The Shit Our Leaders Pull And Lie About

You always knew this was so:

In the late spring of 2001, Vice President Cheney held a series of top secret meetings with the representatives of Exxon-Mobil, Conoco, Shell and BP America for what was later called the Energy Task-force. Their job, ostensibly, was to map out America’s Energy future. Since late 2001 several public interest groups, including the very conservative Judicial Watch, sued to have the proceedings of those meetings opened to public scrutiny. In March 2002, the Commerce Department turned over a few documents from the Task-force meetings to Judicial Watch, among which was the map of Iraq’s Oil Fields, dated March 2001 (above) and a list of the existing “Foreign Suitors” for Iraq Oil. Since that time, Cheney’s office has fought fiercely (and so far, successfully), right up to the Supreme Court, to keep the proceeding secret and to keep any of the private industry officials from disclosing any information about the meetings. Since we all now know the Bush administration’s energy policy, there can be only one explanation for the extraordinary efforts Cheney has taken to keep this secret–he was discussing the potential for a takeover of Iraq’s oil with the companies that might manage the resource, even before 9/11 gave him the excuse to do it.

A little context would be helpful. In early 2001, the Saudi’s were growing impatient that the large American Military presence in their land was causing tension from Muslim clerics who joined Bin Laden’s 1996 call for the “infidel to leave the Holy places of Islam”. In late 2001, the Saudi’s prevented the U.S. from using our Saudi Air Base for attacks on Afghanistan. As the New York Times reported, our departure from Saudi Arabia was abrupt.

The Prince Sultan base, which at the height of the war this spring housed 10,000 American troops and 200 planes, has now been supplanted as the Middle East’s main American military air operations center by Al Udeid Air Base in Qatar.

This last phase of the American departure from the base occurred with almost no fanfare, attracting only minor mention in the Saudi press. ”It was as if they were never here,” a senior Saudi official said. ”They left very quietly.”

Most of the senior policy makers in the Bush administration had as early as January 26, 1998 (while they were still out of power) made explicit their Iraq regime change policy in an extraordinary open letter to President Clinton.

In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy.

So for Cheney in the spring of 2001, the desired outcome of U.S. control of Iraq was not in doubt. What was of concern as you can see from the “Oil Suitor List” (here and here) was that both China and Russia had signed “production sharing contracts” with the Iraq Oil Ministry to develop most of the major fields. The reason this becomes important now is that with yesterday’s agreement in the Iraqi Parliament over Amnesty and Revenue Sharing, the American Embassy is now pushing hard for an Iraq Oil Law which would open up huge new concessions to the Oil Companies that were part of Cheney’s Task force. This rush for a new law confuses the Iraqis.

And as Tariq Shafiq, one of the three-member team charged with drafting the petroleum law for the Iraq Ministry of Oil suggested at the hearing, because Iraq itself doesn’t need to develop those untapped reserves for another decade, pressure to immediately implement any provision that would open them up for exploration and development “fuels the argument” that the Americans and British “are there for the oil.”

There has been a very informed discussion on these pages recently, about the role of U.S. Hard Power in a world increasingly dominated by economic and cultural Soft Power moves by our commercial rivals around the globe. If we are to have an honest discussion about imperialism, mercantilism and the role of our government in an everchanging landscape, wouldn’t shining a little sunlight on the discussions of the Cheney Energy Task-force be a place to start?

Link.

The Recent Past Seen As The Future In The Future Back Past

Bad News

Jaded by the sight of what it deemed "run-of-the-mill" orifices, the nation's pornography-saturated populace released a statement Monday demanding a new bodily opening to leer at. "At this point, staring at an anus, vagina, or beckoning mouth has become so commonplace that it is no more titillating than ogling, say, the human elbow," the statement read in part, its list of demands specifying that the new orifice, wherever its location on the body, must be concealed by some sort of clothing or shroud during the majority of the day, so that the viewer grows more eager for its eventual revelation when its covering is seductively removed. "If at all possible, we'd prefer some sort of self-moistening orifice that grips tightly enough to constrain fingers and foreign objects, but also gapes wide enough to fit a human head." According to pornographic historians, there hasn't been a public outcry like this since 1989, when the nation's mainstream pornographic-film industry pacified its audience by unveiling the first penetrable asshole.

Oh wait, it's from The Onion! Never mind.

How The Wingnut Works; Or How And Why It Is Defective

For, um, real.

The Congressional Whackos Go Crazy!

Greenwald explains the above.

Joe Conason Asks: Johnny Mac: Reformer Or Lying Sack Of Shit?

Short version: not the former.

The long version:

While reporters, critics and campaign flacks debate whether the New York Times probe of John McCain's relationship with lobbyist Vicki Iseman was undercooked or overdone, the sexual implications should not distract from the story's real significance. Iseman is blond, buxom and three decades younger than the Arizona senator, but nobody except Cindy McCain should resent their alleged affair. Her husband has never pretended to be a sexual puritan, like so many of the hypocrites in his party.

But McCain has long pretended (and still pretends) to be purer than ordinary politicians compromised by special interests, soft money and lobbyist perks, which in Washington can include anything from pizza and beer to private air travel, free limousine service, luxury gifts and, of course, extramarital sex -- as scandal after scandal has proved in salacious detail.

We may never know exactly what kind of relationship McCain pursued with Iseman. But if she is a symbol of broader patterns in his political career, as the Times story suggests, then it becomes easier to understand why many of his colleagues regard this great reformer as a preening phony. Although he has often displayed independence from the pressures of the capital, he has sometimes succumbed to those influences; and while he may seem to shun lobbyists, he actually surrounds himself with them.

Indeed, the McCain spokesmen who have mounted his aggressive counterthrust against the New York Times are lobbyists themselves, or at least that's what they do when they aren't speaking up for the integrity and incorruptibility of their candidate.

Among the loudest McCain mouthpieces is Charlie Black, a seasoned Republican operative whose client roster dates back to such paragons as the late Filipino President Ferdinand Marcos and several African dictators, and more recently has featured Erik Prince, the mercenary entrepreneur who founded Blackwater. (Black's wife is a lobbyist too, and his firm, known as BKSH, is owned by Burson-Marsteller, the enormous P.R. conglomerate chaired by Hillary Clinton's top campaign advisor, Mark Penn.) McCain's campaign manager, Rick Davis, is also a lobbyist, whose client interests in the broadcasting and cable industry overlapped with those represented by Iseman and her firm, Alcalde & Fay. During the off years between presidential elections, Davis collected donations from companies regulated by the Senate Commerce Committee, chaired by his boss McCain, for the amusingly named "Reform Institute," which also paid handsome sinecures to Davis and various other McCain campaign consultants. McCain's chief fundraiser is Tom Loeffler, a prominent lobbyist and former Texas congressman whose clients range from PhRMA to the kingdom of Saudi Arabia.

Much of the reporting on Iseman and McCain in the Times and other media outlets has focused on the communications companies represented by her firm, notably including Cablevision, Univision and Paxson Communications, now called Ion Media. Certainly it is clear that the senator provided consideration to the broadcasting and cable companies that Iseman represented, notably Paxson, in his role overseeing the Federal Communications Commission. Those alleged favors deserve further examination, but there are other areas that should also be scrutinized.

Eight years ago, when McCain's connection with Iseman alarmed his staffers, the most lucrative lobbying contracts won by Alcalde & Fay were with the cruise ship industry. In 2001 alone, Iseman's firm received well over a million dollars from passenger ship companies and interest groups, which include local port authorities in Florida as well as companies such as Carnival Cruises. That year, the International Council of Cruise Lines paid Alcalde & Fay a fee of $990,600, by far the largest amount from a single interest that the firm has earned during the past decade. Iseman herself is a longtime registered lobbyist for Carnival.

It may be just a coincidence that around the same time, McCain became a dedicated sponsor of bills to deregulate the cruise and passenger ship industries, which have been hobbled for decades by protectionism and national security laws. Year after year, he promoted legislation that would have permitted greater freedom for foreign-flag cruise ships to operate in U.S. coastal waters, even while he occasionally scolded the cruise operators for persistent safety problems on their boats. During those years, he became known as the best friend of the port authorities, cruise lines and others seeking to rewrite laws dating back to 1886 that protect American ships from foreign competition.

McCain may well have felt there were principled reasons to change those statutes, but his positions also meshed neatly with the most important group of clients at Iseman's company. The most troubling incident linking the senator and the lobbyist, according to staffers interviewed by the Times, occurred on a February night when McCain and Iseman flew back together on a Paxson corporate jet from Florida to Washington. That evening they had attended a small dinner party at the "Miami-area home of a cruise-line executive," who was raising money for McCain's "reform" presidential campaign.

The Times Inspires The Wingnuts To Support Johnny Mac

Note that the quote apparently is not a parody.

Over the past month, John McCain's biggest problem has been convincing conservatives that he's one of them -- or at least close enough to them to be an acceptable Republican presidential nominee. Well, it looks like the New York Times just handed a solution to McCain's problem on a silver platter.

The Times' story about McCain's possible relationship with lobbyist Vicki Iseman, and suggestions that he may have given her improper special treatment, might seem at first glance to have no upside for the McCain campaign. But for many on the right, the Times is a 50-foot-tall boogeyman, and the fact that the paper published what looks to some like an unfair hit piece could be a good enough reason for many conservatives previously wary of McCain or outright opposed to him to coalesce around him now.

Don't think the McCain campaign won't take advantage of that: It has already rolled out a new fundraising e-mail based on the article. The e-mail, sent out under campaign Manager Rick Davis' signature, includes a photo of Thursday's Times' front page that has been turned into a hyperlink above a caption reading "Help us fight back."

The text of the e-mail, in full:

Well, here we go. We could expect attacks were coming; as soon as John McCain appeared to be locking up the Republican nomination, the liberal establishment and their allies at the New York Times have gone on the attack. Today's front-page New York Times story is particularly disgusting -- an un-sourced hit-and-run smear campaign designed to distract from the issues at stake in this election. With John McCain leading a number of general-election polls against Barack Obama and Hillary Clinton, the New York Times knew the time to attack was now, and they did. We will not allow their scurrilous attack against a great American hero to stand.

The New York Times -- the newspaper that gave MoveOn.org a sweetheart deal to run advertisements attacking General Petraeus -- has shown once again that it cannot exercise good journalistic judgment when it comes to dealing with a conservative Republican. We better get ready for more of the Democrats' attacks over the coming months as the Democrats pick their nominee, MoveOn.org starts spending their unlimited soft money, and the liberal media tosses standards aside in an attempt to stop our momentum. We need your help to counteract the liberal establishment and fight back against the New York Times by making an immediate contribution today.

John McCain has a 24-year record of serving our country with honor and integrity. He has led the charge to limit the money and influence of the special interests in politics and stomp out corruption. His life and his record prove just how preposterous the smear by the New York Times really is.

Objective observers are viewing this article exactly as they should -- as a sleazy smear attack from a liberal newspaper against the conservative Republican frontrunner. Sean Hannity said, after reading the article three times, "It was so full of innuendo and so lacking of fact, and so involved in smear, I came to the conclusion that the goal here was to bring up a 20-year-old scandal." Washington attorney Bob Bennett, who was the Democrat counsel during the Keating investigation, said, "This is a real hit job." Joe Scarborough called the allegations "outrageous." Even pundit Alan Colmes -- not known for his conservative leanings -- concludes "this is a non-story."

Yet, it is there, right on the front page of the New York Times. It is now dominating the cable news coverage. We can only expect these sorts of baseless attacks to continue as we move into the general election cycle. We are going to need your help today, and your continued help in the future to have the resources to respond. We'll never match the reach of a front-page New York Times article, but with your immediate help today, we'll be able to respond and defend our nominee from the liberal attack machine.

Davis makes a couple of strange claims in the e-mail. First, MoveOn was not given a "sweetheart deal" for its ad about Petraeus; it was given a standard rate.

Second, Davis' first two examples of "objective observers" are just plain silly. This may be the first time in his life Sean Hannity has been referred to as objective, and while, yes, Bob Bennett is a Democrat, he has also been representing McCain in discussions with the Times about this story.

Quote Of The Day

Howard Dean on the next Beloved Leader:

I have no idea whether the affair story is true or not, and I don't care. What I do care about is John McCain -- and this has been well documented -- is talking all the time about being a reformer and a maverick, and in fact, he has taken thousands of dollars from corporations, ridden on their corporate jets, and then turned around and tried to do favors for them and get projects approved. He has tons of lobbyists on his staff. This is a guy who is very close to the lobbyist community, a guy who has been documented again and again taking contributions and then doing favors for it. This is not a guy who is a reformer. This is a guy who has been in Washington for 25 years and wants to give us four more years of the same, and I don't think we need that ...
This goes all the way back to the Keating Five scandal and the S&L scandals, where he took a hundred thousand donations, rode on corporate jets and then intervened on Charles Keating's behalf -- and again and again we see this ...

This is not a guy who is a reformer. He talks about change, and he makes a big deal about not being like Bush when in fact he is Bush. He voted for Bush's tax cuts after saying he didn't, and has been responsible for a $6 trillion national debt that our children are going to have to pay. He thinks we ought to stay in Iraq for 100 years. He thought it was great that the president vetoed healthcare for our kids under 18. This is four more years of George Bush, and I don't think the American people are going to buy it.

Warning To Obama; Don't Get Swiftboated, Bro'!

It may be too little too late, but Hillary Clinton may have been onto something with her warning to Democrats last night.

Only one of us, she said about her and Barack Obama at a rally in Youngstown, Ohio, is "ready to defeat the Republicans."

On potentially lethal lines of attack, religion and patriotism, Obama has twice now demonstrated that he's not sufficiently aware of the danger that exists from the conservative Freak Show that did as much to beat John Kerry as George W. Bush did in 2004.

Last year, Obama's campaign largely ignored the persistent rumor that he was some sort of crypto-Muslim. Emails to this effect circulated for months, tainting the first impression many casual voters had of the young senator. Obama's camp didn't want to give the smear more attention by spotlighting it, but it reached such a fever pitch in the days leading up to Iowa that the candidate himself finally had to bring it up in his stump speech. And even now, new anecdotes emerge every day about voters who are wary of Obama's middle name (Hussein) or his purported Muslim roots.

And again this week, they've been slow out of the blocks in recognizing another danger zone.

"For the first time in my adult lifetime, I'm really proud of my country," Michelle Obama said Monday in Madison, Wis.

By that evening, the quote was the top headline on the Drudge Report and quickly found its way onto conservative blogs.

Yesterday afternoon on his influential radio show, Rush Limbaugh played the clip and then lit into both Obama's.

"Doesn't it just grate on you that liberals in general are not proud of their country, period?" Limbaugh asked.

By last night, the conservative commentators on Fox News were in high dudgeon over her comments, repeating them over and over before lambasting her and predicting they would be used against the candidate this fall.

And as of now, Wednesday morning, Michelle Obama has made no public comments nor issued any statement to stop the bleeding. Only Obama campaign advisers have sought to explain away an obvious gaffe.

Now, the Obama camp can make the case that her comments are being distorted and that they don't want to legitimize their right-wing tormentors by having Michelle apologize or even clarify the statement.

After all, the mainstream media hasn't exactly pounced on the affair. The New York Times, for example, had just a small story deep in the paper today, completely overshadowed by Obama's success last night.

It all sounds familiar, doesn't it?

Kerry and his top aides didn't want to elevate the attacks of the Swift Boat Veterans for Truth by forcefully rebutting them. And the Swifties didn't exactly garner much attention when they launched their campaign in the summer of 2004. The elite newspapers and network newscasts initially gave them only the most cursory mention. Plus, Kerry was riding high after his military-bedecked convention. Why dignify a few fringe voices?

But as Kerry learned too late, the politico-media world has changed. Obama may not want to play by the rules of the Drudge-Limbaugh-Fox News axis, but their influence is as real as the voters they reach.

More ominous for Obama is that his general election opponent in waiting appears to appreciate the opportunities afforded by the new media forces.

The right-wing media voices may not have any great affection for John McCain, but the senator and some of his top advisers have been around long enough to know that most of these conservatives loathe liberals even more.

They’ll never go anywhere near the Muslim smear or anything approaching racial territory, of course (that has already proven to have considerable currency underground). But there is nothing that delights a Republican operative more than the prospect of a Democratic candidate (or spouse) criticizing the country. It plays right into the blame-America-first narrative that the GOP has been beating over the heads of Democratic candidates dating back to George McGovern in ’72.

So sure enough, Cindy McCain used a public appearance the day after Michelle Obama’s comments to bring them up and note that, for the record, she is “very proud of [her] country.”

That McCain doesn’t typically delve in partisan politics and that her husband served in Vietnam and two sons are currently on active duty today only made her remarks that much more striking.

More important, they doused gasoline on a fire that was already burning on the right and helped pushed it into the mainstream media.

The good news for Obama is that he and his campaign have now — assuming they’ve grasped the impact — been given something of a warning shot. It’s only February. There is time yet to figure out the difference between the way to win and the way to lose.

UPDATE: Barack Obama has said that what his wife meant is that "this is the first time that she's been proud of the politics of America."

Link.

Sign Of Our Tanking Economy

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.[

more]

Living Is More Fatal

U.S. cancer deaths rose by more than 5,000 in 2005, a reversal of a two-year downward trend, the American Cancer Society said in a report issued yesterday.

The group counted 559,312 people who died from cancer.

The cancer death rate among the overall population continued to fall, but only slightly, after a couple of years of more dramatic decline.

In 2005, there were just under 184 cancer deaths per 100,000 people, down from nearly 186 the previous year. Experts said it wasn't surprising that the rate would stabilize.

The cancer death rate has been dropping since the early 1990s, and early in this decade was declining by about 1% a year. The actual number of cancer deaths kept rising, however, because of the growing population.

It was big news when the rate dropped by 2% in both 2003 and 2004, enough to cause the total number of cancer deaths to fall for the first time since 1930. President Bush and others hailed that as a sign that federally funded research was making strides against the disease.

But now the death rate decline is back to 1%. And the 2005 numbers show annual cancer deaths are no longer falling, but are up more than 5,400 since 2004.

"The declining rate was no longer great enough to overcome the increase in population," said Elizabeth Ward, a co-author of the cancer society report.

It may be that cancer screenings are not having as big an effect as they were a few years ago, said Dr. Peter Ravdin, a research professor in biostatistics at the University of Texas M.D. Anderson Cancer Center in Houston.

Link.

More On The Great Economic Meltdown

Again, for consideration. This is not necessarily an endorsement of the item.

The striking thing about the seemingly endless collapse of the subprime-mortgage market is how egalitarian it has been. It's nearly impossible to draw a demographic line between the victims and the perps. Millions of ordinary people ignorant of high finance have lost billions of dollars, but so have the biggest names on Wall Street, and both groups made exactly the same bet: that real estate values would never fall. Stan O'Neal, the former C.E.O. of Merrill Lynch, was fired for the same reason the lower-middle-class family in the suburban wasteland between Los Angeles and San Diego may have lost its surprisingly nice home. Both underestimated the likelihood of an unlikely event: a financial panic. In retrospect, the small army of Wall Street traders who lost tens of billions of dollars in subprime-mortgage investments looks as naive and foolish as the man on the street. But there's another way of viewing this crisis. The man on the street, for the first time, acted on the same foolish principles that have guided the behavior of sophisticated Wall Street traders for the past few decades.

If you had to pick a moment when those principles first appeared a bit shaky, you could do worse than the 1987 stock market crash. Black Monday was the first of a breed: a panic that suggested disastrous economic and social consequences but in the end had no serious effects at all. The bursting of the internet bubble, the Asian currency crisis, the Russian government bond default that triggered the failure of the hedge fund Long-Term Capital Management—all of these extreme events seemed, in the heat of the moment, to have the power to change the world as we know it. None of them, it turned out, was that big of a deal for the U.S. economy or for ordinary citizens. But the 1987 crash marked the beginning of something else too—a collapse brought about not by real or even perceived economic problems but by the new complexity of financial markets.

A new strategy known as portfolio insurance, invented by a pair of finance professors at the University of California at Berkeley, had been taken up in a big way by supposedly savvy investors. Portfolio insurance evolved from the most influential idea on Wall Street, an options-pricing model called Black-Scholes. The model is based on the assumption that a trader can suck all the risk out of the market by taking a short position and increasing that position as the market falls, thus protecting against losses, no matter how steep. Nearly every employee stock-ownership plan uses Black-Scholes as its guiding principle. A pension-fund manager sitting on billions of U.S. equities and fearful of a crash needn't call a Wall Street broker and buy a put option—an option to sell at a set price, limiting potential losses—on the S&P 500. Managers can create put options for themselves, cheaply, by shorting the S&P as it falls, and thus, in theory, be free of all market risk.

Good theory. The glitch was discovered only after the fact: When a market is crashing and no one is willing to buy, it's impossible to sell short. If too many investors are trying to unload stocks as a market falls, they create the very disaster they are seeking to avoid. Their desire to sell drives the market lower, triggering an even greater desire to sell and, ultimately, sending the market into a bottomless free fall. That's what happened on October 19, 1987, when the sweet logic of Black-Scholes was shown to be irrelevant in the real world of crashes and panics. Even the biggest portfolio insurance firm, Leland O'Brien Rubinstein Associates (co-founded and run by the same finance professors who invented portfolio insurance), tried to sell as the market crashed and couldn't.

Oddly, this failure of financial theory didn't lead Wall Street to question Black-Scholes in general. "If you try to attack it," says one longtime trader of abstruse financial options, "you're making a case for your own unintelligence." The math was too advanced, the theorists too smart; the debate, for anyone without a degree in mathematics, was bound to end badly. But after the crash of 1987, individual traders at big Wall Street firms who sold financial-disaster insurance must have smelled a rat. Across markets—in stocks, currencies, and bonds—the price of insuring yourself against financial disaster rose. This rise in prices and the break with Black-Scholes reflected two new beliefs: one, that huge price jumps were more probable and likely to be more extreme than the Black-Scholes model assumed; and two, that you can't manufacture an option on the stock market by selling and buying the market itself, because that market will never allow it. When you most need to sell—or to buy—is exactly when everyone else is selling or buying, in effect canceling out any advantage you once might have had.

"No one believes the original assumptions anymore," says John Seo, who co-manages Fermat Capital, a $2 billion-plus hedge fund that invests in catastrophe bonds—essentially bonds with put options that are triggered by such natural catastrophes as hurricanes and earthquakes. "It's hard to believe that anyone—yes, including me—ever believed it. It's like trying to replicate a fire-insurance policy by dynamically increasing or decreasing your coverage as fire conditions wax and wane. One day, bam, your house is on fire, and you call for more coverage?"

THE PROBLEM

 This is interesting: The very theory underlying all insurance against financial panic falls apart in the face of an actual panic. A few smart traders may have abandoned the theory, but the market itself hasn't; in fact, its influence has mushroomed in the most fantastic ways. At the end of 2006, according to the Bank for International Settlements, there were $415 trillion in derivatives—that is, $415 trillion in securities for which there is no completely satisfactory pricing model. Added to this are trillions more in exchange-traded options, employee stock options, mortgage bonds, and God knows what else—most of which, presumably, are still priced using some version of Black-Scholes. Investors need to believe that there's a rational price for what they buy, even if it requires a leap of faith. "The model created markets," Seo says. "Markets follow models. So these markets spring up, and the people in them figure out that, at least for some of it, Black-Scholes doesn't work. For certain kinds of risk—the risk of rare, extreme events—the model is not just wrong. It's very wrong. But the only reason these markets sprang up in the first place was the supposition that Black-Scholes could price these things fairly."

Black-Scholes didn't work; trillions of dollars' worth of securities may have been priced without regard to the possibility of crashes and panics. But until very recently, no one has bitched and moaned about this problem too loudly. Lay folk might harbor private misgivings about the clergy, but as lay folk, they are reluctant to express them. Now, however, as the subprime market unravels, the beginnings of a revolt against the church seem to be taking shape.

One of the revolt's leaders is Nassim Nicholas Taleb, the bestselling author of The Black Swan and Fooled by Randomness and a former trader of currency options for a big French bank. Taleb can precisely date the origin of his own personal gripe with Black-Scholes: September 22, 1985. On that day, central bankers from Japan, France, Germany, Britain, and the United States announced their intention to torpedo the U.S. dollar—to reduce its value in relation to the other countries' currencies. Every day, Taleb received a list of his trading positions from his firm and a matrix describing his risks. The matrix told him how much money he stood to make or lose, given various currency fluctuations. That September 22, when the central bankers announced their plan to lower the dollar's value, he made money but didn't know it. "I didn't know what my position was," he says, "because the movement was outside the matrix they'd given me." The French bank's risk-analysis program assumed that a currency crash of this magnitude would occur once in several million years and therefore wasn't worth considering.

Taleb made a killing that day, but it wasn't thanks to a grand plan and it wasn't happy money. "People in dark suits started coming from Paris," he says. "They said that the only way I could have made that much was to have taken far too much risk." But he hadn't. They had simply failed to account for the true nature of risk in financial markets. "Then I started looking at the history of markets," he says. "And I saw that these sorts of things happened all the time." Taleb became obsessed with the way prices in the options market, based on the famous Black-Scholes model, underestimated the risk of extreme and rare events. He set up his trading to profit from such events by buying up disaster insurance that would, according to Black-Scholes, be considered overpriced. When October 19, 1987, arrived, he was prepared. "Ninety-seven percent of all the returns I ever made as a trader, I made on that day," he says.

THE SOLUTION

 In the past two years, Taleb has co-authored a pair of papers that have appeared in the sort of academic journals that originally published the Black-Scholes model. He and his co-author attack the model head-on in its own language (math), and as much as call for a retraction of the Nobel Prize awarded to Myron Scholes and Robert Merton for their work in creating the model. "This is what I'm saying to Merton and Scholes," Taleb says. "You guys are just parasites. You're not bringing anything useful to the market. You are lecturing birds on how to fly. You're watching them fly. And then you're taking credit for it."

He's saying more than that, actually. He's saying that the academics, in lecturing the birds, have made flying more difficult. Like John Seo—like a lot of traders who both understand the math of Black-Scholes and the reality of the marketplace—Taleb believes that the model has a pernicious effect: By leading investors to think they understand complicated financial risk when they actually do not, and by mispricing that risk, Black-Scholes encourages them to take more chances than they rationally should. The big Wall Street firms, oddly enough, are the most foolish in this regard. In a post-Black-Scholes world, these companies, more than anyone else, would be compelled to reduce their exposure to financial catastrophe and to raise the prices at which they sell financial insurance to others. Indeed, if no one has made too much of a stink about mispriced risk until now, it may be because the chief victims have been the big Wall Street firms that typically wind up with it. "The main reason there isn't a fundamental public outcry against Black-Scholes," says Seo, "is that the main losers from its mispricing are broker-dealers." The crashes happened, yet only Wall Street traders—rather than living and breathing human beings with whom the world could empathize—suffered.

The collapse of the subprime-mortgage bond market is different from the general run of modern financial panics in this respect: It involves millions of blissfully oblivious people who have never heard of the Black-Scholes options-pricing model. Nevertheless, it was Black-Scholes that gave them—and the rest of the financial system—the excuse to risk the roof over their head. They were followed by the mortgage brokers who lent them money and the banks that funded the brokers. Black-Scholes is no longer just a model; it has evolved into a climate of opinion about a certain kind of financial risk. It wasn't only big Wall Street firms, but a lot of small real estate speculators—otherwise known as homeowners—who, in effect, sold put options too cheaply against the risk of extreme, rare events. That many of these people literally live inside the investment that they've speculated on sharpens the pain but fails to drive home the point. Financial panics have become almost commonplace; events that are meant to occur once in a millennium now seem to occur every few years. Could this be because the financial system was built on an idea that badly underestimates the risk of catastrophes—and so conspires with human nature to create them?

Link.

How The Rightists Will Whump Obama

This is of course after the fact that he's essentially black in a still-racist country and that Big Media are rightist water carriers.

I’m sure some Democrat is going to interpret this as reverse psychology, or that I’m simply issuing misinformation from Dark Master Rove, etc.

So they’ll probably ignore this warning. But if I were a Democrat in Texas or Ohio (or Pennsylvania… or Vermont or Rhode Island, for that matter), I’d be a little hesitant before I drove a stake into the heart of the Hillary Clinton campaign in the coming weeks.

Barack Obama entered national politics with what was widely regarded as a dazzling speech at the Democratic convention in Boston. His expected opponent, Jack Ryan, imploded when his private divorce records were ordered released to the press. Alan Keyes barely amounted to a speedbump. Once elected, he was immediately featured on magazine covers, with Newsweek declaring that in a country of red states and blue states, he was "uniquely qualified to nudge the country toward the color purple."

Barack Obama is doing fantastic in the head-to-head matchups with McCain (or previously, any other Republican) because the average voter has probably heard little or nothing negative about him. Ironically, some of the most widely-trafficked criticisms are nonsense – that he’s secretly a Muslim, or was sworn in on a Koran. So far, there’s nothing to back up speculation from a Hillary surrogate that he dealt drugs in addition to using them.



Democrats may believe that because Obama is besting Hillary, he can withstand anything McCain will throw at him. But a lot of lines of attack that are available for John McCain that just wouldn’t work for Hillary Clinton. For starters, she’s tried to go after him on experience, but she’s got all of four more years in the Senate than he does, and is left arguing that as First Lady, she was responsible for all the good parts of her husband’s White House and none of the bad ones.

John McCain can point out that Barack Obama opposed "letting people use a self-defense argument if charged with violating local handgun bans by using weapons in their homes. The bill was a reaction to a Chicago-area man who, after shooting an intruder, was charged with a handgun violation." Hillary Clinton can’t.

John McCain can point out that Barack Obama sought to ban the sale of firearms at gun shows except for "antique" weapons. Hillary Clinton can’t.

John McCain can point out that Obama wanted to make it a felony if your gun is stolen from your residence and used in a crime, if the government determines you did not “securely store” the weapon. Hillary Clinton can’t.

John McCain can point out how Obama opposes a ban on partial birth abortion ban, and who voted against a bill that would require medical care for aborted fetuses who survive. Hillary Clinton can’t.

John McCain can point out how Obama was the only state senator to oppose a law that prohibited early prison release for sex offenders. For some reason, Hillary Clinton hasn’t.


John McCain can point out that Barack Obama has been rated the most liberal lawmaker in the U.S. Senate by National Journal. Hillary Clinton can’t.

In other words, the only information most Americans have encountered regarding Obama so far has been gushing press coverage, and ineffective attacks on him from Hillary from the left. Conservatives have not, by and large, focused their ire on Obama… mostly because he ain’t her.

But Obama has also been helped by a Aegean shield of charisma, by the gut-level connection that he, and his wife, just seem like likeable people. A lot of conservatives and Republicans, myself included, looked at them and thought that, policy differences aside, they seem like decent folk.

But in the past few weeks, we’re seeing a different side to the nice guy. We’re seeing crowds chant, ‘we are the ones we have been waiting for.’ We’ve seen speeches with the word ‘hope’ repeated with such frequency, it appears to be used as a comma. We’re seeing Che appear on the walls of his volunteers’ offices. And finally, Michelle Obama asserted she had no reason to be proud of her country for roughly the last 25 years.

A comment like that, and one has to wonder how many Americans might do a double take and say, “hmm. Maybe these two aren’t as likeable as we thought.”

Once you take away Barack Obama’s likeability… what’s left?So, Democrats… are you sure you want to place that bet?

Link.

Imagine That: No Justice At Gitmo; The Kangaroo Trials Start

The Nation:

Secret evidence. Denial of habeas corpus. Evidence obtained by waterboarding. Indefinite detention. The litany of complaints about the treatment of prisoners at Guantánamo Bay is long, disturbing and by now familiar. Nonetheless, a new wave of shock and criticism greeted the Pentagon's announcement on February 11 that it was charging six Guantánamo detainees, including alleged 9/11 mastermind Khalid Shaikh Mohammed, with war crimes--and seeking the death penalty for all of them.

Now, as the murky, quasi-legal staging of the Bush Administration's military commissions unfolds, a key official has told The Nation that the trials have been rigged from the start. According to Col. Morris Davis, former chief prosecutor for Guantánamo's military commissions, the process has been manipulated by Administration appointees to foreclose the possibility of acquittal.

Colonel Davis's criticism of the commissions has been escalating since he resigned in October, telling the Washington Post that he had been pressured by politically appointed senior Defense officials to pursue cases deemed "sexy" and of "high interest" (such as the 9/11 cases now being pursued) in the run-up to the 2008 elections. Davis, once a staunch defender of the commissions process, elaborated on his reasons in a December 10, 2007, Los Angeles Times op-ed. "I concluded that full, fair and open trials were not possible under the current system," he wrote. "I felt that the system had become deeply politicized and that I could no longer do my job effectively."

Then, in an interview with The Nation in February after the six Guantánamo detainees were charged, Davis offered the most damning evidence of the military commissions' bias--a revelation that speaks to fundamental flaws in the Bush Administration's conduct of statecraft: its contempt for the rule of law and its pursuit of political objectives above all else.

When asked if he thought the men at Guantánamo could receive a fair trial, Davis provided the following account of an August 2005 meeting he had with Pentagon general counsel William Haynes--the man who now oversees the tribunal process for the Defense Department.

"[Haynes] said these trials will be the Nuremberg of our time," recalled Davis, referring to the Nazi tribunals in 1945, considered the model of procedural rights in the prosecution of war crimes. In response, Davis said he noted that at Nuremberg there had been some acquittals, which had lent great credibility to the proceedings.

"I said to him that if we come up short and there are some acquittals in our cases, it will at least validate the process," Davis continued. "At which point, [Haynes's] eyes got wide and he said, 'Wait a minute, we can't have acquittals. If we've been holding these guys for so long, how can we explain letting them get off? We can't have acquittals. We've got to have convictions.'"

Davis submitted his resignation on October 4, 2007, just hours after he was informed that Haynes had been put above him in the commissions' chain of command. "Everyone has opinions," Davis says. "But when he was put above me, his opinions became orders."

Reached for comment, Defense Department spokeswoman Cynthia Smith said, "The Department of Defense disputes the assertions made by Colonel Davis in this statement regarding acquittals."

"The fact that [Haynes] said there can be no acquittals will stain the entire [tribunal] process," says Scott Horton, who teaches law at Columbia University Law School and has written extensively about Haynes's conflicts with the Judge Advocate General's (JAG) corps, the judicial arm of the armed forces, which is charged with implementing the military commissions. According to Horton, Haynes tried to cut the JAG corps out of internal debates over the detention and prosecution of detainees, knowing it was critical of the Administration's views. In private memos and in public Senate testimony, high-ranking officers of the corps have repeatedly expressed concerns about the Administration's justification of "extreme interrogation techniques."

"The JAG corps consists of a group of rigorous professionals, but Haynes never trusted them to do their job," says Horton. "His clashes have always had the same subtext--they want to be independent; he wants them to do political dirty work."

Haynes, a political appointee and chief legal adviser to Defense secretaries Donald Rumsfeld and Robert Gates, was nominated in 2006 by the Bush Administration for a lifetime seat as a judge in the Court of Appeals for the Fourth Circuit. But his nomination never got out of committee, primarily because of the opposition of Republican Senator (and former military lawyer) Lindsey Graham and other members alarmed over Haynes's role in writing, or supervising the writing of, Pentagon memos advocating the use of harsh interrogation techniques the Geneva Conventions classify as torture.

Currently, in his capacity as Pentagon general counsel, Haynes oversees both the prosecution and the defense for the Guantánamo commissions.

"You would think a person in that position wouldn't be favoring one side," says Colonel Davis.

Told of Davis's story about Haynes, Clive Stafford Smith, a defense attorney who has represented more than seventy Guantánamo clients, said, "Hearing it makes me think I'm back in Mississippi representing a black man in front of an all-white jury."

He adds, "It confirms what people close to the system have always said," noting that when three prosecutors--Maj. Robert Preston, Capt. John Carr and Capt. Carrie Wolf--requested to be transferred out of the Office of Military Commissions in 2004, they said they'd been told the process was rigged. In an e-mail to his supervisors, Preston had said that there was thin evidence against the accused. "But they were told by the chief prosecutor at the time that they didn't need evidence to get convictions," says Stafford Smith.

At the time, the military wrote it off as "miscommunication" and "personality conflicts." And then there were changes in personnel. "They told us that the system had been cleaned up...but I guess the more things change, the more they stay the same," says Stafford Smith.

The terrible truth is that even if acquittals were possible, the government has declared that it can continue to detain anyone deemed an "enemy combatant" for the duration of hostilities--no matter the outcome of a trial. Most of the 275 men held at Guantánamo are classified as "enemy combatants," and the hostilities in the "war on terror" could be never-ending.

Says ACLU staff attorney Ben Wizner, "The trial doesn't make a difference. They can hold you there forever until they decide to let you out." The one person to be released from Guantánamo through the judicial process, Australian David Hicks, pleaded guilty. As Wizner wrote in the Los Angeles Times in April 2007, "In an ordinary justice system, the accused must be acquitted to be released. In Guantánamo, the accused must plead guilty to be released."

Still, the trials serve a purpose for the government by providing the semblance of a legitimate judicial process. According to defense attorneys involved--and many of the former prosecutors, like Davis--the process is political, not legal.

"If someone was acquitted, then it would suggest we did the wrong thing in the first place. That can't happen," says Horton sardonically. "When the government decides to clear someone, it calls the person 'no longer an enemy combatant' instead of just saying they made a mistake."

He adds, "For people like Haynes, justice is meant to serve the party."

We The People Screwed By The Supreme Court Three Times In One Day

The Supreme Court delivered three opinions yesterday that set aside state laws, underscoring the dominant role of Congress in regulating commerce among states.

The rulings involved three different states and dealt with unrelated issues: product liability in New York for a faulty medical device, Maine's attempt to keep cigarettes from minors and a California law aimed at protecting star-struck Hollywood hopefuls from unscrupulous talent agents. In each case and by votes unanimous -- or nearly so -- the justices made clear that federal power is to be read broadly, with state authority surviving only when Congress explicitly permits it a role.

FEDERAL POWERS

• The News: The Supreme Court set aside state laws as it ruled on three cases dealing with unrelated issues -- product liability, selling cigarettes to minors and contract arbitration.
• The Bottom Line: In unanimous, or nearly unanimous decisions, the court made clear that federal power is to be read broadly, with state authority surviving only when Congress explicitly permits it a role.
The medical-device case may have the widest impact, because of the high-profile nature of medical-liability cases. The question at issue was whether traditional private-product lawsuits, as well as state regulations, may be pre-empted by federal law.

After a catheter ruptured during angioplasty, the patient and his wife sued the manufacturer, Medtronic Inc. Lower courts in New York dismissed the suit, finding that a 1976 law immunized Minneapolis-based Medtronic, because its catheter had been approved for sale by the Food and Drug Administration.


Jess Brevin discusses three opinions issued by the Supreme Court on Wednesday that overruled state laws.
Writing for an 8-1 court, Justice Antonin Scalia noted that Congress acted after a slew of medical-device failures, and decided it would be better to have a single national standard instead of varying state laws. Justice Scalia added that states remained free to permit private lawsuits "for claims premised on a violation of FDA regulations."

In dissent, Justice Ruth Bader Ginsburg wrote that the 1976 law was intended to add to consumer protections under existing state product-liability laws, not to replace them. (Riegel v. Medtronic Inc.)

The Maine case involved a different kind of health question -- that of keeping cigarettes from minors. Concerned that youngsters could evade proof-of-age rules by ordering cigarettes online, the state adopted a law requiring shipping companies delivering cigarettes to verify the recipient's identity and age.

Maine said its law wasn't intended to displace federal law regulating private shippers, but rather to protect public health -- and noted that Congress itself had pushed states to discourage youth smoking. A trade group representing delivery companies complained that Maine's requirements were costly, burdensome and contrary to a 1994 federal law that pre-empted state trucking regulations.

MORE


• Split Decisions: Cases That Have Divided the Court1
The Supreme Court unanimously agreed. The opinion, by Justice Stephen Breyer, said the Maine law "produces the very effect that the federal law sought to avoid, namely a State's direct substitution of its own governmental commands for 'competitive market forces.'" Congress had created no exception for "public health," and since the term "public health" was so vague, inferring it into the statute could lead to different rules imposed by various states, frustrating the goal of a single, efficient market for delivery services. (Rowe v. New Hampshire Motor Transport Association)

In the California case, the justices underlined the wide scope of the Federal Arbitration Act, finding that when two parties sign a contract agreeing to arbitrate disputes, it supplants a state law assigning such conflicts to a regulatory agency. The court has heard many arbitration cases over the years, and every day, millions of television viewers watch arbitration in action, on TV "court" shows, where a retired judge, dressed in robes, settles disputes as an arbitrator. But, as reported in a page-one article2 in The Wall Street Journal last month, never before had the worlds of the Supreme Court and "The People's Court" intersected.

In this case, Alex Ferrer, a former Florida state judge who now stars in "Judge Alex," a TV show, had sought to void an arbitration clause in a contract with his former manager, Arnold Preston. Mr. Ferrer argued that California's Talent Agencies Act, which assigns disputes between agents and clients to the state labor commissioner, took precedence over the arbitration clause. A California state court agreed, only to be reversed 8-1 yesterday. Writing for the majority, Justice Ginsburg observed that "under the contract he signed, [Mr. Ferrer] cannot escape resolution of those rights in an arbitral forum." "Judge Alex" is produced by Twentieth Television, a unit of News Corp., which also owns The Wall Street Journal. (Preston v. Ferrer)

Link.

The Disaster Is Far Broader Than Just Too Many Bad Subprime Mortgages

With the economy sputtering and banks pulling back on lending, the noose is starting to tighten around a host of struggling companies.

For years, companies had access to easy money for everything from expansions to acquisitions to leveraged buyouts. For many, this global credit boom forestalled painful plant closings, job cuts and asset sales.

Now, the day of reckoning is arriving for some of them, as skittish corporate lenders push them to the brink of bankruptcy and beyond. Yesterday, the credit crisis hit two national retailers: San Francisco-based Sharper Image, which sells high-tech gadgets such as air purifiers and massage chairs, and Lillian Vernon Corp., which sells low-cost gifts such as Easter baskets and welcome mats. Both filed for federal Chapter 11 bankruptcy protection. (See related article.1)


The mounting woes of the banks that supply corporate capital are contributing to the crisis. "The banks really don't know what kind of room they have to add new loans for companies until [the banks] fill the hole on their nonperforming loans," including mortgages, credit-card debt and auto loans that are souring, says Henry Miller, chairman of Miller Buckfire, a financial restructuring firm. "The dominoes have started to fall."

Corporate defaults and bankruptcies have risen sharply this year. The total value of corporate-bond defaults is already approaching the total for all of 2007. Moody's Investors Service now lists 41 companies it considers to be at risk of violating terms of their loan agreements, compared with 25 at the end of last June. Many companies that depend on consumers are on the list, including movie-rental company Blockbuster Inc. and the Landry's Restaurants Inc. chain.

Even some companies already operating under federal bankruptcy protection are feeling the squeeze. Auto-parts maker Delphi Corp. and chemicals concern Solutia Corp. have been unable to line up financing to emerge from court protection.

"The last couple years had been all about delaying the pain," says Scott Brubaker, managing director for the corporate turnaround firm Alvarez & Marsal. "Troubled companies refinanced in 2005 and 2006 that maybe shouldn't have. Now credit markets have snapped the other way, and some companies that should be able to refinance can't or will struggle to."

The companies at risk range across already-weakened sectors such as home builders and mortgage providers. A squeeze in the broader economy is expected to bring tougher times for trucking firms, restaurant chains and retailers.

Edward Altman, an expert on bankruptcy and corporate defaults who teaches at New York University's business school, says that if his forecasts prove correct, companies could default on more than $220 billion of high-yield corporate bonds, leveraged loans and other nonbank debt this year and next. The spike in defaults and bankruptcies, he argues, is a leading indicator of economic trouble.

'Contagion Effect'

"There is a contagion effect the credit markets have on the real economy," he says. "The traditional view had been: The economy impacts defaults, so peak defaults come at the end of a recession. But in the last two recessions, the default rate went up even before the recession."

UBS AG and Credit Suisse Group are among the banks that have recently written down the value of corporate loans on their books. They announced last week a combined $400 million decline in the value of their leveraged loans. Bank losses on corporate loans, which are expected to grow, will come on top of more than $100 billion in write-downs financial firms have taken on subprime-mortgage holdings.


One concern is that banks grappling with such losses will grow more reluctant to lend to fundamentally creditworthy companies.

"There will be big, sound, reasonable companies out there that will be left on the outside looking in," says John G. Chigounis, chairman of Global Investment Advisors, a $1.8 billion investment fund and division of Reich & Tang Asset Management LLC. "They didn't get their refinancing when they should have, and now the window is shut and the credit markets have closed."

Both Sharper Image and Lillian Vernon suffered through abysmal Christmas seasons. Lillian Vernon, a catalog and Internet retailer based in Virginia Beach, Va., has already laid off about 200 people, about half of its work force. The company said in a news release it is weighing a sale or liquidation.

At Sharper Image, sales declined 25% in 2007. Like a growing number of distressed companies, the retailer found itself unable to borrow more money in recent months, as it had done between 2004 and mid-2007, people familiar with the matter say.

Its lender, Wells Fargo & Co., was unwilling to refinance Sharper Image's debt, in part because it found no interest when it looked to sell pieces of the loan to outside investors, these people say. As a result, the retailer "never got the last $10 million" of the financing it expected, one of these people says. Keeping Sharper Image out of bankruptcy court, he says, "was going to take tremendous financing," which wasn't available in the tight credit markets. A spokeswoman for Wells Fargo declined to comment.

Sharper Image, which employs about 2,500, said yesterday it expects to close nearly half its 190 stores and reorganize the remaining operations. The company "could well be sold" during the bankruptcy process, says the person familiar with the situation, but company officials have yet to begin looking for a buyer. Calls for comment to Sharper Image weren't returned.

Sharper Image "was a classic bankruptcy, because it was a company that wasn't able to address its problems for lack of time, lack of cash, and then, lack of credit," says Ted Stenger, managing director at the turnaround and consulting firm AlixPartners LLP. "A year ago, lenders could have found time to refinance. Not anymore."

Closing Stores

Mr. Stenger says Sharper Image may eventually choose to close even more stores and adopt "premier market" strategy: Keep just a few stores in major cities like New York, and rely on its Internet, licensing and mail-order businesses.

Pressure also is building on other retailers. Kohl's Corp., Gottschalks Inc. and Bon-Ton Stores Inc., for example, all posted double-digit sales declines in December.

Bon-Ton, based in York, Pa., is trying to manage a substantial debt load as the retail outlook worsens. It employs about 33,000 at 280 stores across the Northeast and Midwest. In 2006, when money was cheap, it took on more than $1.7 billion in debt to buy 142 former Saks stores from Northern Department Store Group.

The move allowed it to expand from its core markets in New York, Pennsylvania and Ohio into Illinois, Wisconsin, Minnesota and the Dakotas. It has proved costly to integrate the two companies and to market in the new regions, among other things. The 110-year-old retailer had just $24 million in cash and cash equivalents on hand on Nov. 3, a public filing indicates.

Like many regional department stores, Bon-Ton has faced stiff competition from giants like Target. December was an especially difficult month. Bon-Ton's holiday sales were down 11.3%. It has lowered earnings projections twice since November, and its shares were trading yesterday afternoon at $7.12 on the Nasdaq Stock Market, down from $36 a year ago. A spokeswoman for the company declined to comment on its situation.

Bon-Ton has seen customer traffic drop in recent months, despite spending heavily to upgrade its stores. On the second floor of a Bon-Ton store in Lancaster, Pa., on a recent Monday afternoon, construction workers and clerks outnumbered shoppers seven to two.

The dismal Christmas season has led to numerous markdowns. For much of February, Bon-Ton's store in Reading, Pa., has been holding what it calls a Yellow Dot Clearance sale, with aisles of purses, women's apparel, men's jackets and baby clothing marked down, first by 25% to 30%, and then 70% to 75% off the marked-down price.

Last week, Moody's lowered the company's credit rating by one notch, saying that poor consumer traffic over the holidays could force the company to resort to "heavy markdowns." The ratings agency said that it believes that over the next 12 to 18 months, Bon-Ton's cash flow "will not be sufficient to cover all of the cash requirements, including the working-capital needs....Bon-Ton has limited alternative sources of liquidity since all of its assets are pledged to the bank facility and mortgage loans."

Beyond Retailers

Such adverse conditions are hitting more than just retailers. Restaurant chain Buffets Holdings Inc., which owns Ryan's Steakhouse and Old Country Buffet, recently sought bankruptcy protection. It has shut about 50 locations.

Plastech Engineered Products Inc., which makes plastic parts for car makers, also filed for bankruptcy protection recently. Like other auto suppliers, it has been hurt by declining auto sales at customers such as Ford Motor Co. and General Motors Corp. It has also moved to shed employees.

Tight credit markets are also proving a problem for companies operating under bankruptcy protection. In order for a reorganized company to emerge from court supervision, it must line up new capital, called exit financing.

Chemicals giant Solutia and auto-parts supplier Delphi have been unable to secure the billions of dollars each one needs to get out of bankruptcy proceedings. St. Louis-based Solutia, the former Monsanto chemicals division, claimed in a lawsuit that three banks backed out of a commitment to provide about $2 billion in exit financing. The banks said they terminated the deal because they couldn't find other lenders to participate in the loan.

Delphi is seeking $6.1 billion in such financing. It may need to turn to its former parent company, General Motors, for more funding if banks and lenders remain unwilling to step up.

Advisers who specialize in guiding troubled companies through such ordeals are bulking up for a restructuring boom. Miller Buckfire, for example, now numbers about 60 professionals, double where it was three years ago.

"The warning signs were there when you saw companies that had seven-times leverage decide the answer to their problems was to add more debt," says Mr. Miller. "They were doing that when the economy was getting soft. You do the math."

Link.

A Perspective On Waterboarding

Of course it's torture, but it's also an old American tradition practiced under another Republican administration so it's a GOP tradition as well.

Its history is here.

St. John Indeed

The truth is he's really just a dumb (well, fucking stupid) putz (as in: New boss same as the old boss). As for moral character, op cit the 80s savings and loan crisis, Charles Keating, etc.Or read the long version below -- sorta like Johnny's greatest hits, so to speak.

Raw Story has the short version:

The New York Times is detailing explosive charges that Republican presidential front-runner Sen. John McCain had what could be construed as an inappropriate relationship with a Washington lobbyist.

In an article entitled "For McCain, Self-Confidence on Ethics Poses Its Own Risk," Times reporters write that the lobbyist, named as Vicki Iseman, "had been turning up with [McCain] at fund-raisers, in his offices and aboard a client's corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself — instructing staff members to block the woman's access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity."

The article continues that when news organizations reported McCain "had written letters to government regulators on behalf of the lobbyist's clients, the former campaign associates said, some aides feared for a time that attention would fall on her involvement."

McCain and Iseman, according to the Times, both say they never had a romantic relationship.

In a press release at his official campaign website, the McCain campaign issued the following statement:

"It is a shame that the New York Times has lowered its standards to engage in a hit and run smear campaign. John McCain has a 24-year record of serving our country with honor and integrity. He has never violated the public trust, never done favors for special interests or lobbyists, and he will not allow a smear campaign to distract from the issues at stake in this election.

"Americans are sick and tired of this kind of gutter politics, and there is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career."
Not long after the NY Times article was published, Iseman's bio was apparently removed from the website of Alcalde & Faye, the firm that employs her. Huffington Post captured a screenshot of the bio. Blogger Will Bunch has an undated photo of Iseman posing with George W. Bush.

Journalist and author Ron Rosenbaum wrote in a blog post from October of last year that he had "run into a well-connected media person, who told me flatly, unequivocally that 'everyone knows' The LA Times was sitting on a story, all wrapped up and ready to go about what is a potentially devastating sexual scandal involving a leading Presidential candidate." The LA Times apparently never did publish the piece, if it is indeed the same story as reported by the NY Times.

Wait, what about that spiked L.A. Times piece?

So I was down in DC this past weekend and happened to run into a well-connected media person, who told me flatly, unequivocally that “everyone knows” The LA Times was sitting on a story, all wrapped up and ready to go about what is a potentially devastating sexual scandal involving a leading Presidential candidate. “Everyone knows” meaning everyone in the DC mainstream media political reporting world. “Sitting on it” because the paper couldn’t decide the complex ethics of whether and when to run it. The way I heard it they’d had it for a while but don’t know what to do. The person who told me )not an LAT person) knows I write and didn’t say “don’t write about this”.
If it’s true, I don’t envy the LAT. I respect their hesitation, their dilemma, deciding to run or not to run it raises a lot of difficult journalism ethics questions and they’re likely to be attacked, when it comes out—the story or their suppression of the story—whatever they do.

I’ve been sensing hints that something’s going on, something’s going unspoken in certain insider coverage of the campaign (and by the way this rumor the LA Times is supposedly sitting on is one I never heard in this specific form before. By the way, t’s not the Edwards rumor, it’s something else.
And when my source said “everyone in Washington”, knows about it he means everyone in the elite Mainstream media, not just the LA Times, but everyone regularly writing about the Presdidential campaign knows about it and doesn’t know what to do with it. And I must admit it really is was juicy if true. But I don’t know if it’s true and I can’t decide if I think it’s relevant. But the fact that “everyone” in the elite media knew about it and was keeping silent about it, is, itself, news. But you can’t report the “news” without reporting the thing itself. Troubling!
It raises all sorts of ethical questions. What about private sexual behavior is relevant? What about a marriage belongs in the coverage of a presidential campaign? Does it go to the judgment of the candidate in question? Didn’t we all have a national nervous breakdown over these questions nearly a decade ago?
Now, as I say it’s a rumor; I haven’t seen the supporting evidence. But the person who told me said it offhandedly as if everyone in his world knew about it. And if you look close enough you can find hints of something impending, something potentially derailing to this candidate in the reporting of the campaign. Which could mean that something unspoken, unwritten about is influencing what is written, what we read.
Why are well wired media elite keeping silent about it? Because they think we can’t handle the truth? Because they think it’s substantively irrelevant? What standards of judgment are they using? Are they afraid that to print it will bring on opprobrium. Are they afraid not printing it will bring on opprobrium? Or both?
But alas if it leaks out from less “responsible” sources. then all their contextual protectiveness of us will have been wasted.
And what about timing? They, meaning the DC elite media, must know if it comes out before the parties select their primary winners and eventual nominees, voters would have the ability to decide how important they felt it to the narrative of the candidate in question. Aren’t they, in delaying and not letting the pieces fall where they potentially may, not refusing to act but acting in a different way—taking it upon themselves to decide the Presidential election by their silence?
If they waited until the nominees were chosen wouldn’t that be unfair because, arguably, it could sink the candidacy of one of the potential nominees after the nomination was finalized? And doesn’t the fact that they “all” know something’s there but can’t say affect their campaign coverage in a subterranean, subconscious way that their readers are excluded from?
I just don’t know the answer. I’m glad in a situation like this, if there is in fact truth to it, that I wouldn’t have to be the “decider”. I wouldn’t want to be in a position of having to make that choice. But it’s a choice that may well decide a crucial turning point in history. Or maybe not: Maybe voters will decide they don’t think it’s important, however juicy. But should it be their choice or the choice of the media elites? It illustrates the fact that there are still two cultures at war within our political culture, insiders and outsiders. As a relative outsider I have to admit I was shocked not just by this but by several other things “everyone” down there knows.
There seem to be two conflicting imperatives here. The new media, Web 2.0 anti-elitist preference for transparency and immediacy and the traditional elitist preference for reflection, judgment and standards—their reflection, their small-group judgment and standards. Their civic duty to “protect” us from knowing too much.
I feel a little uneasy reporting this. No matter how well “nailed” they think they have it, it may turn out to be untrue. What I’m really reporting on is the unreported persistence of a schism between the DC media elites and their inside knowlede and the public that is kept in the dark. For their own good? Maybe they’d dismiss it as irrelevant, but shouldn’t they know?
I don’t know.

Let's take a break and meet Johnny's babe.

And the long version:

Early in Senator John McCain’s first run for the White House eight years ago, waves of anxiety swept through his small circle of advisers.

A female lobbyist had been turning up with him at fund-raisers, visiting his offices and accompanying him on a client’s corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself — instructing staff members to block the woman’s access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity.

When news organizations reported that Mr. McCain had written letters to government regulators on behalf of the lobbyist’s client, the former campaign associates said, some aides feared for a time that attention would fall on her involvement.

Mr. McCain, 71, and the lobbyist, Vicki Iseman, 40, both say they never had a romantic relationship. But to his advisers, even the appearance of a close bond with a lobbyist whose clients often had business before the Senate committee Mr. McCain led threatened the story of redemption and rectitude that defined his political identity.

It had been just a decade since an official favor for a friend with regulatory problems had nearly ended Mr. McCain’s political career by ensnaring him in the Keating Five scandal. In the years that followed, he reinvented himself as the scourge of special interests, a crusader for stricter ethics and campaign finance rules, a man of honor chastened by a brush with shame.

But the concerns about Mr. McCain’s relationship with Ms. Iseman underscored an enduring paradox of his post-Keating career. Even as he has vowed to hold himself to the highest ethical standards, his confidence in his own integrity has sometimes seemed to blind him to potentially embarrassing conflicts of interest.

Mr. McCain promised, for example, never to fly directly from Washington to Phoenix, his hometown, to avoid the impression of self-interest because he sponsored a law that opened the route nearly a decade ago. But like other lawmakers, he often flew on the corporate jets of business executives seeking his support, including the media moguls Rupert Murdoch, Michael R. Bloomberg and Lowell W. Paxson, Ms. Iseman’s client. (Last year he voted to end the practice.)

Mr. McCain helped found a nonprofit group to promote his personal battle for tighter campaign finance rules. But he later resigned as its chairman after news reports disclosed that the group was tapping the same kinds of unlimited corporate contributions he opposed, including those from companies seeking his favor. He has criticized the cozy ties between lawmakers and lobbyists, but is relying on corporate lobbyists to donate their time running his presidential race and recently hired a lobbyist to run his Senate office.

“He is essentially an honorable person,” said William P. Cheshire, a friend of Mr. McCain who as editorial page editor of The Arizona Republic defended him during the Keating Five scandal. “But he can be imprudent.”

Mr. Cheshire added, “That imprudence or recklessness may be part of why he was not more astute about the risks he was running with this shady operator,” Charles Keating, whose ties to Mr. McCain and four other lawmakers tainted their reputations in the savings and loan debacle.

During his current campaign for the Republican presidential nomination, Mr. McCain has played down his attacks on the corrupting power of money in politics, aware that the stricter regulations he championed are unpopular in his party. When the Senate overhauled lobbying and ethics rules last year, Mr. McCain stayed in the background.

With his nomination this year all but certain, though, he is reminding voters again of his record of reform. His campaign has already begun comparing his credentials with those of Senator Barack Obama, a Democratic contender who has made lobbying and ethics rules a centerpiece of his own pitch to voters.

“I would very much like to think that I have never been a man whose favor can be bought,” Mr. McCain wrote about his Keating experience in his 2002 memoir, “Worth the Fighting For.” “From my earliest youth, I would have considered such a reputation to be the most shameful ignominy imaginable. Yet that is exactly how millions of Americans viewed me for a time, a time that I will forever consider one of the worst experiences of my life.”

A drive to expunge the stain on his reputation in time turned into a zeal to cleanse Washington as well. The episode taught him that “questions of honor are raised as much by appearances as by reality in politics,” he wrote, “and because they incite public distrust they need to be addressed no less directly than we would address evidence of expressly illegal corruption.”

A Formative Scandal

Mr. McCain started his career like many other aspiring politicians, eagerly courting the wealthy and powerful. A Vietnam war hero and Senate liaison for the Navy, he arrived in Arizona in 1980 after his second marriage, to Cindy Hensley, the heiress to a beer fortune there. He quickly started looking for a Congressional district where he could run.

Mr. Keating, a Phoenix financier and real estate developer, became an early sponsor and, soon, a friend. He was a man of great confidence and daring, Mr. McCain recalled in his memoir. “People like that appeal to me,” he continued. “I have sometimes forgotten that wisdom and a strong sense of public responsibility are much more admirable qualities.”

During Mr. McCain’s four years in the House, Mr. Keating, his family and his business associates contributed heavily to his political campaigns. The banker gave Mr. McCain free rides on his private jet, a violation of Congressional ethics rules (he later said it was an oversight and paid for the trips). They vacationed together in the Bahamas. And in 1986, the year Mr. McCain was elected to the Senate, his wife joined Mr. Keating in investing in an Arizona shopping mall.

Mr. Keating had taken over the Lincoln Savings and Loan Association and used its federally insured deposits to gamble on risky real estate and other investments. He pressed Mr. McCain and other lawmakers to help hold back federal banking regulators.

For years, Mr. McCain complied. At Mr. Keating’s request, he wrote several letters to regulators, introduced legislation and helped secure the nomination of a Keating associate to a banking regulatory board.

By early 1987, though, the thrift was careering toward disaster. Mr. McCain agreed to join several senators, eventually known as the Keating Five, for two private meetings with regulators to urge them to ease up. “Why didn’t I fully grasp the unusual appearance of such a meeting?” Mr. McCain later lamented in his memoir.

When Lincoln went bankrupt in 1989 — one of the biggest collapses of the savings and loan crisis, costing taxpayers $3.4 billion — the Keating Five became infamous. The scandal sent Mr. Keating to prison and ended the careers of three senators, who were censured in 1991 for intervening. Mr. McCain, who had been a less aggressive advocate for Mr. Keating than the others, was reprimanded only for “poor judgment” and was re-elected the next year.

Some people involved think Mr. McCain got off too lightly. William Black, one of the banking regulators the senator met with, argued that Mrs. McCain’s investment with Mr. Keating created an obvious conflict of interest for her husband. (Mr. McCain had said a prenuptial agreement divided the couple’s assets.) He should not be able to “put this behind him,” Mr. Black said. “It sullied his integrity.”

Mr. McCain has since described the episode as a unique humiliation. “If I do not repress the memory, its recollection still provokes a vague but real feeling that I had lost something very important,” he wrote in his memoir. “I still wince thinking about it.”

A New Chosen Cause

After the Republican takeover of the Senate in 1994, Mr. McCain decided to try to put some of the lessons he had learned into law. He started by attacking earmarks, the pet projects that individual lawmakers could insert anonymously into the fine print of giant spending bills, a recipe for corruption. But he quickly moved on to other targets, most notably political fund-raising.

Mr. McCain earned the lasting animosity of many conservatives, who argue that his push for fund-raising restrictions trampled free speech, and of many of his Senate colleagues, who bristled that he was preaching to them so soon after his own repentance. In debates, his party’s leaders challenged him to name a single senator he considered corrupt (he refused).

“We used to joke that each of us was the only one eating alone in our caucus,” said Senator Russ Feingold, Democrat of Wisconsin, who became Mr. McCain’s partner on campaign finance efforts.

Mr. McCain appeared motivated less by the usual ideas about good governance than by a more visceral disapproval of the gifts, meals and money that influence seekers shower on lawmakers, Mr. Feingold said. “It had to do with his sense of honor,” he said. “He saw this stuff as cheating.”

Mr. McCain made loosening the grip of special interests the central cause of his 2000 presidential campaign, inviting scrutiny of his own ethics. His Republican rival, George W. Bush, accused him of “double talk” for soliciting campaign contributions from companies with interests that came before the powerful Senate commerce committee, of which Mr. McCain was chairman. Mr. Bush’s allies called Mr. McCain “sanctimonious.”

At one point, his campaign invited scores of lobbyists to a fund-raiser at the Willard Hotel in Washington. While Bush supporters stood mocking outside, the McCain team tried to defend his integrity by handing the lobbyists buttons reading “McCain voted against my bill.” Mr. McCain himself skipped the event, an act he later called “cowardly.”

By 2002, he had succeeded in passing the McCain-Feingold Act, which transformed American politics by banning “soft money,” the unlimited donations from corporations, unions and the rich that were funneled through the two political parties to get around previous laws.

One of his efforts, though, seemed self-contradictory. In 2001, he helped found the nonprofit Reform Institute to promote his cause and, in the process, his career. It collected hundreds of thousands of dollars in unlimited donations from companies that lobbied the Senate commerce committee. Mr. McCain initially said he saw no problems with the financing, but he severed his ties to the institute in 2005, complaining of “bad publicity” after news reports of the arrangement.

Like other presidential candidates, he has relied on lobbyists to run his campaigns. Since a cash crunch last summer, several of them — including his campaign manager, Rick Davis, who represented companies before Mr. McCain’s Senate panel — have been working without pay, a gift that could be worth tens of thousands of dollars.

In recent weeks, Mr. McCain has hired another lobbyist, Mark Buse, to run his Senate office. In his case, it was a round trip through the revolving door: Mr. Buse had directed Mr. McCain’s committee staff for seven years before leaving in 2001 to lobby for telecommunications companies.

Mr. McCain’s friends dismiss questions about his ties to lobbyists, arguing that he has too much integrity to let such personal connections influence him.

“Unless he gives you special treatment or takes legislative action against his own views, I don’t think his personal and social relationships matter,” said Charles Black, a friend and campaign adviser who has previously lobbied the senator for aviation, broadcasting and tobacco concerns.

Concerns in a Campaign

Mr. McCain’s confidence in his ability to distinguish personal friendships from compromising connections was at the center of questions advisers raised about Ms. Iseman.

The lobbyist, a partner at the firm Alcalde & Fay, represented telecommunications companies for whom Mr. McCain’s commerce committee was pivotal. Her clients contributed tens of thousands of dollars to his campaigns.

Mr. Black said Mr. McCain and Ms. Iseman were friends and nothing more. But in 1999 she began showing up so frequently in his offices and at campaign events that staff members took notice. One recalled asking, “Why is she always around?”

That February, Mr. McCain and Ms. Iseman attended a small fund-raising dinner with several clients at the Miami-area home of a cruise-line executive and then flew back to Washington along with a campaign aide on the corporate jet of one of her clients, Paxson Communications. By then, according to two former McCain associates, some of the senator’s advisers had grown so concerned that the relationship had become romantic that they took steps to intervene.

A former campaign adviser described being instructed to keep Ms. Iseman away from the senator at public events, while a Senate aide recalled plans to limit Ms. Iseman’s access to his offices.

In interviews, the two former associates said they joined in a series of confrontations with Mr. McCain, warning him that he was risking his campaign and career. Both said Mr. McCain acknowledged behaving inappropriately and pledged to keep his distance from Ms. Iseman. The two associates, who said they had become disillusioned with the senator, spoke independently of each other and provided details that were corroborated by others.

Separately, a top McCain aide met with Ms. Iseman at Union Station in Washington to ask her to stay away from the senator. John Weaver, a former top strategist and now an informal campaign adviser, said in an e-mail message that he arranged the meeting after “a discussion among the campaign leadership” about her.

“Our political messaging during that time period centered around taking on the special interests and placing the nation’s interests before either personal or special interest,” Mr. Weaver continued. “Ms. Iseman’s involvement in the campaign, it was felt by us, could undermine that effort.”

Mr. Weaver added that the brief conversation was only about “her conduct and what she allegedly had told people, which made its way back to us.” He declined to elaborate.

It is not clear what effect the warnings had; the associates said their concerns receded in the heat of the campaign.

Ms. Iseman acknowledged meeting with Mr. Weaver, but disputed his account.

“I never discussed with him alleged things I had ‘told people,’ that had made their way ‘back to’ him,” she wrote in an e-mail message. She said she never received special treatment from Mr. McCain’s office.

Mr. McCain said that the relationship was not romantic and that he never showed favoritism to Ms. Iseman or her clients. “I have never betrayed the public trust by doing anything like that,” he said. He made the statements in a call to Bill Keller, the executive editor of The New York Times, to complain about the paper’s inquiries.

The senator declined repeated interview requests, beginning in December. He also would not comment about the assertions that he had been confronted about Ms. Iseman, Mr. Black said Wednesday.

Mr. Davis and Mark Salter, Mr. McCain’s top strategists in both of his presidential campaigns, disputed accounts from the former associates and aides and said they did not discuss Ms. Iseman with the senator or colleagues.

“I never had any good reason to think that the relationship was anything other than professional, a friendly professional relationship,” Mr. Salter said in an interview.

He and Mr. Davis also said Mr. McCain had frequently denied requests from Ms. Iseman and the companies she represented. In 2006, Mr. McCain sought to break up cable subscription packages, which some of her clients opposed. And his proposals for satellite distribution of local television programs fell short of her clients’ hopes.

The McCain aides said the senator sided with Ms. Iseman’s clients only when their positions hewed to his principles.

A champion of deregulation, Mr. McCain wrote letters in 1998 and 1999 to the Federal Communications Commission urging it to uphold marketing agreements allowing a television company to control two stations in the same city, a crucial issue for Glencairn Ltd., one of Ms. Iseman’s clients. He introduced a bill to create tax incentives for minority ownership of stations; Ms. Iseman represented several businesses seeking such a program. And he twice tried to advance legislation that would permit a company to control television stations in overlapping markets, an important issue for Paxson.

In late 1999, Ms. Iseman asked Mr. McCain’s staff to send a letter to the commission to help Paxson, now Ion Media Networks, on another matter. Mr. Paxson was impatient for F.C.C. approval of a television deal, and Ms. Iseman acknowledged in an e-mail message to The Times that she had sent to Mr. McCain’s staff information for drafting a letter urging a swift decision.

Mr. McCain complied. He sent two letters to the commission, drawing a rare rebuke for interference from its chairman. In an embarrassing turn for the campaign, news reports invoked the Keating scandal, once again raising questions about intervening for a patron.

Mr. McCain’s aides released all of his letters to the F.C.C. to dispel accusations of favoritism, and aides said the campaign had properly accounted for four trips on the Paxson plane. But the campaign did not report the flight with Ms. Iseman. Mr. McCain’s advisers say he was not required to disclose the flight, but ethics lawyers dispute that.

Recalling the Paxson episode in his memoir, Mr. McCain said he was merely trying to push along a slow-moving bureaucracy, but added that he was not surprised by the criticism given his history.

“Any hint that I might have acted to reward a supporter,” he wrote, “would be taken as an egregious act of hypocrisy.”

Statement by McCain

Mr. McCain’s presidential campaign issued the following statement Wednesday night:

“It is a shame that The New York Times has lowered its standards to engage in a hit-and-run smear campaign. John McCain has a 24-year record of serving our country with honor and integrity. He has never violated the public trust, never done favors for special interests or lobbyists, and he will not allow a smear campaign to distract from the issues at stake in this election.

“Americans are sick and tired of this kind of gutter politics, and there is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career.”

Obama Tunes 2

Obama Tunes 1