no longer wants to maintain a military option and is pledged to supporting peace,” Martin McMonagle, who sits on the executive of the INLA-aligned Irish Republican Socialist Party said yesterday in a telephone interview. Earlier, McMonagle gave the same message to a crowd of republicans in Bray, County Wicklow. Renounced Violence All of the main terrorist groups who fought in Northern Ireland’s conflict have now renounced violence. Still, the peace process has been shaken by violence this year. Dissident republican terrorists, opposed to the power sharing, killed two British soldiers and a policeman in gun attacks in March, the first fatalities for the military in the region since 1997. Last month dissidents planted a 600-pound (272-kilogram) bomb in a bid to kill police and since July have been blamed for orchestrating riots in Belfast. Clinton stayed at Belfast’s Europa Hotel, which was the most-bombed in Europe during the conflict. Clinton, who appointed a special economic envoy for Northern Ireland, said the region could thrive if it moved forward with the peace process. Economic Slump The global economic slump is already undermining the peace dividend in Northern Ireland. Unemployment has almost doubled in the past year as companies from Caterpillar Inc . to Ulster Bank Ltd. cut jobs amid the global recession. House prices have fallen by almost 35 percent since hitting a peak of 227,970 pounds in late 2007, according to Nationwide Building Society. Clinton noted that she often refers to the Northern Ireland peace process as an inspiration to other foes to make peace. “Many people who are despairing over the prospects of peace look to Northern Ireland,” she said yesterday after meeting with Irish Prime Minister Brian Cowen . “They think to themselves that if it could be done there, then perhaps we, too, have a chance to try to cross that border between conflict and peace.” Before flying to Belfast yesterday, Clinton made an impromptu, campaign-like stop in downtown Dublin, detouring to Grafton Street, the city’s fashionable main drag, while en route to the airport. Clinton stunned patrons first at Bewley’s cafe when she came in and ordered a cappuccino. She then walked to an Irish pub, McDaids, and hoisted a Harp beer as people there cheered and raised glasses of Guinness to her. To contact the reporters on this story: Janine Zacharia in Belfast, Ireland at jzacharia@bloomberg.net ; Colm Heatley in Belfast at cheatley@bloomberg.net .

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Les Leopold: Dwight D. Eisenhower vs. Andrew J. Hall

October 10, 2009

New York Times : The banking giant Citigroup is saying goodbye to its $100 million man, Andrew J. Hall, and the commodities firm he ran. While the firm had generated big profits for the bank, it had also led to significant controversy because of Mr. Hall’s huge promised bonus…. Citigroup announced on Friday that it was selling its energy-trading operation, Phibro, to the oil and gas company Occidental Petroleum, potentially allowing the bank to avoid a confrontation with the Obama administration over executive compensation. The way in which oil speculator Andrew J. Hall is going to get his $100 million demonstrates clearly why we need to return to the 91 percent top bracket income taxes of the Eisenhower years. Hall was scheduled to get nearly $100 million in bonuses for his services he and his firm Philbro provided to Citigroup. (Philbro is currently a subsidiary of Citigroup.) He earned his keep by using Citigroup capital to play the oil markets, which he did successfully. It’s unclear if his actions resulted in any real economic value–no part of our economy functions more efficiently and no one has fuel in their gas tank they wouldn’t have had because of his commodity trades. More than likely it resulted in a slight increase in overall oil prices that we all pay. Nevertheless he earned a pretty penny for Citigroup in the process–and for himself. Unfortunately for Hall, the financial system collapsed and Citigroup was about to go under. Had it collapsed his contract would have been worthless as he lined up behind thousands of other creditors. However, the American taxpayer bailed out Citigroup with about $350 billion in TARP funds and asset guarantees. So Hall, who had a contract that predated the coronation of the Pay Czar, was all set to get his $100 million. But the public and maybe a few of us bloggers got in the way. We created enough of a stink that Citigroup appears ready to sell him off. Out of sight, out of mind. But Hall will still get his $100 million, and more. The Obama administration will look the other way because he’ll no longer be at Citigroup and therefore not under Pay Czar review. But we should keep looking, especially at the tax code that treats the super-wealthy as if they were Pharaohs. We have yet to face up to the fact that our current crisis was caused in large part because we threw away the progressive taxes instituted by our forefathers to prevent speculative excess. The more extreme the distribution of income, the greater the chance of a fantasy finance casino. The last time we had a distribution as skewed as today was 1929. Is that coincidental? No. When capital builds up in the hands of the few, the economy becomes imbalanced. There are not enough tangible investments in goods and services to satisfy the investment desires of concentrated wealth holders. So the money runs to Wall Street-created securities and Wall Street-enabled bubbles. You can bank on it. During the New Deal and afterward we tamed such excesses through steep progressive income taxes. The rate hit 91 percent during the Eisenhower years on incomes that today would be about $3 million. That means the next dollar of income would send 91 cents to the Treasury (while the tax rate applied to the first $3 million was lower). Our economy did not suffer. Quite the contrary, this coincided with America’s economic “Golden Age.” And we had no financial crashes. Yes, there were all kinds of loopholes but we had the narrowest distribution of income on record during those years. Rich people were still rich, but the blind race to accumulate billions was held in check. Such progressive taxes are the only way to stop the excesses represented by Andrew J. Hall. If Ike’s taxe rates were still with us, Hall would see his income reduced to about $10 million, hardly a hardship. Look, the 1950s was not nirvana. You have only to watch Mad Men to be reminded of the overt racism, sexism and discrimination against gays. But that era with its compressed income brackets was making a statement. It was important to build the middle class. It was important to strive for goals other than accumulating wealth. In fact, public service was held in high esteem. Can we even imagine that anymore? In contrast, the Andrew J. Hall era is all about grabbing as much as you can for yourself. Milton Friedman preached that society would benefit as a whole if each of us pursued our self-interest and maximized our gains. With this philosophy we didn’t have to ask hard questions about whether or not our actual work contributed to the social good. By definition if we made millions by speculating it meant we were doing good. But it turns out there’s a price to pay for ruthless selfishness. The system crashes. We send millions to the unemployment lines because we let the accumulation process run wild. We no longer give a damn about the middle class and the jobs it needs. All that matters is accumulating vast riches. We may patch together our rickety financial system and restart the economy again, now that we’ve bailed out the very people who gambled us into the ground. But failure to grapple with our obscene wealth distribution is still with us and still tears at the fabric of our society. If we don’t change it, the next crash can’t be far away. Eisenhower, a conservative Republican understood this well and kept our excesses in check. It’s stunning that both our parties today don’t have the guts to tackle our billionaire bailout society. The best they seem able to do is make sure Andrew J. Hall’s loot is no longer in plain view. Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It , Chelsea Green Publishing, June 2009.

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Wen, Hatoyama, Lee Push for Resumption of North Korea Nuclear Negotiations

October 9, 2009

By Bloomberg News Oct. 10 (Bloomberg) — The leaders of China, Japan and South Korea pledged to work together to quickly restart talks aimed at removing North Korea’s nuclear weapons program. Chinese Premier Wen Jiabao , Japanese Prime Minister Yukio Hatoyama and South Korean President Lee Myung Bak said they wanted an early resumption of joint talks with North Korea, which also include the U.S. and Russia. Earlier this week Wen, visiting Pyongyang, won an assurance from North Korean leader Kim Jong Il that he is willing to return to nuclear disarmament talks. The regime said in April it was abandoning the negotiations forever. “The North Korean side during the negotiations expressed flexibility toward the six-party talks, and said they were not opposed to them,” Wen said at a press conference with Hatoyama and Lee in Beijing today. “We’ve come across some good luck,” he said of talks with the North. “If we take advantage of it and use it we can make some positive progress. If we miss this opportunity, we will waste a lot of effort.” Wen said the nuclear issue occupied four of the 10 hours of his discussions with leaders including Kim. “North Korea doesn’t just want to improve relations with the U.S., but also with South Korea and Japan,” Wen said. China until June had resisted efforts by Japan and the U.S. to get penalties imposed on North Korean entities involved in the country’s nuclear and missile programs. China is trying to avoid sudden regime change in North Korea, which could spark a refugee crisis along the 1,415-kilometer (880-mile) border it shares with its ally of six decades. Change of Stance China’s stance changed after North Korea launched a rocket on April 5 and tested a nuclear device on May 25. China agreed in June to back curbs of loans and money transfers to North Korea as punishment for the tests. Wen today pledged to uphold UN Security Council resolutions on North Korea. “We will make joint efforts with other parties for an early resumption of the six-party talks, so as to safeguard peace and stability in Northeast Asia, and thereby to build an Asia of peace, harmony, openness and prosperity,” Wen, Hatoyama and Lee said in a joint statement. The challenge for China, Japan and South Korea is to prevent Kim from exploiting differences among them that would delay any agreement to curtail North Korea’s nuclear weapons program, said Zhu Feng , a professor at Beijing University who specializes in international security issues. ‘Tricky’ “We all know who Kim Jong Il is, we know how tricky” the North Koreans are, Zhu said. “If China moves one way and Japan and South Korea move in the opposite direction, then we’ll leave room for North Korea to maneuver.” Both Lee and Hatoyama need Wen’s government to continue to exert pressure on North Korea to make good its promises to return to nuclear talks. Beijing University’s Zhu said a common front by North Korea’s neighbors is central to achieving that. “It is so significant for the three East Asian nations, China, Japan and Korea to formulate a consensus,” Zhu said. “We should put our hands together.” The second summit between the three countries marks a further warming of ties with Japan. Hatoyama has pledged not to visit a shrine in Tokyo that memorializes Japan’s war dead, including leaders responsible for the country’s aggression in China during the first part of the 20th century. Visits by some of his predecessors angered China and South Korea, which were both occupied by Japan. Long View “We agree that it is important to look at the relationship between the three countries from a long-term and strategic point of view,” Wen said at the press conference. The three leaders also pledged to work together to help enact a new climate-change accord this December in Copenhagen, which is meant to replace the Kyoto Protocol. Hatoyama, who took office last month, has made climate change a focus of his administration, vowing to cut carbon emissions 25 percent from 1990 levels by 2020. His proposal is contingent on other countries adopting targets as well, something China, the world’s biggest emitter of greenhouse gasses, has resisted. China, India and other developing countries say cutting emissions will crimp economic growth, and instead are focusing on reducing the amount of energy used to generate a given amount of economic output. In the statement, the three leaders pledged to work together to help manage forests and rivers and promote recycling. They also pledged to help conclude a new round of global trade talks, oppose protectionism and promote economic growth that minimizes damage to the environment. — Michael Forsythe , Takashi Hirokawa , Seonjin Cha . Editors: Ben Richardson , Mike Millard . To contact Bloomberg News staff on this story: Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net .

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Germany Votes as Merkel-Steinmeier Race Tightens in Final Days

September 27, 2009

By Tony Czuczka and Brian Parkin Sept. 27 (Bloomberg) — Germany votes today to decide who steers the European Union’s biggest country, with polls showing Angela Merkel set to remain chancellor and her bid to forge a coalition with the pro-business Free Democrats in doubt. Merkel’s challenger, Social Democratic Foreign Minister Frank-Walter Steinmeier , has narrowed the gap in the past two weeks and about a quarter of the electorate was undecided in the last days of the campaign. The candidates used their final appeals yesterday urging supporters to turn out. “It’s going to be a thriller,” said Peter Loesche , a political scientist at Goettingen University in central Germany. While he expects Merkel to win, he said the race for her coalition partner is “50-50.” After four years of compromise in a grand coalition of their two parties, Merkel, 55, and Steinmeier, 53, used the campaign to set out competing visions on how to spur growth as the economy emerges from the worst post-World War II slump. Merkel backs tax cuts that Steinmeier says are unaffordable as debt soars. He wants a national minimum wage and an increase in the top income-tax rate to 47 percent from 45 percent. The vote, which decides the balance of power in the 598- seat lower house of parliament, “is a crossroads,” Merkel told a rally in Berlin yesterday after returning from the Group of 20 summit in Pittsburgh. Only a coalition of her Christian Democrats with the Free Democrats can “secure economic growth and jobs.” Voting is from 8 a.m. until 6 p.m., when television stations ARD and ZDF release the first exit polls. ‘Cold Place’ Steinmeier, addressing supporters in Dresden , said a Merkel-FDP alliance would benefit only the rich and turn Germany into a “cold place.” Merkel’s Christian Democrats and their Bavarian sister party, the Christian Social Union, slipped 2 points to 33 percent in a Forsa poll released on Sept. 25, their lowest score since March. The Social Democrats lost a point to 25 percent, while the Left rose two points to 12 percent and the Greens declined 1 point to 10 percent. The Free Democratic Party, led by Guido Westerwelle , gained a point to 14 percent, giving a CDU-FDP alliance combined support of 47 percent, the lowest since October last year. A score as low as 46 percent may still be enough to form a government, analysts say. Forsa polled 2,001 voters on Sept. 21- 24 with a margin of error of as many as 2.5 percentage points. Al Qaeda Threat The vote comes amid heightened security after video threats by al-Qaeda and the Taliban. The Interior Ministry banned flights over the Munich Oktoberfest and raised security at train stations and airports after videos surfaced warning Germany to withdraw its 4,200 troops from Afghanistan. While Afghanistan featured only briefly in the election campaign, the parties have clashed on energy policy. Merkel wants to extend the lifespan of nuclear-power plants by as many as 15 years, while Steinmeier backs a law he helped negotiate as Schroeder’s chief of staff that will shut them by about 2021. Nuclear power is “yesterday’s energy,” he said. At stake are stations run by Dusseldorf-based E.ON AG, RWE AG of Essen, Sweden’s Vattenfall AB and Karlsruhe-based EnBW Energie Baden-Wuerttemberg AG that generated 23 percent of Germany’s electricity last year. ‘Old Greed’ Steinmeier, who pledges to promote green technology to create as many as 4 million new jobs, says a CDU-FDP coalition would make it easier to fire workers and promote “the old greed.” He wants to lower the bottom tax rate to 10 percent from 14 percent and use the top rate increase to improve the education system. “The voters want a government that offers social justice for everyone in this country,” Steinmeier said in Dresden. “They won’t get that with Merkel’s CDU and certainly not with Westerwelle’s party.” Merkel wants to push deregulation, overhaul labor-market rules to make it easier to hire and fire and cut taxes by 15 billion euros ($22 billion) over four years. She aims to lower the bottom tax rate to 12 percent and raise the threshold for the 45 percent rate to 60,000 euros from 52,000 euros. Merkel wants to avoid a repeat of the 2005 election, when then-Chancellor Gerhard Schroeder hauled the Social Democrats back into contention after trailing by as many as 20 percentage points. Merkel’s victory by a single point forced her into coalition with her traditional rivals. Coalition Stimulus Policies enacted by the coalition helped Germany, the world’s biggest exporter, emerge from recession in the second quarter, sooner than economists forecast. The government pushed through stimulus spending of 85 billion euros and a 102 billion- euro government-backed rescue of Munich-based lender Hypo Real Estate Holding AG, helping keep unemployment below the U.S. level and the euro-area average. “The election is too close to call,” Gary Smith , director of the American Academy in Berlin, a trans-Atlantic research institute, said in an interview. “We might end up with another not-so-grand coalition.” To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net ; Brian Parkin in Berlin at bparkin@bloomberg.net

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Baucus Makes Last Health-Care Bid After Obama’s `Game Changer’ Address

September 14, 2009

By Kristin Jensen and Laura Litvan Sept. 14 (Bloomberg) — Senate Finance Committee Chairman Max Baucus will make one last attempt this week to win Republican support before he joins Democrats in a party-line effort to overhaul the U.S. health-care system. While Baucus said President Barack Obama’s Sept. 9 speech to Congress “breathed new life” into negotiations for a bipartisan compromise, the Montana Democrat vowed to present draft legislation with or without Republican votes, after struggling for months to reach a deal. Failure to achieve a bipartisan bill may undermine public support for the measure, some Republicans have warned. It would also raise the question of whether Obama and congressional leaders can keep enough Democrats unified to pass legislation. “There’s not very many moderates,” said James Thurber , director of the Center for Congressional and Presidential Studies at American University in Washington. “You move to the middle and you start losing people, significant people.” The finance committee is the last of five congressional panels to deal with legislation intended to cover more of the 46 million uninsured Americans and tame rising health-care costs , which account for a sixth of the U.S. economy. They are grappling with whether to create a government-run program to compete with private insurers , whether to require employers to cover workers and how to pay for the $900-billion plan. Democratic Divisions Congressional Republicans say the proposal is too costly and will add to the federal deficit, which is forecast to be $1.5 trillion next year. Besides failing to win over any Republicans, Democrats have faced divisions within their own party, particularly over the idea of the new government program, or “public option,” which some party members say would threaten private insurers. Obama may have helped get Democrats in line during his Sept. 9 speech. He exhorted a joint session of Congress to stop bickering and start cooperating. House Speaker Nancy Pelosi , who had said she couldn’t pass a plan without a public option, said on Sept. 10 that she had no “non-negotiable” demands. Nebraska Senator Ben Nelson , one of the most vocal skeptics of the public option among Democrats, called Obama’s speech a “game changer.” Steve Hildebrand , Obama’s former deputy campaign manager who had criticized the president for not pushing liberal policies hard enough, echoed those remarks. ‘Both Parties’ “This is going to reach the public, and that’s going to reach senators of both parties,” said Senator Charles Schumer , a New York Democrat. A CBS News poll taken the day after Obama spoke found that 52 percent of Americans now approve of the way he’s handling health care, up from 40 percent the week before. And three- fifths of those who watched said they “mostly agree” with the plans the president presented, CBS said. In the speech, Obama focused on proposed changes such as barring insurers from refusing to accept new clients with preexisting conditions and limiting out-of-pocket expenses. He also embraced the idea of a tax on companies offering the most expensive insurance policies and left the door open to nonprofit member-run cooperatives instead of a public option. “It’s cannily similar to what we’re working on,” Baucus said. The Baucus plan would also require most Americans to get insurance or pay a fine, and allow states to form compacts to sell health insurance across state lines, a Republican priority. Sticking Points One sticking point for Baucus’s group is how an expansion of the Medicaid program for the poor affects state governments, which would pick up a portion of the costs. Baucus wants to extend Medicaid coverage to those with incomes 133 percent above the poverty level. That’s worried governors, some of whom will speak to committee members today, said Senator Kent Conrad , a North Dakota Democrat who’s in the negotiating group. Meanwhile, the group may go further than Obama in making changes to medical malpractice law — an effort designed to make an overhaul appeal more to Republicans. There is consensus to include “safe harbor” legal protection for doctors who can show they comply with “best practices,” and expanded use of arbitration to end disputes between patients and practitioners, Conrad said on Sept. 10. Without Republicans, the options for Democrats may be limited. They control 59 of the 99 current votes in the Senate, short of the 60 usually need to pass legislation. While they can use a budget process known as reconciliation that requires only a simple majority vote, it comes with limits that might require Democrats to significantly scale back their plans. ‘Obama = Socialism’ There are few signs that skeptics are coming on board. Thousands of protesters carrying signs saying “Obama = Socialism” and “Keep Government out of Health Care,” descended on Washington on Sept. 12 to oppose government spending and the rising U.S. budget deficit. Demonstrators expressing disapproval of plans to overhaul the health-care system, filled Pennsylvania Avenue near the White House and marched toward the U.S. Capitol. And Senator George Voinovich , an Ohio Republican seen as one possible vote for the Democrats, said he won’t support an expansion of health care at a time of soaring deficits. “I am very, very, very concerned about the fragility of our financial situation,” Voinovich told reporters on Sept. 10. To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net ; Laura Litvan in Washington at llitvan@bloomberg.net

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Iris Martin: Homeowners: The War Games Have Begun

September 11, 2009

Homeowners across the nation have locked and loaded and are launching their mortgage wars. Sales of my new book, Mortgage Wars: How to Fight Fraud and Reverse Foreclosure are thriving among homeowners and attorneys alike. We have even taken over the airways, advertising the book on Monday night football! The book was requested for sale at the annual conference of the California Bar Association. More attorneys are being trained up, and California attorney Walter Hackett is in the process of announcing an institute for lending practices to help attorneys gear up faster. Lenders are besieged with mortgage audits, qualified written requests and predatory lending complaints. As a result, many lenders are postponing foreclosure sales time and again, and some states, like Florida and Ohio have become virtually, no foreclosure zones. The war games have begun and now it’s time for the predatory lenders, brokers and foreclosure consultants to sweat. The Fed is weeding out the predators who promise loan mods and can’t deliver after devouring huge fees. The tide is turning, as it must, if the largest lenders, like Chase, Citibank, Wells Fargo and the like, are to transform their predatory schemes against innocent homeowners. There has been so much progress since my book has hit bookshelves. Just ask forensic expert Marie McDonnell, who is offering a full securitization analysis for $1,500 dollars. She maps every transaction in the securitization daisy chain and prepares an expert report to demonstrate to the judge how the lender has no legal standing to foreclose. She is also available as an expert witness at trial. Or ask California attorney, Walter Hackett, who challenges the sanctity of a deed of trust when there has been no trust in the mortgage transaction. Or California attorney, Jeff Schwartz, who incorporates a lack of fiduciary duty claim into some of his well deserving complaints. Or ask Ohio attorney Dan McGookey, who just reversed a foreclosure action due to the lender not owning the loan and note. His pleadings are becoming legendary. Rock on, Dan! I receive daily calls from homeowners confused about the mortgage war plan of attack, and many have been incredibly misinformed. Some have committed bankruptcy fraud and didn’t know it, making themselves vulnerable to criminal charges. So here is the skinny on what to do and not do in your own mortgage war. The Dos: 1. Get a mortgage audit. For only $499.00, you can go to www.yourmortgagewar.com and order one. Our evidentiary audit has been designed by attorneys. It examines TILA and RESPA violations, fraud and illegal securitization. You will receive your report after two week upon collecting all the documents. 2. Second, if your audit warrants it, you can file a legal complaint. We can help you find a qualified attorney from our network, or from their networks. The good ones are always in contact with each other. 3. Your new best friend attorney will take the audit data and interview you at length. Based upon your responses, your attorney will prepare a legal complaint detailing the facts of your case and appropriate causes of action. You should not pay more than $2,500 for this service, including court filing fees. On that note, you should not pay more than $275 per hour for legal assistance, as that is the going national rate. 4. Your attorney will determine whether to file your complaint in state or federal court. TILA violations are heard in federal court, as are RESPA claims. However, many attorneys I chat with believe that predatory complaints involving other causes of action, such as fraud and lack of fiduciary duty, are best heard in state court. Your attorney can educate you on what’s best for you in your state. 5. Your attorney will also determine whether to demand a jury trial. The attorneys I know are split on this one: some believe a jury would side with a fellow homeowner. However, some cities may have jurors who cannot follow the proceedings, particularly with regard to technicalities in the securitization process. Your attorney will determine which choice is right for you. 6. Once your complaint is filed and served, your attorney can begin discovery after only a few days. Discovery takes the form of written demands for information from your lender, including who owns your loan and note. If your lender refused to answer, it can be compelled to do so by the court. Your attorney will also depose representatives from your lender or brokerage, and other parties with knowledge. Not a bad idea to search for whistle blowers who worked for your lender in sunnier times. 7. You will also get a trial date at a hearing known as a case management conference. Your trial date most likely will be scheduled many months in the future. 8. Your attorney can also begin settlement discussions with your lender. These take the form of a reduction in interest rate and principal balance. Just ask Florida attorney, Dawn Rapoport how lenders are responding, now that the number of plaintiffs is dramatically increasing. 9. Your judge, by the way, may very likely order you to meet with a negotiator or mediator to settle your case. Most judges do not want their courtroom crowded by enraged homeowners engaging in mortgage war. This is also a time to get a better deal from your lender in exchange for dropping your lawsuit. In my opinion, this is the only way to get a decent loan modification. 10. If you live in a non-judicial state, and your lender attempts to foreclose before your trial, your attorney will have to obtain a TRO, or temporary restraining order from the judge. The judge will have to be convinced that you will be irreparably harmed by the foreclosure, and that you stand a good chance to win at trial. This is a very good time to have Marie McDonnell prepare a report for the judge regarding who owns your loan and note. You may find you already own your home free and clear and don’t know it yet. 11. After obtaining the TRO, you will have to go back to court to obtain an injunction to stay the foreclosure pending outcome of your trial. The judge may demand that you post a bond to stop the bleeding for your lender. There is a new cottage industry sprouting in the bond business, and many companies are providing bonds using real estate as collateral. However, you cannot use the subject property as collateral. 12. You may receive several settlement offers pre-trial. Let your attorney determine which one is best for you. Or you may just roll the dice and take your war to the courtroom. 13. If you decide to go to court, your attorney may demand a portion of your settlement in exchange for litigating your case. This arrangement, called a contingency agreement, allows you to defer your considerable legal costs until the end of the trial. If you get nothin’, your attorney gets nothin’ as well. 14. If you don’t like the outcome of your trial and there were process errors, you may decide to appeal. This may also require the posting of a bond. 15. Or you may prevail, and win your mortgage war. It’s happening more and more every day. Here is my list of Don’ts when waging your mortgage war: 1. Don’t go pro per. There is nothing wrong with having an attorney write, file and serve a pro per complaint. This may save you money on the front end. After the complaint is served, your defendants, which should include all parties you have a beef with, such as your appraiser, broker, lender, title agent, servicer, trustee and beneficiary, have thirty days to respond. They generally respond with a “demur” which is an attack on your complaint. 2. Don’t go to court by yourself. You will need an attorney to oppose the demur in writing and at a hearing. Don’t’ play Perry Mason and think you can waltz into court and get the result that you want. Judges do not like pro per litigants, as they are ill-trained in courtroom procedure and etiquette. You may score a sympathetic judge, but sooner or later the lender’s attorneys will eat your alive. Don’t have a fool for a client, or go into battle without a loaded weapon. 3. Don’t believe that bankruptcy is the answer to your mortgage hell. Lender’s attorneys will request a lift of stay in a New York minute. They often get it, and you lose your home. File a predatory claim first. You can always succumb to filing bankruptcy. So don’t believe predatory attorneys who tell you that your only hope is to file bankruptcy without interviewing skilled predatory lending litigators. 4. Don’t play any tricks with having others take a piece of your home and then they declare bankruptcy. Whoever invented this illegal practice, ain’t doing homeowners a world of good. Especially when those homeowners are facing bankruptcy themselves and have already defrauded the court. 5. Don’t put your home in the hands of loan mod companies. I get calls every day from foreclosed homeowners who were told their loans were being modified and there was nothing to worry about. If this has happened to you, sue the loan mod company, or file a malpractice complaint against your loan modification attorney. The only thing that will stop your foreclosure is a signed settlement from your lender or an order signed by a judge. If you are one of the few that has gotten a loan modification on your own, make sure it is good for you. If not, sue the bastards. 6. Don’t deny your mortgage hell. If you are in delinquency or default, it is time to get moving. God helps those who get help themselves. I get many calls from homeowners whose foreclosure sale is imminent, and there isn’t much that can be done. Preparing and filing a legal complaint is required before you can seek a temporary restraining order. All this takes time. Good attorneys are swamped with clients. Plan in advance to save your home. 7. Don’t attempt a loan modification on your own. Attorneys tell me war stories that set my hair on file. How the banksters use every trick in the book to trap the homeowner into an unaffordable profile. This gives the lender even more ammunition to foreclose, especially because it has “cooperated” with the Obama plan. 8. Don’t drive your auditor and attorney crazy with all hours phone calls. Yes, you have every right to panic, and the threat of losing the roof over your head is a terrifying possibility. But you must control your anxiety so that your helpers can do their jobs. Constant demands for reassurance and advice only makes them want to avoid contact with you. 9. Don’t prematurely give up and turn in keys for cash. If you have been told by a reputable attorney that you have a strong case, persevere and fight on. The bank is not your mother or father. If your lender has violated laws, there are legal remedies at your disposal. But only if you use them. 10. Don’t rush or second guess the process. Every case is different, depending on a unique set of facts. Even attorneys disagree on various approaches to a complaint. It takes time and effort to research the law and what causes of action and motions are working. Mortgage war is a marathon, not a sprint. 11. Don’t get discouraged. You will have good days and bad days. It helps to meditate instead of awfulize. You will sleep better at night when you are sure you are following the best plan of attack for saving your home and waging war against your predatory lender and broker. I hope this helps answer some of your questions. I do try to call everyone who contacts me through our website www.yourmortgagewar.com . I am truly blessed to have chatted with so many smart, and justifiably, enraged homeowners in the throes of their mortgage wars. If you have a reaction to the book or have a question, feel free to e mail me. And give yourselves kudos for pioneering this war. It is only when the courts are overwhelmed with predatory lending lawsuits that the state and federal government may follow the steps of Ohio and force arrogant predatory lenders to prove that they have standing before filing a foreclosure action. So, in the spirit of celebrity chef Bobby Flay, Ohio, keep doing what you’re doin’. And the rest of America? Ask yourself this: Are you ready for a mortgage throw down?

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Google May Have to Modify Book Settlement for Court Approval, Lawyers Say

September 10, 2009

By Susan Decker and David Glovin Sept. 10 (Bloomberg) — Google Inc., the Web-search engine scanning millions of books to create a digital library, may have to modify a settlement with publishers and authors after more than 60 groups and individuals filed objections or demanded changes, lawyers said. A federal judge is scheduled to decide Oct. 7 whether to approve a $125 million agreement to establish a “Book Rights Registry,” which would identify and compensate rights holders whose books have been scanned by Google. The governments of Germany and France have joined authors in the U.S., Japan and Europe to oppose the settlement, saying it doesn’t give copyright owners enough choice about how their content is used. “There are some good points the court cannot ignore” while some attacks are “unfair,” said Terence Ross , a copyright lawyer with Gibson Dunn & Crutcher in Washington who is following the case and doesn’t represent either side. “He may ask the parties to go back, without rewriting the agreement from scratch, and address certain objections. Innovation often poses problems for the law and established bureaucracy.” The settlement has become part of a larger fight over the future of digital books. Sales of electronic titles more than doubled to $61 million in the first six months of 2009, according to the Association of American Publishers in New York. Total U.S. book sales rose just 1.8 percent over that period. Objections to the agreement were due this week. The U.S. Justice Department, which is investigating whether the plan violates antitrust law, has until Sept. 18 to weigh in on the issue. U.S. District Judge Denny Chin , who sentenced conman Bernard Madoff to 150 years in prison, will then oversee the Oct. 7 review. Back to Life A House Judiciary Committee hearing is scheduled for today with testimony expected from both sides and from Marybeth Peters , the register of copyrights at the Library of Congress. David Drummond , Google’s chief legal officer, is set to testify. Google was sued in 2005 by authors and publishers, who said the company was infringing their copyrights on a massive scale by digitizing books. The Mountain View, California-based company said a settlement struck last year will “bring back to life” millions of books that are sitting unread on library shelves or are out of print. Amazon.com Inc. is part of a group that argues the agreement would give Google unfair control over a vast database of books. Sony Corp., which makes a digital-book reader that competes with Amazon.com’s Kindle, works with Google to offer digital books and supports the settlement. Settlement Changes “I doubt the judge is going to just say, ‘I disapprove it,’” said June Besek, executive director of the Kernochan Center for Law, Media and the Arts at Columbia Law School, part of Columbia University in New York. “There is enough good in it, he might indicate what changes are needed and how it could be done.” Authors in the U.S. are split on the agreement. “Wonder Boys” writer Michael Chabon and “Pay It Forward” author Catherine Ryan Hyde object, while satirist Dave Barry, “Presumed Innocent” writer Scott Turow and children’s author Judy Blume are among those who say they support it. Under a key aspect of the agreement, Google would make digital copies of books that are no longer commercially available but are still covered by copyright. The out-of-print books would be available for preview and purchase, unless the author tells Google not to offer them. ‘Favored Nation’ Changes to the plan could include eliminating a provision that gives Google “most-favored nation status,” which means publishers pledge not to strike more favorable deals with Google rivals, and addressing how Google would use information on people’s reading habits, said Tom Selz , a copyright lawyer with Frankfurt, Kurnit, Klein and Selz in New York. Google is “confident in our agreement,” said Jennie Johnson, a spokeswoman for the company. The company also said the agreement allows for court supervision. Google rose $5.35 to $463.97 yesterday in Nasdaq Stock Market trading. The shares have gained 51 percent this year, compared with the 41 percent gain in the Standard & Poor’s 500 Information Technology Index. Google has sought to highlight the benefits of creating a digital library. Civil rights groups say individuals with disabilities, people who live in poor neighborhoods and community college students would have access to the top-notch libraries like those at Harvard, Princeton and Columbia universities. Blind people would also benefit because digital books can be read aloud or shown on Braille displays, according to The National Federation of the Blind . More Access “It would give blind people more access to more books than we have had in all of human history,” said Chris Danielsen, a spokesman for the federation. “Google is the only one making sure these books are accessible to blind people. If it is derailed, it would be a huge setback for blind Americans.” A group of 32 economics and antitrust professors said the agreement fosters competition because it gives consumers more information about how to find and buy books. The American Library Association and other library groups say the agreement would give “unprecedented” access to digital books and simplify how digital rights are managed. Still, the library groups expressed concern that Google would have too much control of digital books and are worried about protecting user privacy. Germany and France both filed objections to the agreement, and the European Union held a Sept. 7 hearing in Brussels. Germany said the plan would interfere with a European initiative to create noncommercial digital libraries. The biggest concern for the judge in the U.S. will be the Justice Department’s investigation, Selz said. What Google might have to change is still unclear, he said. “They have to be prepared to modify, but what the modifications will be and what the judge will require is anybody’s guess,” Selz said. The case is Authors Guild v. Google Inc., 05-cv-8136, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: Susan Decker in Washington at decker1@bloomberg.net ; David Glovin in New York federal court at glovin@bloomberg.net .

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Michael Russnow: My GE Dishwasher Tragedy, Manufacturer Parts, Car Repairs and Doctor Visits: Let’s Be Mad as Hell and Not Take it Anymore!

August 23, 2009

I had some experiences recently I thought I’d share that may have happened to you. Experiences that cost time and money and seem designed to screw us, while perpetuating a steady flow of income for other parties. In the first case, before you remind me, I will readily admit I caused the problem. My objection is with the available solution that now confronts me. I bought a General Electric Portable dishwasher a number of years ago. It has worked fine, and I have no complaint with its operation. The problem is its design. In order to connect it to my sink, I have to fasten a unicouple — a device that delivers water to and from the dishwasher — to the faucet and over time it has become worn, making it a bit more difficult to disengage. After the last usage when I tried to take it off, the entire faucet adapter (which connects it with the faucet) came along with it. Try as I might to detach the unicouple, I couldn’t get it to budge. I finally tapped it against the sink and, in the process, the unicouple broke. Okay, it was my fault. However, instead of being able to replace a cheap plastic part that might have set me back a few bucks, I am stymied by the fact that the unicouple, designed by mega-corp GE, is attached to two hoses that extend well inside the machine. Now it’s a humongous job. The part alone costs over a hundred dollars, not to mention a repairman who would charge anywhere from $75-100 an hour. A new machine costs about $450, so it’d be dumb to pay so much just to get my dishwasher repaired. However, the simple question is why wasn’t the machine designed so that the unicouple might click in and out of the hoses or attach with common screws, enabling a simple and inexpensive replacement instead of combining all elements of the operation into one device? Not to mention the fact that the hoses go all the way inside the machine, requiring me to open the dishwasher up and figure out how to disconnect and reassemble the part. It’s absurd that a simple appendage made of cheap plastic and thus easily breakable under many circumstances cannot be replaced without undergoing the options I’ve described. And yet without the unicouple, the machine, even with its primary operating functions working perfectly, is now kaput! And consumer headaches don’t stop there. Have you looked under your car hood lately? In order to repair something otherwise very cheap, a mechanic often has to disassemble many of the parts to get to where your $5.95 hose or fuse might be. The other day a dashboard light came on in my Toyota Corolla — one I’d never seen. I looked in my manual and discovered it was the “Check Engine Light.” I went to my local PepBoys, and they said the “Check Engine Light could be a myriad of causes and they’d have to hook my car to an analysis machine, costing $90, which was in addition to any work they might have to do. Fortunately, I’d secured a coupon from their website for, among other things, checking the engine light. They happily agreed to do so and later informed me it was smog device related, referring me to a Toyota dealer. As I was headed for an important appointment, I got their assurance that my engine was not in jeopardy and the car wouldn’t break down. However, out of curiosity I called the Toyota dealership and gave them the engine analysis code number PO 404, and was told the repair could cost over $400. I consulted The Internet about this PO 404 code — thank God for Internet “Ask” sites — and was advised the light might simply be due to a loose gas cap (which I tightened) or possibly some water in the gas. Such circumstances might correct themselves after a few days of driving. Sure enough in a couple of days the engine light went off. But why is this “Check Engine Light” such a catchall of scary possibilities? There are separate light indicators for oil and battery and overheating problems. Since newer cars have computer systems, couldn’t they have a number system that would identify the problem, e.g. a “32″ appears on the dash, and your manual lists the problem or at least localizes the area of the dilemma? Manufacturing CEOs do very little to reduce the need for maintenance work and perhaps there should be legislative enforcement requiring them to do so. We have laws about emission controls and gas mileage. Why not for manufacturing devices mandating modular parts that are easier to get to and for systems that would more easily identify the problem and not subject us to “analysis” costs? And while I’m at it, there should be a recoupment procedure available when doctors make us wait an unreasonable amount of time. It’s quite common to be made to wait more than an hour — sometimes two and three — and when you complain to the receptionist you are treated in a “how dare you” manner, as if it’s unconscionable to gripe about a doctor. Not to mention the fact that many people are intimidated from doing so, perhaps after years of being told that that profession was the gold standard when nailing a husband. A friend of mine, who has severe glaucoma, waited two and a half hours, having already inquired about the tardiness of the doctor after the first hour. Only after almost three hours of waiting was she told there were emergencies that had come through the door. My question, of course, is why weren’t the waiting patients notified so that they could determine whether they wanted to reschedule? Indeed, my friend decided not to wait further and she told me the receptionist looked at her like she was crazy for not hanging out longer. Why can’t we bill a doctor for our time when we are kept waiting — let’s say — more than half an hour? What’s our time worth? After all, they have the cheek to bill us if we cancel our appointment within a short time frame or don’t show up at all. It’s time to rise up and not take crap, like Peter Finch’s character Howard Beale advised us in Paddy Chayefsky’s classic film Network . Isn’t it time for Anderson Cooper to do a Keeping Them Honest report on CNN? How about 60 Minutes on CBS, Dateline on NBC or 20/20 on ABC? Maybe Oprah could do a show. Meanwhile, as I live alone and mostly cook for myself when I’m home, I’ll just deal with washing my dishes the old fashioned way. As I said at the outset, this particular problem was my own fault. Pity the solution isn’t less costly and complicated. Michael Russnow’s website is www.ramproductionsinternational.com

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Alan Frumin May Rise From Obscurity to Craft Senate’s Health-Care Overhaul

August 12, 2009

By Brian Faler Aug. 12 (Bloomberg) — The central figure in Congress’s struggle to craft health-care legislation may be someone who’s neither a Democratic nor Republican lawmaker, or an elected official of any kind. He’s Alan Frumin , Senate parliamentarian. It’s a role the obscure official could assume if the Senate fails to reach a bipartisan deal on a health-care bill. Democratic leaders and President Barack Obama say they would prefer such an accord. If they can’t get it, they have signaled they will turn to the so-called reconciliation procedure to short-circuit Republican opposition. That move would enable Senate Democrats to pass a bill with 51 votes, rather than the 60 typically needed for contentious legislation. Under Senate rules, it also would give Frumin, 62, broad authority to decide which portions of the Democrats’ bill are relevant to the budget and empower him to delete provisions he considers unrelated. “You’d end up with the parliamentarian of the United States Senate writing a health-care bill,” said Senator  Lamar Alexander , a Tennessee Republican. Provisions of a health-care plan Frumin may remove, lawmakers say, include a proposal barring insurers from denying coverage, the creation of a government-run insurance program and efforts to encourage preventive medicine. Used by Both Parties Reconciliation has been used 22 times, by both parties, since it was created in 1974. Republicans relied on it in 1981 to cut spending programs such as welfare and food stamps. President George W. Bush employed the procedure to approve his tax cuts. In the mid-1990s, President Bill Clinton revamped welfare policies with it. In 2007, Senate Democrats invoked it to pass a measure cutting subsidies to student-loan providers. Talk of reconciliation in the health-care battle intensified as the Senate headed into its August recess without an agreement on a bill. Senator  Charles Schumer , a New York Democrat, said last week that if the Finance Committee’s Republicans and Democrats couldn’t strike a deal by Sept. 15, his party may go it alone through reconciliation. Obama also raised that prospect. The reconciliation process was devised to make it easier to trim the federal deficit by removing the 60-vote requirement that proved a barrier to passing tax increases or spending cuts. Senate rules bar lawmakers from using it to pass measures tangential to the budget. Appointed in 2001 Frumin declined to comment. A graduate of Colgate University in Hamilton, New York, and Georgetown University’s law school in Washington, he’s worked in the parliamentarian’s office since 1977. He was appointed to the top job in 2001 after his predecessor, Bob Dove , was fired by then-Majority Leader Trent Lott , a Mississippi Republican. Frumin became the first parliamentarian named by both parties. The job pays about $167,000 a year. A senator may demand that a bill’s provision be deleted if it has only an “incidental” budgetary impact. Deciding what counts as incidental is the parliamentarian , whose rulings stand unless overridden with 60 votes. Republicans have said that if Democrats invoke reconciliation, they would respond by turning to Frumin to try to leave a health-care measure in tatters. Senator Tom Coburn , an Oklahoma Republican, said he has been researching Frumin’s role under reconciliation. He said he didn’t want to give Democrats advance warning by identifying the provisions he might target. “I’m not going there,” Coburn said. Concern The chamber’s No. 2 Democrat, Senator Dick Durbin of Illinois, said he was concerned that “just about any of the insurance reforms we’re talking about” could be eliminated by Frumin on grounds they aren’t connected to the budget. That includes provisions to bar insurance companies from denying coverage to those with pre-existing conditions. Also vulnerable, said Senator Kent Conrad , a North Dakota Democrat, is a public insurance plan that Obama and many in his party consider crucial and is opposed by most Republicans. Proposals designed to encourage preventive medicine may also be struck, said Senator Charles Grassley of Iowa, the finance panel’s top Republican. The parliamentarian’s authority to alter legislation under reconciliation stems from the so-called Byrd Rule, named for Senator Robert Byrd , the West Virginia Democrat who devised it. Durbin calls the rule “the most inscrutable thing I’ve ever dealt with” in the Senate. ‘Chopped Up’ Dove said that because of the position’s power, any health-care bill “has the potential of being very badly chopped up” under reconciliation. “It will be a huge mess.” He declined to speculate on which provisions might run afoul of the rule, saying “only one person knows the answers to your questions — his name is Alan Frumin .” Dove said Frumin would probably drop anything the Congressional Budget Office said wouldn’t affect the budget. Even a provision that affects the budget may be deleted if Frumin concludes “the real reason that it’s there is not for its budgetary implications but for its policy implications,” Dove said. As a hypothetical example, he said that as parliamentarian he would kill a provision barring the government from financing abortions because saving money wasn’t the reason it was put in a bill. Lawmakers “get really ticked off” about such rulings, Dove said. “I made enemies by the score,” he said, recalling he once dropped 250 provisions from a bill. To contact the reporter on this story: Brian Faler  in Washington at   or bfaler@bloomberg.net .

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North Korea Rejects China Model as Kim Jong Il Spurns Furs in Nuclear Test

August 4, 2009

By Bomi Lim Aug. 4 (Bloomberg) — The closing of Kim Yong Gu’s fur clothing factory in North Korea may be the beginning of the end for the communist country’s only cross-border business center with the South, the last symbol of reconciliation between the former wartime foes. As the North makes documentaries about leader Kim Jong Il following reports he has terminal cancer, businessman Kim pulled out after his managers were stranded in a government protest of military drills by the U.S. and the South

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