Bush's cloak-and-stagger folly
ANDREW GREELEY agreel@aol.com
Copyright by The Chicago Sun-Times
August 15, 2007
The president's comment that the CIA was just guessing is spinless truth, for a change. In fact, the agency knew virtually nothing about what was happening inside of Iraq, and hence described the worst possible case, just as it was unaware that the Soviet Union was falling apart at the end of the Stalinist era. The best intelligence about the Soviets was contained in the books written at the time by the reporters from the Washington Post and the New York Times.
On the basis of these books, I predicted in the early '80s the Soviet Union would fall apart. The social scientist in me could not believe that the corrupt, incompetent society described by Robert Kaiser and Hedrick Smith could survive. In the meantime, the CIA was warning of the increasing power and threat of the Soviets. They could not have been more wrong.
They could have hired the reporters or just read their books. But that would not have helped because the White House in that era wouldn't have believed them.
Tim Weiner in his new history of the CIA, Legacy of Ashes, argues that the agency's mistakes on Iraq are like its other major failures -- they have never had good data on societies about which they are supposed to be advising the government. In recent years, they knew nothing about Iraq. They had to rely on Iraqi defectors (many produced by Vice President Dick Cheney), foreign intelligence units (French and English), and the occasional sociopath like the notorious "Curveball."
The CIA had no hard evidence about weapons of mass destruction. It did not report that uncertainty. But internal and external pressure (from the head of the CIA) forced them to selectively choose evidence. Thus the various CIA reports confirmed what the president and the vice president wanted to do -- protect the United States from terrorists by invading Iraq. It did not report that there wasn't much reason to believe that Iraq had the fearsome weapons. Similarly, when Colin Powell went to the U.N., his arguments, shaped by the CIA, were formed to provide a rationale for war.
Weiner contends that the CIA was not actually lying to the president, not actually telling him that he had a slam dunk. Alas, thousands of Americans and tens of thousands of Iraqis would die. The CIA is an agent of the American government. In the past it has been forced into projects by presidents and highly placed presidential advisers -- Robert Kennedy, Henry Kissinger, Oliver North. Presidents have used the CIA to try to kill many foreign leaders the presidents didn't like. Presidents generally do not want to be bothered by espionage that is hard to gather and by reports that are almost always hedged in uncertainties.
The structures of American government make it impossible for the CIA to flatly tell the president that he was wrong. The vice president had his own information that he thought was better than that of the CIA. No one, not even the hapless Powell, was in a position to say, "we don't have hard evidence to go to war." So now the president is spinning phony success on the road to phony victory. Dead humans have piled up by the thousands.
The nation needs to have a competent and independent intelligence agency, something like the Federal Reserve, which can protect itself from punishment for telling the truth, from telling the president that he is wrong. The Iraq war is the Bay of Pigs fiasco writ large.
Wednesday, August 15, 2007
Goldman poll hits 5-year low
Goldman poll hits 5-year low
By Lina Saigol in London
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
Confidence among some of the world's top business leaders has slumped to its lowest level since the third quarter of 2002, suffering from concerns about financial market volatility and mixed US economic data, according to an investment bank's survey.
The Goldman Sachs Confidence Index - which was conducted in the last week of July and the first week of August - is based on chief executives' assessments of business conditions for the coming quarter and regarded as a leading indicator of company sentiment.
The survey shows their outlook for the third quarter of the year has declined dramatically, after buoyant readings in the past few quarters.
The headline reading for the global business outlook for the third quarter stands at 33 - a steep fall from the reading of 57 for the second quarter. A score of 50 marks the dividing line between executives who think conditions are improving and those who feel they are worsening.
However, the collapse of confidence has not yet affected the willingness to do deals and several chief executives in several sectors see the credit crunch as a chance to outbid their private equity rivals as the squeeze forces them to the sidelines.
"There is an enormous amount of uncertainty about the outlook in the near-term, but if the credit shock hurts private equity, it may also provide an opportunity for corporates, especially as deal multiples come down," said Sandra Lawson, a global economist at Goldman Sachs.
This month, Imperial Tobaccooutbid CVC Capital Partners to buy Altadis, the Franco-Spanish tobacco company, after the private equity group was unable to finance its deal. In March, Schering Plough, the US pharmaceuticals group, beat private equity firms in the auction for Organon Biosciences, an Akzo Nobel-owned pharmaceuticals unit.
Tom Cooper, European head of mergers and acquisitions at UBS, said corporate buyers should be best placed to benefit from the correction. "There could be a window of opportunity for investment-grade buyers, in particular. Unlike private equity, strategic buyers can bridge funding gaps with their own paper," he said.
The confidence index also showed little change in the readings for capital spending on factories and equipment - the traditional engine of profit and economic growth.
Although the global reading has fallen from 68 in the second quarter to 57 in the third, US chief executives expected conditions to improve slightly.
By Lina Saigol in London
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
Confidence among some of the world's top business leaders has slumped to its lowest level since the third quarter of 2002, suffering from concerns about financial market volatility and mixed US economic data, according to an investment bank's survey.
The Goldman Sachs Confidence Index - which was conducted in the last week of July and the first week of August - is based on chief executives' assessments of business conditions for the coming quarter and regarded as a leading indicator of company sentiment.
The survey shows their outlook for the third quarter of the year has declined dramatically, after buoyant readings in the past few quarters.
The headline reading for the global business outlook for the third quarter stands at 33 - a steep fall from the reading of 57 for the second quarter. A score of 50 marks the dividing line between executives who think conditions are improving and those who feel they are worsening.
However, the collapse of confidence has not yet affected the willingness to do deals and several chief executives in several sectors see the credit crunch as a chance to outbid their private equity rivals as the squeeze forces them to the sidelines.
"There is an enormous amount of uncertainty about the outlook in the near-term, but if the credit shock hurts private equity, it may also provide an opportunity for corporates, especially as deal multiples come down," said Sandra Lawson, a global economist at Goldman Sachs.
This month, Imperial Tobaccooutbid CVC Capital Partners to buy Altadis, the Franco-Spanish tobacco company, after the private equity group was unable to finance its deal. In March, Schering Plough, the US pharmaceuticals group, beat private equity firms in the auction for Organon Biosciences, an Akzo Nobel-owned pharmaceuticals unit.
Tom Cooper, European head of mergers and acquisitions at UBS, said corporate buyers should be best placed to benefit from the correction. "There could be a window of opportunity for investment-grade buyers, in particular. Unlike private equity, strategic buyers can bridge funding gaps with their own paper," he said.
The confidence index also showed little change in the readings for capital spending on factories and equipment - the traditional engine of profit and economic growth.
Although the global reading has fallen from 68 in the second quarter to 57 in the third, US chief executives expected conditions to improve slightly.
US banks refuse to accept subprime collateral
US banks refuse to accept subprime collateral
By Deborah Brewster in New York
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
US banks caught in the credit market upheaval have started refusing to lend money against hedge funds' subprime credit portfolios.
Hedge funds said several banks in recent days had cut off lending to funds that use credit portfolios, including mortgages, collateralised debt obligations and subprime securities, as collateral. That leaves the highly leveraged funds heavily reliant on their prime brokers for borrowing.
The banks mentioned were Bank of America and Countrywide, although there were believed to be others. Bank of America declined to comment. Countrywide did not return calls.
Hedge fund managers nervous about the reliability of theirlending sources were likely to attempt to reduce their level of borrowings further, said one hedge fund manager not directly affected by the banks' actions.
Several hedge fund managers, who spoke to the Financial Times on condition of anonymity, said funds that were heavy investors in the credit markets and, therefore, often highlyleveraged, were finding they were no longer able to use theirportfolios as collateral to borrow.
One manager said: "My prime broker is my first source of borrowing but I used to get additional financing from other sources. I called my usual banks last week to ask for their terms and they told me there weren't any terms because they weren't lending against my credit portfolio any more. I'm not that happy. I need more than just one lender."
There is no evidence that prime brokers have reduced such lending to their own clients. Yet, prime brokers have recently lifted their requirements for margin lending, contributing to forced selling as funds have to meet margin calls.
Steve Persky, a managing partner at Dalton Investments, said: "The type of investors who are exposed are highly leveraged with CDOs and asset-backed securities. It's a game of musical chairs . . . people have too much debt and are trying to offload it."
"If the prime brokers began to pull back, that would have a huge effect on the hedge fund business," said one hedge fund manager.
By Deborah Brewster in New York
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
US banks caught in the credit market upheaval have started refusing to lend money against hedge funds' subprime credit portfolios.
Hedge funds said several banks in recent days had cut off lending to funds that use credit portfolios, including mortgages, collateralised debt obligations and subprime securities, as collateral. That leaves the highly leveraged funds heavily reliant on their prime brokers for borrowing.
The banks mentioned were Bank of America and Countrywide, although there were believed to be others. Bank of America declined to comment. Countrywide did not return calls.
Hedge fund managers nervous about the reliability of theirlending sources were likely to attempt to reduce their level of borrowings further, said one hedge fund manager not directly affected by the banks' actions.
Several hedge fund managers, who spoke to the Financial Times on condition of anonymity, said funds that were heavy investors in the credit markets and, therefore, often highlyleveraged, were finding they were no longer able to use theirportfolios as collateral to borrow.
One manager said: "My prime broker is my first source of borrowing but I used to get additional financing from other sources. I called my usual banks last week to ask for their terms and they told me there weren't any terms because they weren't lending against my credit portfolio any more. I'm not that happy. I need more than just one lender."
There is no evidence that prime brokers have reduced such lending to their own clients. Yet, prime brokers have recently lifted their requirements for margin lending, contributing to forced selling as funds have to meet margin calls.
Steve Persky, a managing partner at Dalton Investments, said: "The type of investors who are exposed are highly leveraged with CDOs and asset-backed securities. It's a game of musical chairs . . . people have too much debt and are trying to offload it."
"If the prime brokers began to pull back, that would have a huge effect on the hedge fund business," said one hedge fund manager.
Democrats vow pursuit of Rove over scandals
Democrats vow pursuit of Rove over scandals
By Andrew Ward andStephanie Kirchgaessnerin Washington
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
As Karl Rove prepares to leave the White House, the Democrats have vowed to continue investigating his role in a range of scandals and controversies dogging the Bush administration.
Democratic leaders in the US Congress want to question him about the sacking of several federal prosecutors last year, amid allegations that the White House ordered the purge for political reasons.
The case is the most prominent in a series of inquiries into alleged abuse of power by the administration, with the White House accused of politicising large parts of the federal government.
As chief political adviser to President George W. Bush and bête noire of the Democratic party, Mr Rove had become the prime target of the investigations.
His resignation on Monday was viewed by some as an attempt to ease pressure on the administration by re-moving a key target in the White House. But Mr Rove said his departure was un-likely to end the Democrats' pursuit of his political scalp.
"I'm realistic enough to understand that the subpoenas are going to keep flying my way," he said. "I'm Moby-Dick and we've got three or four members of Congress who are trying to cast themselves in the part of Captain Ahab."
Both the House and Senate judiciary committees declared they would press ahead with their inquiries.
"The need for Karl Rove to explain his role in the firing of the US attorneys does not diminish when he leaves the White House,'' said John Conyers, chairman of the House committee.
Mr Rove was issued with a subpoena last month requiring him to testify to Congress about the firings. But the White House has refused to make him or other senior officials available for testimony, arguing that its internal deliberations are protected by executive privilege.
Mr Rove said he would re-main protected by executive privilege after leaving his post at the end of the month.
Democrats are trying to prove that the White House targeted federal prosecutors deemed unsympathetic to Republican interests, to make room for what one Justice Department e-mail described as "loyal Bushies".
Among the candidates nominated to fill the vacancies was Timothy Griffin, a former aide to Mr Rove and a legal adviser to the Bush campaign during the 2000 presidential election recount.
Mr Rove is the third White House official embroiled in the controversy to have quit this year, following Harriet Miers, the former legal counsel, and Sara Taylor, former political director.
Other cases involving Mr Rove include an inquiry by the House oversight committee into whether White House staff used Republican party e-mail accounts to evade rules on presidential record-keeping. He is also at the centre of an investigation by the same committee into whether the White House broke the law by giving political briefings to federal officials. In addition to the congressional inquiry, the briefings are also under scrutiny by the Office of Special Counsel, a federal investigative body.
Mr Rove denied that his resignation was connected to the inquiries, insisting that he had been considering his future since last summer.
"Anybody who suggests the investigations had something to do with getting me out is putting Congress in the position of being the rooster that believes that crowing loudly brings the sun to come up," he said.
By Andrew Ward andStephanie Kirchgaessnerin Washington
Copyright The Financial Times Limited 2007
Published: August 15 2007 03:00 | Last updated: August 15 2007 03:00
As Karl Rove prepares to leave the White House, the Democrats have vowed to continue investigating his role in a range of scandals and controversies dogging the Bush administration.
Democratic leaders in the US Congress want to question him about the sacking of several federal prosecutors last year, amid allegations that the White House ordered the purge for political reasons.
The case is the most prominent in a series of inquiries into alleged abuse of power by the administration, with the White House accused of politicising large parts of the federal government.
As chief political adviser to President George W. Bush and bête noire of the Democratic party, Mr Rove had become the prime target of the investigations.
His resignation on Monday was viewed by some as an attempt to ease pressure on the administration by re-moving a key target in the White House. But Mr Rove said his departure was un-likely to end the Democrats' pursuit of his political scalp.
"I'm realistic enough to understand that the subpoenas are going to keep flying my way," he said. "I'm Moby-Dick and we've got three or four members of Congress who are trying to cast themselves in the part of Captain Ahab."
Both the House and Senate judiciary committees declared they would press ahead with their inquiries.
"The need for Karl Rove to explain his role in the firing of the US attorneys does not diminish when he leaves the White House,'' said John Conyers, chairman of the House committee.
Mr Rove was issued with a subpoena last month requiring him to testify to Congress about the firings. But the White House has refused to make him or other senior officials available for testimony, arguing that its internal deliberations are protected by executive privilege.
Mr Rove said he would re-main protected by executive privilege after leaving his post at the end of the month.
Democrats are trying to prove that the White House targeted federal prosecutors deemed unsympathetic to Republican interests, to make room for what one Justice Department e-mail described as "loyal Bushies".
Among the candidates nominated to fill the vacancies was Timothy Griffin, a former aide to Mr Rove and a legal adviser to the Bush campaign during the 2000 presidential election recount.
Mr Rove is the third White House official embroiled in the controversy to have quit this year, following Harriet Miers, the former legal counsel, and Sara Taylor, former political director.
Other cases involving Mr Rove include an inquiry by the House oversight committee into whether White House staff used Republican party e-mail accounts to evade rules on presidential record-keeping. He is also at the centre of an investigation by the same committee into whether the White House broke the law by giving political briefings to federal officials. In addition to the congressional inquiry, the briefings are also under scrutiny by the Office of Special Counsel, a federal investigative body.
Mr Rove denied that his resignation was connected to the inquiries, insisting that he had been considering his future since last summer.
"Anybody who suggests the investigations had something to do with getting me out is putting Congress in the position of being the rooster that believes that crowing loudly brings the sun to come up," he said.
ECB chief fails to reassure markets
ECB chief fails to reassure markets
By Ralph Atkins in Frankfurt, Michael Mackenzie in New York and Paul J Davies in London
Copyright The Financial Times Limited 2007
Published: August 14 2007 08:36 | Last updated: August 15 2007 00:29
Renewed turmoil in global money markets sent stock prices falling around the world on Tuesday as traders ignored a declaration by Jean-Claude Trichet, European Central Bank president, that conditions were returning to normal.
Traders were particularly alarmed by signs that the market for asset-backed commercial paper – which provides $1,500bn in short-term borrowings for big companies – was drying up.
The anxieties were exacerbated by dismal pronouncements from a variety of financial companies. UBS, the giant Swiss bank, issued a profit warning. Sentinel, a little-known US money manager with $1.5bn in assets, told the Commodity Futures Trading Commission it would halt redemptions. Thornburg Mortgage, a US home lender that focuses on wealthy home buyers, delayed payment of its dividend, triggering a 47 per cent plunge in its share price.
Drew Matus, economist at Lehman Brothers, said: “We are in a minefield. No one knows where the mines are planted and we are just trying to stumble through it.”
In an attempt to calm investors, Mr Trichet, speaking before US markets opened, said conditions “have gone progressively back to normal”. The bank is expected to press ahead with another increase in its main interest rate next month. The ECB and central banks pumped funds into the interbank lending markets at the end of last week after investors deserted short-term debt markets, making it much harder to raise short-term funds. The ECB on Tuesday made its fourth intervention since last Thursday. The €7.7bn ($10.4bn) injected was down from €47.67bn on Monday and €95bn put in on Thursday.
The Bank of Japan even attempted to reduce liquidity on Tuesday, draining Y1,600bn ($13.6bn) from the banking system, equivalent to the amount it had poured in over two days beginning on Friday.
In the US, the overnight money market seemed liquid. The Fed Funds rate fell below 4 per cent at one point, significantly below the Federal Reserve’s target of 5.25 per cent, and well below the benchmark three-month London interbank (Libor) rate of 5.53 per cent. The two rates are normally much closer.
Stocks gained in Asia and early in the session in Europe, but the fresh wave of liquidity concerns triggered a new round of selling once Wall Street opened.
By the close in New York, the S&P 500 index was down 1.8 per cent. The FTSE Eurofirst closed down 1.3 per cent and the FTSE 100 was 1.2 per cent lower. Tokyo’s Nikkei 225 Average ended 0.3 per cent higher.
The concerns about asset-backed commercial paper were triggered by news that Coventree, a listed Canadian investment manager that is a heavy user of such funding, was forced to draw on C$700m (US$656m) worth of liquidity facilities from banks.
Additional reporting by Chris Flood in London and John Authers in New York
By Ralph Atkins in Frankfurt, Michael Mackenzie in New York and Paul J Davies in London
Copyright The Financial Times Limited 2007
Published: August 14 2007 08:36 | Last updated: August 15 2007 00:29
Renewed turmoil in global money markets sent stock prices falling around the world on Tuesday as traders ignored a declaration by Jean-Claude Trichet, European Central Bank president, that conditions were returning to normal.
Traders were particularly alarmed by signs that the market for asset-backed commercial paper – which provides $1,500bn in short-term borrowings for big companies – was drying up.
The anxieties were exacerbated by dismal pronouncements from a variety of financial companies. UBS, the giant Swiss bank, issued a profit warning. Sentinel, a little-known US money manager with $1.5bn in assets, told the Commodity Futures Trading Commission it would halt redemptions. Thornburg Mortgage, a US home lender that focuses on wealthy home buyers, delayed payment of its dividend, triggering a 47 per cent plunge in its share price.
Drew Matus, economist at Lehman Brothers, said: “We are in a minefield. No one knows where the mines are planted and we are just trying to stumble through it.”
In an attempt to calm investors, Mr Trichet, speaking before US markets opened, said conditions “have gone progressively back to normal”. The bank is expected to press ahead with another increase in its main interest rate next month. The ECB and central banks pumped funds into the interbank lending markets at the end of last week after investors deserted short-term debt markets, making it much harder to raise short-term funds. The ECB on Tuesday made its fourth intervention since last Thursday. The €7.7bn ($10.4bn) injected was down from €47.67bn on Monday and €95bn put in on Thursday.
The Bank of Japan even attempted to reduce liquidity on Tuesday, draining Y1,600bn ($13.6bn) from the banking system, equivalent to the amount it had poured in over two days beginning on Friday.
In the US, the overnight money market seemed liquid. The Fed Funds rate fell below 4 per cent at one point, significantly below the Federal Reserve’s target of 5.25 per cent, and well below the benchmark three-month London interbank (Libor) rate of 5.53 per cent. The two rates are normally much closer.
Stocks gained in Asia and early in the session in Europe, but the fresh wave of liquidity concerns triggered a new round of selling once Wall Street opened.
By the close in New York, the S&P 500 index was down 1.8 per cent. The FTSE Eurofirst closed down 1.3 per cent and the FTSE 100 was 1.2 per cent lower. Tokyo’s Nikkei 225 Average ended 0.3 per cent higher.
The concerns about asset-backed commercial paper were triggered by news that Coventree, a listed Canadian investment manager that is a heavy user of such funding, was forced to draw on C$700m (US$656m) worth of liquidity facilities from banks.
Additional reporting by Chris Flood in London and John Authers in New York
Financial Times Editorial Comment: Chinese dragon feels the heat
Financial Times Editorial Comment: Chinese dragon feels the heat
Copyright The Financial Times Limited 2007
Published: August 14 2007 17:04 | Last updated: August 14 2007 17:04
Does the Chinese dragon need to take a cold bath? Recent data releases suggest that the risk of overheating is there. China’s inflation rate reached a 10-year high of 5.6 per cent in July, prompting hawkish noises from the central bank. A growing trade surplus also masked strong growth in imports in July, up 27 per cent year on year. Yet the real risks spring from the fact that the Chinese economy looks hopelessly unbalanced.
The inflation spike itself looks manageable. Blame an epidemic in the pig population, and so high pork prices, for some of it. Indeed, leaving aside the admittedly important food sector, inflation is less than 1 per cent a year. The import surge, too, can be partly blamed on high oil prices; oil imports were up 39 per cent year on year in July. It is part of the Chinese problem: so large is the economy these days that everything it imports becomes more expensive while everything it exports becomes cheaper.
As the Chinese economy becomes ever more market-oriented, the old command-and-control tools wielded by the authorities become ever less effective. Interest rates cannot rise without sucking yet more capital into a country drowning in it, while quantitative controls on bank lending have led to all the clumsy distortions one would expect.
Cheap capital, subsidised energy, lax bank lending to state enterprises and – thanks to the largesse of eager local authorities – free land, have all played their part in skewing China’s economy towards capital-intensive industry. This is perverse. China’s prime policy anxiety is jobs for the rural masses and the growing urban underclass, but capital-intensive industries create few such jobs. They also consume scarce natural resources.
All the while, Chinese households are earning derisory income on their savings, and in rural, inland areas poverty remains widespread. The Asian Development Bank was right when it recently fretted about China’s income distribution, the most unequal in Asia alongside Nepal’s.
The policy prescriptions are well known: a more realistic price for energy and for capital; reform of the state enterprise sector and restructuring of the banks; eventual liberalisation of the capital account. Some sort of social safety net is going to be essential, too, if any of that is to work. Simply to read the list, though, is to realise how complex and interconnected China’s policy challenges have become. China’s growth has been, arguably, the biggest economic success story of all time. But the next chapters may contain a twist or two.
Copyright The Financial Times Limited 2007
Published: August 14 2007 17:04 | Last updated: August 14 2007 17:04
Does the Chinese dragon need to take a cold bath? Recent data releases suggest that the risk of overheating is there. China’s inflation rate reached a 10-year high of 5.6 per cent in July, prompting hawkish noises from the central bank. A growing trade surplus also masked strong growth in imports in July, up 27 per cent year on year. Yet the real risks spring from the fact that the Chinese economy looks hopelessly unbalanced.
The inflation spike itself looks manageable. Blame an epidemic in the pig population, and so high pork prices, for some of it. Indeed, leaving aside the admittedly important food sector, inflation is less than 1 per cent a year. The import surge, too, can be partly blamed on high oil prices; oil imports were up 39 per cent year on year in July. It is part of the Chinese problem: so large is the economy these days that everything it imports becomes more expensive while everything it exports becomes cheaper.
As the Chinese economy becomes ever more market-oriented, the old command-and-control tools wielded by the authorities become ever less effective. Interest rates cannot rise without sucking yet more capital into a country drowning in it, while quantitative controls on bank lending have led to all the clumsy distortions one would expect.
Cheap capital, subsidised energy, lax bank lending to state enterprises and – thanks to the largesse of eager local authorities – free land, have all played their part in skewing China’s economy towards capital-intensive industry. This is perverse. China’s prime policy anxiety is jobs for the rural masses and the growing urban underclass, but capital-intensive industries create few such jobs. They also consume scarce natural resources.
All the while, Chinese households are earning derisory income on their savings, and in rural, inland areas poverty remains widespread. The Asian Development Bank was right when it recently fretted about China’s income distribution, the most unequal in Asia alongside Nepal’s.
The policy prescriptions are well known: a more realistic price for energy and for capital; reform of the state enterprise sector and restructuring of the banks; eventual liberalisation of the capital account. Some sort of social safety net is going to be essential, too, if any of that is to work. Simply to read the list, though, is to realise how complex and interconnected China’s policy challenges have become. China’s growth has been, arguably, the biggest economic success story of all time. But the next chapters may contain a twist or two.
China’s toymakers press for tighter controls
China’s toymakers press for tighter controls
By Robin Kwong and Tom Mitchell in Hong Kong
Copyright The Financial Times Limited 2007
Published: August 15 2007 14:15 | Last updated: August 15 2007 14:15
China’s toy industry group has urged manufacturers to sign a public pledge to improve product safety after Mattel issued its second worldwide recall of Chinese-made toys that might contain lead paint.
The recalls by the world’s largest toy company are adding to trade tensions be tween China and the US and hurting the reputation of a country that produces 80 per cent of the world’s toys. But there are signs both government and industry are responding to the pressure.
China’s top government quality watchdog on Wednesday said police had traced the cause of Mattel’s first recall to a batch of leaded yellow pigment sold by a supplier with fake certification that it was lead-free. This caused the paint company to provide contaminated paint to Lee Der Industrial, the manufacturer identified by Mattel during its recall of Fisher Price toys two weeks ago.
Local media in China’s south-eastern Guangdong province on Wednesday reported that police are seeking seven executives from the pigment company after they went on the run. Guangdong police declined to comment.
The call for manufacturers to sign a public pledge came in a bid to restore consumer confidence by the China Chamber of Commerce which encompasses toy companies. The chamber urged manufacturers to “exercise self-discipline” by not accepting overseas orders that pay little and have unclear quality demands. They should also employ full-time quality inspection staff and allow buyers to inspect their plants.
Recent scandals were a result of “the irresponsible behaviour of some individual companies”, the chamber said in its statement, which also warned that “some countries may take advantage of this issue to raise trade barriers”.
Many of China’s toy factories are concentrated in Guangdong province and owned by Hong Kong entrepreneurs. As a result the city’s industry groups have begun scrambling to contain the reputational fallout.
“These incidents have involved major [US] importers and caused significant damage to the image and reputation of the Hong Kong toy industry,” the Federation of Hong Kong Industries said in a statement on Wednesday. One Hong Kong-based toy executive, who asked not to be named, said: “Everyone is very scared and no one is taking any chances. “We are all very worried about quality now.”
By Robin Kwong and Tom Mitchell in Hong Kong
Copyright The Financial Times Limited 2007
Published: August 15 2007 14:15 | Last updated: August 15 2007 14:15
China’s toy industry group has urged manufacturers to sign a public pledge to improve product safety after Mattel issued its second worldwide recall of Chinese-made toys that might contain lead paint.
The recalls by the world’s largest toy company are adding to trade tensions be tween China and the US and hurting the reputation of a country that produces 80 per cent of the world’s toys. But there are signs both government and industry are responding to the pressure.
China’s top government quality watchdog on Wednesday said police had traced the cause of Mattel’s first recall to a batch of leaded yellow pigment sold by a supplier with fake certification that it was lead-free. This caused the paint company to provide contaminated paint to Lee Der Industrial, the manufacturer identified by Mattel during its recall of Fisher Price toys two weeks ago.
Local media in China’s south-eastern Guangdong province on Wednesday reported that police are seeking seven executives from the pigment company after they went on the run. Guangdong police declined to comment.
The call for manufacturers to sign a public pledge came in a bid to restore consumer confidence by the China Chamber of Commerce which encompasses toy companies. The chamber urged manufacturers to “exercise self-discipline” by not accepting overseas orders that pay little and have unclear quality demands. They should also employ full-time quality inspection staff and allow buyers to inspect their plants.
Recent scandals were a result of “the irresponsible behaviour of some individual companies”, the chamber said in its statement, which also warned that “some countries may take advantage of this issue to raise trade barriers”.
Many of China’s toy factories are concentrated in Guangdong province and owned by Hong Kong entrepreneurs. As a result the city’s industry groups have begun scrambling to contain the reputational fallout.
“These incidents have involved major [US] importers and caused significant damage to the image and reputation of the Hong Kong toy industry,” the Federation of Hong Kong Industries said in a statement on Wednesday. One Hong Kong-based toy executive, who asked not to be named, said: “Everyone is very scared and no one is taking any chances. “We are all very worried about quality now.”
Suicide bombers kill 200 in northern Iraq
Suicide bombers kill 200 in northern Iraq
By Andrew England in Cairo and agencies
Copyright The Financial Times Limited 2007
Published: August 14 2007 22:34 | Last updated: August 15 2007 12:08
About 200 people were killed on Tuesday when at least three suicide bombers struck in northern Iraq, according to Iraqi officials.
The attackers targeted members of the ancient Yazidi Kurdish sect in residential areas near the northern town of Sinjar near the Syrian border. Some reports suggested they were driving fuel tankers.
More than 300 people were wounded, according to some, in what would be one of the deadliest attacks since the US invasion of Iraq in 2003.
Abdul-Rahman al-Shimiri, a government official in the area, told AP that at least 30 homes had been destroyed.
The US military said it was too early to say who was responsible, but the scale and apparently coordinated nature meant the attack carried the hallmarks of Sunni Islamist al Qaeda. The United States has condemned the attack as barbaric.
The bombings capped a bloody day in Iraq in which the US reported nine deaths, including five service members killed in a helicopter crash west of Baghdad, and a suicide truck bombing north of the capital killed at least 10 and destroyed a strategic bridge linking Baghdad with Mosul.
The violence came as the Iraqi government struggles to resolve a political crisis and shortly after the US military announced it had, with Iraqi forces, mounted a fresh operation, involving 16,000 troops, against al-Qaeda suspects in Diyala province, north of Baghdad.
There have been warnings that al-Qaeda would increase attacks before General David Petraeus, the US commander in Iraq, and Ryan Crocker, Washington’s envoy to Baghdad, present a report to Congress next month on the success of President George W. Bush’s Iraq strategy.
Iraqi politicians have been holding meetings to try to find a way out of the political crisis sparked when the main Sunni Arab political alliance, the Iraqi Consensus Front, said it was pulling out of the Shia-led government at the start of the month, leading to the resignation of six cabinet members. The next week, several ministers loyal to the Iraqi National List of Iyad Allawi, the former prime minister, said they would boycott cabinet meetings. Both groups said their decisions were caused by the failure of Nouri al-Maliki, the Shia prime minister, to meet their demands.
Hoshyar Zebari, foreign minister, said the talks aimed to re-engage the Sunni Arab parties and try to reach a consensus on key legislation. “The idea is to really try to work together to overcome the government crisis, make it functional.”
Sectarian divisions have plagued the government and the crisis will make it difficult for parliament to pass a series of laws that Washington hopes will smooth sectarian tensions and coax Sunni insurgents to join the political process.
By Andrew England in Cairo and agencies
Copyright The Financial Times Limited 2007
Published: August 14 2007 22:34 | Last updated: August 15 2007 12:08
About 200 people were killed on Tuesday when at least three suicide bombers struck in northern Iraq, according to Iraqi officials.
The attackers targeted members of the ancient Yazidi Kurdish sect in residential areas near the northern town of Sinjar near the Syrian border. Some reports suggested they were driving fuel tankers.
More than 300 people were wounded, according to some, in what would be one of the deadliest attacks since the US invasion of Iraq in 2003.
Abdul-Rahman al-Shimiri, a government official in the area, told AP that at least 30 homes had been destroyed.
The US military said it was too early to say who was responsible, but the scale and apparently coordinated nature meant the attack carried the hallmarks of Sunni Islamist al Qaeda. The United States has condemned the attack as barbaric.
The bombings capped a bloody day in Iraq in which the US reported nine deaths, including five service members killed in a helicopter crash west of Baghdad, and a suicide truck bombing north of the capital killed at least 10 and destroyed a strategic bridge linking Baghdad with Mosul.
The violence came as the Iraqi government struggles to resolve a political crisis and shortly after the US military announced it had, with Iraqi forces, mounted a fresh operation, involving 16,000 troops, against al-Qaeda suspects in Diyala province, north of Baghdad.
There have been warnings that al-Qaeda would increase attacks before General David Petraeus, the US commander in Iraq, and Ryan Crocker, Washington’s envoy to Baghdad, present a report to Congress next month on the success of President George W. Bush’s Iraq strategy.
Iraqi politicians have been holding meetings to try to find a way out of the political crisis sparked when the main Sunni Arab political alliance, the Iraqi Consensus Front, said it was pulling out of the Shia-led government at the start of the month, leading to the resignation of six cabinet members. The next week, several ministers loyal to the Iraqi National List of Iyad Allawi, the former prime minister, said they would boycott cabinet meetings. Both groups said their decisions were caused by the failure of Nouri al-Maliki, the Shia prime minister, to meet their demands.
Hoshyar Zebari, foreign minister, said the talks aimed to re-engage the Sunni Arab parties and try to reach a consensus on key legislation. “The idea is to really try to work together to overcome the government crisis, make it functional.”
Sectarian divisions have plagued the government and the crisis will make it difficult for parliament to pass a series of laws that Washington hopes will smooth sectarian tensions and coax Sunni insurgents to join the political process.
Puerto Rico's Economic Slump Weighs Hard on Consumers Cost of Living Surges As Inflation Helps Tip Island Into Recession
Puerto Rico's Economic Slump Weighs Hard on Consumers Cost of Living Surges As Inflation Helps Tip Island Into Recession
By CONOR DOUGHERTY
Copyright by THE WALL STREET JOURNAL
August 14, 2007; Page A6
SAN JUAN, Puerto Rico -- With her living costs rising, Teresa Cruz has stopped shopping at her favorite stores. Instead of buying clothing at Marshalls, a popular merchant known for selling name-brand clothing at a discount, she now looks for bargains at local thrift shops.
She is also buying less-costly packaged foods instead of fresh fruits and vegetables. "I have to use my money only to pay for necessary [items]," says the 34-year-old telemarketing supervisor, who says it costs $50 to fill up her Kia Sedona with gasoline, up from $30 a few months ago.
The rising cost of food and energy has been a nagging problem for many Americans. Yet even as oil neared $80 a barrel before its recent slide and the cost of milk has surged to a record $3.80 a gallon in the past year, overall inflation in most of the U.S. Has remained subdued. In June, the consumer-price index was up 2.7% from a year ago.
But here in Puerto Rico, the consumer-price index, which includes food and fuel prices, was up 15% in 2006, according to the Puerto Rico Department of Labor and Human Resources. Water and sewer rates have more than doubled over the past two years, and electric bills jumped about 40% last year, according to Standard & Poor's. Economists and the Puerto Rican government say the Labor Department figures overstate inflation by a large margin (the government says it is in the process of revamping its consumer-price index) but they generally agree prices are rising faster here than in the rest of the U.S.
The increases are more painful to Puerto Rican consumers, whose $17,000 median household income is less than half that of U.S. Residents. Those problems, which come as the island's manufacturing segment is hurting and the government is struggling with deficits, have helped push an already troubled economy into recession.
"You hate to use the term 'the perfect storm,' but whenever you get all these different things coming together at the same time there's no other way to describe it," says Miguel Soto-Class, executive director of the Center for the New Economy, a Puerto Rican think tank.
Puerto Rico's gross national product is forecast for a 1.4% decline in the fiscal year ended in June. The overall U.S. Economy grew 2.9% last year, as measured by changes in gross domestic product, and expanded at an annual rate of 3.4% in the second quarter.
Inflation is higher in Puerto Rico partly because of its geography. Located 1,000 miles southeast of Miami in the Caribbean Sea, most of what the island consumes is transported by plane or by boat, adding to the cost. And while Puerto Rico has built natural-gas and coal-fired plants to reduce its dependence on oil, about 67% of its electricity comes from petroleum, compared with 3% for the U.S.
The price run-up comes at the worst possible time. A self-governing commonwealth of the U.S., Puerto Rico's economy is essentially built around two sectors: the government and manufacturing, which combined account for 39% of the territory's jobs and 52% of its GDP. But in recent years, manufacturing has been facing tough competition from international competitors while the government is cutting costs and reducing payrolls as it struggles with debt.
Puerto Rico's manufacturing sector, much of it pharmaceutical makers, was built up with the aid of low taxes and inexpensive labor. But those advantages have recently eroded: Two years ago, the U.S. Completed a decade-long phase-out of a section of the tax code that allowed many U.S. Companies to operate in Puerto Rico without paying federal taxes on profits generated there.
Meanwhile, some lower-cost manufacturers have moved to less costly destinations such as South America and Eastern Europe. These and other challenges caused Puerto Rico's manufacturing sector to lose about 8,400 jobs last year, a 7.3% decline, according to Moody's Economy.Com. The losses were heavier in lower-skill sectors such as textiles, which saw a 16% contraction; chemical and pharmaceutical manufacturing dipped 7%.
Amid these cutbacks, employment has declined and consumer spending has fallen. This has reduced government tax revenue, creating a nasty cycle where the government has trimmed costs but also raised taxes. That has further increased prices, hurting consumers even more. "It was almost a self-inflicted recession," says Horacio Aldrete-Sanchez, director of public-finance ratings for Standard & Poor's Ratings Services, the credit-rating service.
The Commonwealth had a budget deficit of $605 million for fiscal-year 2007 and is projecting a deficit of $260 million next year. To address the gap, the government has cut jobs and introduced its first sales tax, at 5.5%. The average electric bill increased to about $81 last year, from $58 the year earlier, a 40% increase. The government is also cutting costs, dropping workers and delayed almost $100 million in payments to contractors and suppliers.
Security guard Luis Rivera says the financial troubles cost him his job. Mr. Rivera says he was one of many employees let go by Island Security, which had a contract with a San Juan hospital. After he left, city police officers temporarily took over security, but were later replaced by another private company. Mr. Rivera has since gotten a job with a new security company. "The economy gets worse everyday because the government fails too much," he says.
High costs are also tough on business owners such as Tony Larrea. The president of fast-food operator South American Restaurants Corp., Mr. Larrea says the water bill at his restaurants increased 70% over the past year and he now pays an average of 18 cents a kilowatt hour for electricity -- about double the rate in the U.S. "We pay more in electricity than we pay in rent," he says.
With less to spend, consumers have drastically cut back on their car purchases. Car dealers in Puerto Rico sold 117,838 cars last year, a 16% decrease from 2005. Sales are down another 17% this year through June. Carlos Lopez-Lay, chief executive of Bella Group, a Honda distributor in San Juan, says one of the hardest things for dealers to accept is that there just aren't as many customers anymore.
"The market has been reduced," he says. Between layoffs and attrition, Mr. Lopez-Lay has reduced his work force by 42 people, or about 8% of his employees, most in administrative and office jobs.
By CONOR DOUGHERTY
Copyright by THE WALL STREET JOURNAL
August 14, 2007; Page A6
SAN JUAN, Puerto Rico -- With her living costs rising, Teresa Cruz has stopped shopping at her favorite stores. Instead of buying clothing at Marshalls, a popular merchant known for selling name-brand clothing at a discount, she now looks for bargains at local thrift shops.
She is also buying less-costly packaged foods instead of fresh fruits and vegetables. "I have to use my money only to pay for necessary [items]," says the 34-year-old telemarketing supervisor, who says it costs $50 to fill up her Kia Sedona with gasoline, up from $30 a few months ago.
The rising cost of food and energy has been a nagging problem for many Americans. Yet even as oil neared $80 a barrel before its recent slide and the cost of milk has surged to a record $3.80 a gallon in the past year, overall inflation in most of the U.S. Has remained subdued. In June, the consumer-price index was up 2.7% from a year ago.
But here in Puerto Rico, the consumer-price index, which includes food and fuel prices, was up 15% in 2006, according to the Puerto Rico Department of Labor and Human Resources. Water and sewer rates have more than doubled over the past two years, and electric bills jumped about 40% last year, according to Standard & Poor's. Economists and the Puerto Rican government say the Labor Department figures overstate inflation by a large margin (the government says it is in the process of revamping its consumer-price index) but they generally agree prices are rising faster here than in the rest of the U.S.
The increases are more painful to Puerto Rican consumers, whose $17,000 median household income is less than half that of U.S. Residents. Those problems, which come as the island's manufacturing segment is hurting and the government is struggling with deficits, have helped push an already troubled economy into recession.
"You hate to use the term 'the perfect storm,' but whenever you get all these different things coming together at the same time there's no other way to describe it," says Miguel Soto-Class, executive director of the Center for the New Economy, a Puerto Rican think tank.
Puerto Rico's gross national product is forecast for a 1.4% decline in the fiscal year ended in June. The overall U.S. Economy grew 2.9% last year, as measured by changes in gross domestic product, and expanded at an annual rate of 3.4% in the second quarter.
Inflation is higher in Puerto Rico partly because of its geography. Located 1,000 miles southeast of Miami in the Caribbean Sea, most of what the island consumes is transported by plane or by boat, adding to the cost. And while Puerto Rico has built natural-gas and coal-fired plants to reduce its dependence on oil, about 67% of its electricity comes from petroleum, compared with 3% for the U.S.
The price run-up comes at the worst possible time. A self-governing commonwealth of the U.S., Puerto Rico's economy is essentially built around two sectors: the government and manufacturing, which combined account for 39% of the territory's jobs and 52% of its GDP. But in recent years, manufacturing has been facing tough competition from international competitors while the government is cutting costs and reducing payrolls as it struggles with debt.
Puerto Rico's manufacturing sector, much of it pharmaceutical makers, was built up with the aid of low taxes and inexpensive labor. But those advantages have recently eroded: Two years ago, the U.S. Completed a decade-long phase-out of a section of the tax code that allowed many U.S. Companies to operate in Puerto Rico without paying federal taxes on profits generated there.
Meanwhile, some lower-cost manufacturers have moved to less costly destinations such as South America and Eastern Europe. These and other challenges caused Puerto Rico's manufacturing sector to lose about 8,400 jobs last year, a 7.3% decline, according to Moody's Economy.Com. The losses were heavier in lower-skill sectors such as textiles, which saw a 16% contraction; chemical and pharmaceutical manufacturing dipped 7%.
Amid these cutbacks, employment has declined and consumer spending has fallen. This has reduced government tax revenue, creating a nasty cycle where the government has trimmed costs but also raised taxes. That has further increased prices, hurting consumers even more. "It was almost a self-inflicted recession," says Horacio Aldrete-Sanchez, director of public-finance ratings for Standard & Poor's Ratings Services, the credit-rating service.
The Commonwealth had a budget deficit of $605 million for fiscal-year 2007 and is projecting a deficit of $260 million next year. To address the gap, the government has cut jobs and introduced its first sales tax, at 5.5%. The average electric bill increased to about $81 last year, from $58 the year earlier, a 40% increase. The government is also cutting costs, dropping workers and delayed almost $100 million in payments to contractors and suppliers.
Security guard Luis Rivera says the financial troubles cost him his job. Mr. Rivera says he was one of many employees let go by Island Security, which had a contract with a San Juan hospital. After he left, city police officers temporarily took over security, but were later replaced by another private company. Mr. Rivera has since gotten a job with a new security company. "The economy gets worse everyday because the government fails too much," he says.
High costs are also tough on business owners such as Tony Larrea. The president of fast-food operator South American Restaurants Corp., Mr. Larrea says the water bill at his restaurants increased 70% over the past year and he now pays an average of 18 cents a kilowatt hour for electricity -- about double the rate in the U.S. "We pay more in electricity than we pay in rent," he says.
With less to spend, consumers have drastically cut back on their car purchases. Car dealers in Puerto Rico sold 117,838 cars last year, a 16% decrease from 2005. Sales are down another 17% this year through June. Carlos Lopez-Lay, chief executive of Bella Group, a Honda distributor in San Juan, says one of the hardest things for dealers to accept is that there just aren't as many customers anymore.
"The market has been reduced," he says. Between layoffs and attrition, Mr. Lopez-Lay has reduced his work force by 42 people, or about 8% of his employees, most in administrative and office jobs.
Denied Medication, AIDS Patient Dies in Custody; Victor Arellano's Fellow Detainees Staged a Protest Over His Treatment
Denied Medication, AIDS Patient Dies in Custody; Victor Arellano's Fellow Detainees Staged a Protest Over His Treatment
By Sandra Hernandez
© 2007 Daily Journal Corporation. All rights reserved.
LOS ANGELES, Aug. 9, 2007 - The handful of prescription drugs Victor Arellano took each morning kept him alive.
But Arellano, in the throes of full-blown AIDS, was denied that medicine when immigration officials locked him up at the San Pedro detention center, other detainees said.
Two months later Arellano, 23, died in custody - too weak to walk to the bathroom alone, but shackled to a hospital bed.
Arellano's family and his fellow detainees said the detention center's staff denied him his critical medication despite repeated requests.
"He called me two weeks before he died and told me he was afraid," said Arellano's mother, Olga. "He kept telling me how frustrated he felt because he wanted to see a doctor. He asked for his medicine but no one listened to him."
Victor came to the United States from Mexico as a child. A transgender person, he was known as Victoria Arellano to his fellow detainees, who routinely referred to him as her.
"She was so sick that if you tried to move her she would scream," said Walter Ayala, another detainee, recalling her final two weeks.
Arellano spent most days in a bunk bed, complaining of debilitating headaches, back pain, nausea and stomach cramps, Ayala said.
"This is the most extreme case I've encountered in my research," said Megan McLemore of Human Rights Watch in New York. She is preparing a report, due out this fall, on HIV/AIDS conditions in U.S. immigration detention centers.
"We have received a lot of complaints from detainees and their advocates," McLemore said. "The complaints are about the delays in getting medication and continuity issues where people get moved around."
Three years ago, doctors at a Los Angeles free clinic said Arellano did not require skilled nursing care and was asymptomatic.
She was prescribed daily doses of bactrim, a prophylactic antibiotic given to HIV patients to prevent pulmonary infections from developing into life-threatening pneumonia. Arellano was later switched to dapasone, another antibiotic.
Arellano was still taking dapasone when she was sent to the San Pedro detention center in May. Medical experts said taking HIV patients off dapasone could produce deadly results.
"The consequences of taking someone off that medication is that within a few weeks a patient may unfortunately develop pneumonia and then not respond to treatment," said Homayoon Khanlou, chief of medicine for AIDS Healthcare Foundation, the largest AIDS clinic in the U.S., based in Los Angeles.
Arellano's mother said doctors at the San Pedro hospital said her son's body was wracked by meningitis and pneumonia.
"We spend millions to ensure every single detainee is screened and has access to medical care," said Marc Raimondi, a spokesman for Immigration and Customs Enforcement, the agency that oversees detention centers.
"A significant percentage of those that come into our care have pre-existing conditions that we provide care for," said Raimondi, who said he could not comment on Arellano's case. "A lot of times our medical care is the first time they receive treatment for illnesses they didn't even know they had."
An estimated 29,000 foreigners are held in U.S. detention centers, a loose network of 400 jails, private facilities and federal detention centers.
The medical system designed to help detainees was unable to keep Arellano alive.
Arellano's final days were spent in a dormitory-style cell built to hold 50 men but often houses as many as 80.
Arellano's care fell to fellow detainees, who soaked their bath towels in water to cool her fever and used a cardboard box as a makeshift trash can to gather her vomit.
"We all asked the guards for help, to take Victoria to the infirmary but no one did anything," said Oscar Santander, a fellow detainee.
"The last week was the worst," Santander said. "She couldn't stand so we took turns taking her to the bathroom. She was vomiting and had terrible diarrhea."
Arellano was taken to the infirmary and on July 13 given drugs to treat nausea and amoxicillin, an antibiotic, according to a prescription signed by Jeff Brinkley, a senior nurse practitioner assigned to the San Pedro detention center.
Medical experts said amoxicillin is not used to treat AIDS-related infections.
"It would not be my drug of choice because it would not cover the problems or infections an HIV person would have, such as a lung infection or meningitis," said the AIDS Healthcare Foundation's Khanlou.
Arellano couldn't keep the drugs down and began vomiting blood, Santander said.
By nightfall, Arellano looked so pale and weak that 80 detainees staged a protest, ignoring an order to get in line for the nightly head count.
The men began chanting "hospital," said Abel Gutierrez, a Mexican detainee.
"She was so sick and they wouldn't do anything," Gutierrez said.
Arellano was taken by ambulance to a San Pedro hospital. Less than 24 hours later, she was back in the detention center, crippled by intense vomiting and bouts of diarrhea.
Arellano was again rushed to the hospital.
This time, Arellano was taken to Little Company of Mary Hospital's intensive care unit, where she died July 20, shackled to a bed with two immigration agents standing guard at the hospital room door.
Raimondi said 62 immigrants, including Arellano, have died in federal immigration custody since 2004, three at the San Pedro center.
In 2000, federal immigration officials adopted medical standards. However, those standards are not legally enforceable, unlike those for inmates in state or federal prisons.
"The fact is there is no legal recourse for immigrants in detention, and that is a major systemic problem," McLemore said. "Both the federal and state prison system have enforceable detention standards, but immigration has nothing like that."
The result, immigration advocates say, are deaths like that of a Barbadian woman who died in 2005 while detained in Virginia after she was denied her medication for high blood pressure.
That same year, Haitian writer Edwidge Danticat's uncle died in a South Florida detention center after he was stopped at the Miami International Airport, where his medications for hypertension and an inflamed prostate were seized.
Immigration officials have denied any wrongdoing and said the deaths were caused by pre-existing conditions.
Legal advocates, however, said medical problems at detention centers are widespread.
"The No. 1 complaint I hear about is the lack of medical care for immigrant detainees," said Tom Jawetz, a staff attorney with the American Civil Liberties Union's national prison project in Washington, D.C. "And typically the complaints come from detainees or lawyers around the country."
In June, the ACLU's national prison project filed a federal lawsuit over medical conditions at the San Diego Correction Facility, a privately run detention center.
The lawsuit came after a detainee died and several others immigrants suffered life-threatening illnesses.
Francisco Castaneda, a Salvadoran immigrant who was held at San Diego and San Pedro, repeatedly asked to be taken to the infirmary when he was at San Pedro last year, according to his lawyer, Conal Doyle.
Castaneda would show guards his bloodstained underwear, hoping to persuade them to let him see a nurse or doctor, Doyle said.
In December, the ACLU's Jawetz sent immigration officials a letter asking San Pedro officials to provide medical treatment, but nothing happened.
Castaneda's health grew worse after a small lesion on his groin was left untreated for 10 months while he was in detention, Doyle said. Castaneda has since been released. His penis was amputated, and he is now battling penile and lymph node cancer, Doyle said.
The ACLU's lawsuit comes too late for Arellano's family, who struggle to understand an unexpected death and the federal government's actions during those final days.
Sitting in her Ventura County apartment, Olga looks at the bags of medication her son took and cries.
She said her greatest comfort has come from Arellano's fellow detainees, who last week pooled their own money and sent the family $245.
"I can only find the strength to talk about this because I want people to know what is going on inside that place," Olga said. "I don't want another family to have to live through this nightmare."
By Sandra Hernandez
© 2007 Daily Journal Corporation. All rights reserved.
LOS ANGELES, Aug. 9, 2007 - The handful of prescription drugs Victor Arellano took each morning kept him alive.
But Arellano, in the throes of full-blown AIDS, was denied that medicine when immigration officials locked him up at the San Pedro detention center, other detainees said.
Two months later Arellano, 23, died in custody - too weak to walk to the bathroom alone, but shackled to a hospital bed.
Arellano's family and his fellow detainees said the detention center's staff denied him his critical medication despite repeated requests.
"He called me two weeks before he died and told me he was afraid," said Arellano's mother, Olga. "He kept telling me how frustrated he felt because he wanted to see a doctor. He asked for his medicine but no one listened to him."
Victor came to the United States from Mexico as a child. A transgender person, he was known as Victoria Arellano to his fellow detainees, who routinely referred to him as her.
"She was so sick that if you tried to move her she would scream," said Walter Ayala, another detainee, recalling her final two weeks.
Arellano spent most days in a bunk bed, complaining of debilitating headaches, back pain, nausea and stomach cramps, Ayala said.
"This is the most extreme case I've encountered in my research," said Megan McLemore of Human Rights Watch in New York. She is preparing a report, due out this fall, on HIV/AIDS conditions in U.S. immigration detention centers.
"We have received a lot of complaints from detainees and their advocates," McLemore said. "The complaints are about the delays in getting medication and continuity issues where people get moved around."
Three years ago, doctors at a Los Angeles free clinic said Arellano did not require skilled nursing care and was asymptomatic.
She was prescribed daily doses of bactrim, a prophylactic antibiotic given to HIV patients to prevent pulmonary infections from developing into life-threatening pneumonia. Arellano was later switched to dapasone, another antibiotic.
Arellano was still taking dapasone when she was sent to the San Pedro detention center in May. Medical experts said taking HIV patients off dapasone could produce deadly results.
"The consequences of taking someone off that medication is that within a few weeks a patient may unfortunately develop pneumonia and then not respond to treatment," said Homayoon Khanlou, chief of medicine for AIDS Healthcare Foundation, the largest AIDS clinic in the U.S., based in Los Angeles.
Arellano's mother said doctors at the San Pedro hospital said her son's body was wracked by meningitis and pneumonia.
"We spend millions to ensure every single detainee is screened and has access to medical care," said Marc Raimondi, a spokesman for Immigration and Customs Enforcement, the agency that oversees detention centers.
"A significant percentage of those that come into our care have pre-existing conditions that we provide care for," said Raimondi, who said he could not comment on Arellano's case. "A lot of times our medical care is the first time they receive treatment for illnesses they didn't even know they had."
An estimated 29,000 foreigners are held in U.S. detention centers, a loose network of 400 jails, private facilities and federal detention centers.
The medical system designed to help detainees was unable to keep Arellano alive.
Arellano's final days were spent in a dormitory-style cell built to hold 50 men but often houses as many as 80.
Arellano's care fell to fellow detainees, who soaked their bath towels in water to cool her fever and used a cardboard box as a makeshift trash can to gather her vomit.
"We all asked the guards for help, to take Victoria to the infirmary but no one did anything," said Oscar Santander, a fellow detainee.
"The last week was the worst," Santander said. "She couldn't stand so we took turns taking her to the bathroom. She was vomiting and had terrible diarrhea."
Arellano was taken to the infirmary and on July 13 given drugs to treat nausea and amoxicillin, an antibiotic, according to a prescription signed by Jeff Brinkley, a senior nurse practitioner assigned to the San Pedro detention center.
Medical experts said amoxicillin is not used to treat AIDS-related infections.
"It would not be my drug of choice because it would not cover the problems or infections an HIV person would have, such as a lung infection or meningitis," said the AIDS Healthcare Foundation's Khanlou.
Arellano couldn't keep the drugs down and began vomiting blood, Santander said.
By nightfall, Arellano looked so pale and weak that 80 detainees staged a protest, ignoring an order to get in line for the nightly head count.
The men began chanting "hospital," said Abel Gutierrez, a Mexican detainee.
"She was so sick and they wouldn't do anything," Gutierrez said.
Arellano was taken by ambulance to a San Pedro hospital. Less than 24 hours later, she was back in the detention center, crippled by intense vomiting and bouts of diarrhea.
Arellano was again rushed to the hospital.
This time, Arellano was taken to Little Company of Mary Hospital's intensive care unit, where she died July 20, shackled to a bed with two immigration agents standing guard at the hospital room door.
Raimondi said 62 immigrants, including Arellano, have died in federal immigration custody since 2004, three at the San Pedro center.
In 2000, federal immigration officials adopted medical standards. However, those standards are not legally enforceable, unlike those for inmates in state or federal prisons.
"The fact is there is no legal recourse for immigrants in detention, and that is a major systemic problem," McLemore said. "Both the federal and state prison system have enforceable detention standards, but immigration has nothing like that."
The result, immigration advocates say, are deaths like that of a Barbadian woman who died in 2005 while detained in Virginia after she was denied her medication for high blood pressure.
That same year, Haitian writer Edwidge Danticat's uncle died in a South Florida detention center after he was stopped at the Miami International Airport, where his medications for hypertension and an inflamed prostate were seized.
Immigration officials have denied any wrongdoing and said the deaths were caused by pre-existing conditions.
Legal advocates, however, said medical problems at detention centers are widespread.
"The No. 1 complaint I hear about is the lack of medical care for immigrant detainees," said Tom Jawetz, a staff attorney with the American Civil Liberties Union's national prison project in Washington, D.C. "And typically the complaints come from detainees or lawyers around the country."
In June, the ACLU's national prison project filed a federal lawsuit over medical conditions at the San Diego Correction Facility, a privately run detention center.
The lawsuit came after a detainee died and several others immigrants suffered life-threatening illnesses.
Francisco Castaneda, a Salvadoran immigrant who was held at San Diego and San Pedro, repeatedly asked to be taken to the infirmary when he was at San Pedro last year, according to his lawyer, Conal Doyle.
Castaneda would show guards his bloodstained underwear, hoping to persuade them to let him see a nurse or doctor, Doyle said.
In December, the ACLU's Jawetz sent immigration officials a letter asking San Pedro officials to provide medical treatment, but nothing happened.
Castaneda's health grew worse after a small lesion on his groin was left untreated for 10 months while he was in detention, Doyle said. Castaneda has since been released. His penis was amputated, and he is now battling penile and lymph node cancer, Doyle said.
The ACLU's lawsuit comes too late for Arellano's family, who struggle to understand an unexpected death and the federal government's actions during those final days.
Sitting in her Ventura County apartment, Olga looks at the bags of medication her son took and cries.
She said her greatest comfort has come from Arellano's fellow detainees, who last week pooled their own money and sent the family $245.
"I can only find the strength to talk about this because I want people to know what is going on inside that place," Olga said. "I don't want another family to have to live through this nightmare."
Tuesday, August 14, 2007
Final reckoning only days away for Musharraf
Final reckoning only days away for Musharraf
By Jo Johnson
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Confronted by the gravest crisis of his eight-year rule, Pakistan's President Pervez Musharraf faces an ever-shrinking menu of options. In recent weeks he has spent much of his time shut away in his military camp in Rawalpindi, surrounded by self-interested advisers, increasingly intolerant of criticism and displaying signs, diplomats say, of growing insecurity.
But as the general toys with ideas such as imposing a state of emergency that would suspend elections and extend his rule, the reality is that he has just days left to find a way out of his labyrinth before a constitutional crisis paralyses Pakistan.
If Gen Musharraf proceeds with his plan to seek a new mandate from the existing state and national legislatures - themselves the product of rigged 2002 elections - he is likely to find his ability to govern severely impaired. Challenges to his legitimacy are likely to hit him on two fronts: in the courts, from a judiciary emboldened by the reinstatement of Iftikhar Chaudhry, chief justice; and on the streets, from a newly courageous civil society.
Presidential elections must be held between September 15 and October 15. The constitution forbids a general from holding political office while still serving and also for up to two years after retirement. In December 2003, Gen Musharraf finessed matters by persuading a coalition of Islamic parties to back an amendment exempting him from the restriction, initially for one year. When the December 2004 deadline expired, the exemption was extended until the end of 2007 by a rubber stamp parliament endorsed by the Supreme Court. Today it is a different story.
"This is going to be a battle," says Shafqat Mahmood, a political analyst. "Back then, the Supreme Court was not free. . . If the court now decides to disqualify him from contesting, it could lead to full martial law."
Gen Musharraf acknowledged at the weekend that he had last week come close to declaring a state of emergency, only relenting after a 2am telephone call from Condoleezza Rice, US secretary of state.
Washington is keen for the isolated general to broaden his political base through an alliance with Benazir Bhutto, leader of the Pakistan People's party, and to reduce his dependency on religious parties.
Relations between the government and those religious parties were disrupted by last month's raid on Islamabad's red mosque, which has prompted outrage among Islamists and a surge in suicide attacks.
"With all the suicide attacks, the sense of crisis is very acute now," says Hasan- Askari Rizvi, a Lahore-based security analyst. "[The Islamic parties] want to show that [Gen Musharraf] can no longer count on them as intermediaries with the jihadis or govern effectively without them."
Co-opting Ms Bhutto into government increasingly looks like Gen Musharraf's best chance of securing his political future. The two met in secret in Abu Dhabi late last month, but have yet to agree terms of cohabitation. Under one scenario, Gen Musharraf, in return for the PPP's support in the presidential election, would seek election as a civilian, drop corruption charges against Ms Bhutto, change the law that prevents her from seeking a third term as prime minister and allow her back to campaign for the parliamentary elections.
If Gen Musharraf refuses to put on civvies, a deal will be more complicated. Ms Bhutto is under pressure to insist he step out of uniform, but many believe she might soften.
All bets would be off under an emergency. It still cannot be ruled out: the pro-Musharraf ruling party, the Pakistan Muslim League (Q), a rag-bag of deserters from the PPP and Nawaz Sharif's Pakistan Muslim League (N), has much to lose from a return of the exiled former prime ministers.
An emergency that would derail a deal with Ms Bhutto, head off a challenge to the PML(Q) from Mr Sharif and postpone parliamentary elections for a year therefore has its appeal. It could also appeal to Gen Musharraf's military instincts.
"He's really not a great strategist," says a diplomat in Islamabad. "He's a commando who, when he's in a fix, likes to blast his way out."
The coming weeks will present a new set of challenges, starting with the Supreme Court's imminent hearing of a petition demanding that Mr Sharif, the target of Gen Musharraf's 1999 coup, be immediately permitted the right to return. If that petition is accepted, the temptation to impose an emergency will undoubtedly return.
Ruling party backs president despite doubts over his talks with Bhutto
By Farhan Bokhari in Islamabad
Pakistan's president, General Pervez Musharraf, faces growing calls from within his ruling coalition to reconsider links with Benazir Bhutto, the exiled former premier, as he seeks to consolidate support for his re-election as early as next month.
News that Gen Musharraf met Ms Bhutto in Abu Dhabi last month triggered anxiety among members of the ruling PML(Q) party, who perceived a potential erosion of their power. But its leaders have also been at pains to reinforce their support for a president who has never looked weaker in his eight-year rule.
Chaudhry Shujaat Hussain, the PML(Q) president, is believed to have reassured Gen Musharraf of the party's complete backing.
The president also has the support of the MQM, a big regional party of Urdu-speaking immigrants from India, dominating Karachi, the southern port city.
Altaf Hussain, the MQM's leader, lives in exile in London. But he has carefully built up a party structure that has effectively blocked the rise of its opponents in Pakistan's main commercial centre. At the last count, the 342-member lower house of parliament in Islamabad had 183 pro-government deputies, while the 100-member Senate was estimated to have up to60 pro-government members.
The president's electoral college also consists of the legislatures of the four provinces - Punjab, Sindh, Baluchistan and North West Frontier Province - which are stacked heavily in Gen Musharraf's favour.
By Jo Johnson
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Confronted by the gravest crisis of his eight-year rule, Pakistan's President Pervez Musharraf faces an ever-shrinking menu of options. In recent weeks he has spent much of his time shut away in his military camp in Rawalpindi, surrounded by self-interested advisers, increasingly intolerant of criticism and displaying signs, diplomats say, of growing insecurity.
But as the general toys with ideas such as imposing a state of emergency that would suspend elections and extend his rule, the reality is that he has just days left to find a way out of his labyrinth before a constitutional crisis paralyses Pakistan.
If Gen Musharraf proceeds with his plan to seek a new mandate from the existing state and national legislatures - themselves the product of rigged 2002 elections - he is likely to find his ability to govern severely impaired. Challenges to his legitimacy are likely to hit him on two fronts: in the courts, from a judiciary emboldened by the reinstatement of Iftikhar Chaudhry, chief justice; and on the streets, from a newly courageous civil society.
Presidential elections must be held between September 15 and October 15. The constitution forbids a general from holding political office while still serving and also for up to two years after retirement. In December 2003, Gen Musharraf finessed matters by persuading a coalition of Islamic parties to back an amendment exempting him from the restriction, initially for one year. When the December 2004 deadline expired, the exemption was extended until the end of 2007 by a rubber stamp parliament endorsed by the Supreme Court. Today it is a different story.
"This is going to be a battle," says Shafqat Mahmood, a political analyst. "Back then, the Supreme Court was not free. . . If the court now decides to disqualify him from contesting, it could lead to full martial law."
Gen Musharraf acknowledged at the weekend that he had last week come close to declaring a state of emergency, only relenting after a 2am telephone call from Condoleezza Rice, US secretary of state.
Washington is keen for the isolated general to broaden his political base through an alliance with Benazir Bhutto, leader of the Pakistan People's party, and to reduce his dependency on religious parties.
Relations between the government and those religious parties were disrupted by last month's raid on Islamabad's red mosque, which has prompted outrage among Islamists and a surge in suicide attacks.
"With all the suicide attacks, the sense of crisis is very acute now," says Hasan- Askari Rizvi, a Lahore-based security analyst. "[The Islamic parties] want to show that [Gen Musharraf] can no longer count on them as intermediaries with the jihadis or govern effectively without them."
Co-opting Ms Bhutto into government increasingly looks like Gen Musharraf's best chance of securing his political future. The two met in secret in Abu Dhabi late last month, but have yet to agree terms of cohabitation. Under one scenario, Gen Musharraf, in return for the PPP's support in the presidential election, would seek election as a civilian, drop corruption charges against Ms Bhutto, change the law that prevents her from seeking a third term as prime minister and allow her back to campaign for the parliamentary elections.
If Gen Musharraf refuses to put on civvies, a deal will be more complicated. Ms Bhutto is under pressure to insist he step out of uniform, but many believe she might soften.
All bets would be off under an emergency. It still cannot be ruled out: the pro-Musharraf ruling party, the Pakistan Muslim League (Q), a rag-bag of deserters from the PPP and Nawaz Sharif's Pakistan Muslim League (N), has much to lose from a return of the exiled former prime ministers.
An emergency that would derail a deal with Ms Bhutto, head off a challenge to the PML(Q) from Mr Sharif and postpone parliamentary elections for a year therefore has its appeal. It could also appeal to Gen Musharraf's military instincts.
"He's really not a great strategist," says a diplomat in Islamabad. "He's a commando who, when he's in a fix, likes to blast his way out."
The coming weeks will present a new set of challenges, starting with the Supreme Court's imminent hearing of a petition demanding that Mr Sharif, the target of Gen Musharraf's 1999 coup, be immediately permitted the right to return. If that petition is accepted, the temptation to impose an emergency will undoubtedly return.
Ruling party backs president despite doubts over his talks with Bhutto
By Farhan Bokhari in Islamabad
Pakistan's president, General Pervez Musharraf, faces growing calls from within his ruling coalition to reconsider links with Benazir Bhutto, the exiled former premier, as he seeks to consolidate support for his re-election as early as next month.
News that Gen Musharraf met Ms Bhutto in Abu Dhabi last month triggered anxiety among members of the ruling PML(Q) party, who perceived a potential erosion of their power. But its leaders have also been at pains to reinforce their support for a president who has never looked weaker in his eight-year rule.
Chaudhry Shujaat Hussain, the PML(Q) president, is believed to have reassured Gen Musharraf of the party's complete backing.
The president also has the support of the MQM, a big regional party of Urdu-speaking immigrants from India, dominating Karachi, the southern port city.
Altaf Hussain, the MQM's leader, lives in exile in London. But he has carefully built up a party structure that has effectively blocked the rise of its opponents in Pakistan's main commercial centre. At the last count, the 342-member lower house of parliament in Islamabad had 183 pro-government deputies, while the 100-member Senate was estimated to have up to60 pro-government members.
The president's electoral college also consists of the legislatures of the four provinces - Punjab, Sindh, Baluchistan and North West Frontier Province - which are stacked heavily in Gen Musharraf's favour.
Fresh blow to lame-duck Bush
Fresh blow to lame-duck Bush
By Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Karl Rove was a founding member of the close-knit group of Texan political operatives who helped propel George W. Bush first to the state governorship and then to the White House.
Yesterday, he became the latest of the so-called "Texas Mafia" to leave the Bush administration, after more than six years as one of the most powerful and polar-ising figures in US politics.
Mr Rove's departure at the end of this month completes a radical transformation of the White House staff since Andrew Card was replaced by Josh Bolten as chief of staff last year.
He is the third long-serving Texan adviser to quit the administration since January, when Harriet Miers stepped down as Mr Bush's legal counsel.
Dan Bartlett, who rivalled Mr Rove as Mr Bush's closest and most trusted aide, resigned as White House counsellor in June. Another senior departure came last month when Rob Portman, one of Mr Bush's leading economic advisers, stepped down as budget director.
Political commentators said the exodus was not un-usual for an administration nearing its seventh year. "They have stayed together for longer than most administrations," said Whit Ayres, a Republican strategist.
But the break-up of the original Bush team symbolises the sense of disintegration surrounding his presidency in recent months.
The Democratic takeover of Congress in the mid-term elections, combined with the growing unpopularity of the Iraq war, has turned Mr Bush - who has 17 months of his term remaining - into a lame-duck president.
John Fortier, a research fellow at the American Enterprise Institute, says the Republican defeat last year robbed Mr Rove of his primary role in the administration. "His job was to work with the Republican Congress in pushing forward the Bush agenda. But since the mid-term election, his role has been limited to keeping enough Republicans in line to block Democratic proposals," he said. "Rove's ambitions have always been bigger than that."
Analysts said Mr Rove's departure would increase the importance of Mr Bolten and Ed Gillespie, the veteran strategist and lobbyist who replaced Mr Bartlett as White House counsellor.
"Ed Gillespie is a very fine political mind who is likely to play an enhanced role in White House deliberations," said Mr Ayres. "But there's no way to replace Karl Rove, because his breadth of political and policy experience and his relationship with the president are unmatched."
Mr Rove said he would leave next month for a duck-hunting trip in Texas. He wanted to write a book on the Bush presidency - with the president's approval.
Standing next to Mr Bush yesterday, his voice quivering with emotion, he said he had been weighing his fu-ture for a year. "It's not been an easy decision," he said. "It always seemed there was a better time to leave somewhere out there in the future. But now is the time."
By Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Karl Rove was a founding member of the close-knit group of Texan political operatives who helped propel George W. Bush first to the state governorship and then to the White House.
Yesterday, he became the latest of the so-called "Texas Mafia" to leave the Bush administration, after more than six years as one of the most powerful and polar-ising figures in US politics.
Mr Rove's departure at the end of this month completes a radical transformation of the White House staff since Andrew Card was replaced by Josh Bolten as chief of staff last year.
He is the third long-serving Texan adviser to quit the administration since January, when Harriet Miers stepped down as Mr Bush's legal counsel.
Dan Bartlett, who rivalled Mr Rove as Mr Bush's closest and most trusted aide, resigned as White House counsellor in June. Another senior departure came last month when Rob Portman, one of Mr Bush's leading economic advisers, stepped down as budget director.
Political commentators said the exodus was not un-usual for an administration nearing its seventh year. "They have stayed together for longer than most administrations," said Whit Ayres, a Republican strategist.
But the break-up of the original Bush team symbolises the sense of disintegration surrounding his presidency in recent months.
The Democratic takeover of Congress in the mid-term elections, combined with the growing unpopularity of the Iraq war, has turned Mr Bush - who has 17 months of his term remaining - into a lame-duck president.
John Fortier, a research fellow at the American Enterprise Institute, says the Republican defeat last year robbed Mr Rove of his primary role in the administration. "His job was to work with the Republican Congress in pushing forward the Bush agenda. But since the mid-term election, his role has been limited to keeping enough Republicans in line to block Democratic proposals," he said. "Rove's ambitions have always been bigger than that."
Analysts said Mr Rove's departure would increase the importance of Mr Bolten and Ed Gillespie, the veteran strategist and lobbyist who replaced Mr Bartlett as White House counsellor.
"Ed Gillespie is a very fine political mind who is likely to play an enhanced role in White House deliberations," said Mr Ayres. "But there's no way to replace Karl Rove, because his breadth of political and policy experience and his relationship with the president are unmatched."
Mr Rove said he would leave next month for a duck-hunting trip in Texas. He wanted to write a book on the Bush presidency - with the president's approval.
Standing next to Mr Bush yesterday, his voice quivering with emotion, he said he had been weighing his fu-ture for a year. "It's not been an easy decision," he said. "It always seemed there was a better time to leave somewhere out there in the future. But now is the time."
Goldman in $3bn bailout of fund
Goldman in $3bn bailout of fund
By James Mackintosh
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Goldman Sachs is to inject $2bn (£993m) of its own money to bail out its Global Equity Opportunities hedge fund in an embarrassing admission that its highly regarded computerised funds malfunctioned last week.
The investment bank has raised a further $1bn from outside investors to support the $3.6bn GEO fund, which lost about $1.5bn when computer models failed to predict market turbulence.
The new investors include Hank Greenberg, former chairman of American International Group, hedge fund Perry Capital and Eli Broad, the US billionaire.
Goldman, the second-largest hedge fund manager, said its computer-driven, or quantitative, funds had been hit by unpredictable price movements as rivals with similar strategies dumped shares to cut their borrowing.
But it said it now saw opportunities in markets and believed most of the reduction in leverage by quantitative hedge funds was complete.
David Viniar, chief financial officer at Goldman, said valuations had got "way out of whack", and denied the bank was rescuing the fund.
"Given the dislocation in the markets we believe this is a good investment opportunity for us and the other investors we have brought in," he said.
The problems at the GEO fund reflect wider difficulties for computer-driven quantitative hedge funds, known as equity market neutral or statistical arbitrage funds, as stock markets oscillated wildly in the past two weeks.
"It has been a great time touse your mind rather than a machine," said a senior executive at one big fund of hedge funds.
Many of the biggest hedge funds have suffered as theircomputer models failed to respond correctly to the swinging markets.
Renaissance Technologies, one of the most respected managers, lost 8.7 per cent in August up to Thursday in its Institutional Equities Fund - before bouncing back on Friday to end the week down 4.9 per cent for the month.
Other big-name funds hit included some run by AQR Capital, Barclays Global Investors, Highbridge Capital Management, controlled by JPMorgan, and DE Shaw, in which Lehman Brothers has a 20 per cent stake, investors said.
But several fund managers said the entire sector had recovered in the past two days, making up a large chunk of their losses.
Goldman's two other big quantitative hedge funds, its flagship Global Alpha and the smaller North American Opportunities fund, have also been hard hit by the failure of their models.
Global Alpha dropped 27 per cent so far this year with MrViniar saying more than half of the loss was last week.
The scale of the losses at Goldman's funds reflect the high level of borrowing the funds had, with one investor putting gearing at eight to 10 times before it began to cut back last week.
Goldman said GEO's gearing now stood at six times and the new investments would reduce that to 3.5 times.
By James Mackintosh
Copyright The Financial Times Limited 2007
Published: August 14 2007 03:00 | Last updated: August 14 2007 03:00
Goldman Sachs is to inject $2bn (£993m) of its own money to bail out its Global Equity Opportunities hedge fund in an embarrassing admission that its highly regarded computerised funds malfunctioned last week.
The investment bank has raised a further $1bn from outside investors to support the $3.6bn GEO fund, which lost about $1.5bn when computer models failed to predict market turbulence.
The new investors include Hank Greenberg, former chairman of American International Group, hedge fund Perry Capital and Eli Broad, the US billionaire.
Goldman, the second-largest hedge fund manager, said its computer-driven, or quantitative, funds had been hit by unpredictable price movements as rivals with similar strategies dumped shares to cut their borrowing.
But it said it now saw opportunities in markets and believed most of the reduction in leverage by quantitative hedge funds was complete.
David Viniar, chief financial officer at Goldman, said valuations had got "way out of whack", and denied the bank was rescuing the fund.
"Given the dislocation in the markets we believe this is a good investment opportunity for us and the other investors we have brought in," he said.
The problems at the GEO fund reflect wider difficulties for computer-driven quantitative hedge funds, known as equity market neutral or statistical arbitrage funds, as stock markets oscillated wildly in the past two weeks.
"It has been a great time touse your mind rather than a machine," said a senior executive at one big fund of hedge funds.
Many of the biggest hedge funds have suffered as theircomputer models failed to respond correctly to the swinging markets.
Renaissance Technologies, one of the most respected managers, lost 8.7 per cent in August up to Thursday in its Institutional Equities Fund - before bouncing back on Friday to end the week down 4.9 per cent for the month.
Other big-name funds hit included some run by AQR Capital, Barclays Global Investors, Highbridge Capital Management, controlled by JPMorgan, and DE Shaw, in which Lehman Brothers has a 20 per cent stake, investors said.
But several fund managers said the entire sector had recovered in the past two days, making up a large chunk of their losses.
Goldman's two other big quantitative hedge funds, its flagship Global Alpha and the smaller North American Opportunities fund, have also been hard hit by the failure of their models.
Global Alpha dropped 27 per cent so far this year with MrViniar saying more than half of the loss was last week.
The scale of the losses at Goldman's funds reflect the high level of borrowing the funds had, with one investor putting gearing at eight to 10 times before it began to cut back last week.
Goldman said GEO's gearing now stood at six times and the new investments would reduce that to 3.5 times.
INSTITUTE OF PUERTO RICAN ARTS & CULTURE PRESENTS BARRIO ART FEST 2007 (BAF07
MEDIA ADVISORY MEDIA CONTACT:
August 2007 Jorge Félix
(773) 620-8608 - felixjorge@msn.com
INSTITUTE OF PUERTO RICAN ARTS & CULTURE PRESENTS BARRIO ART FEST 2007 (BAF07)
Humboldt Park’s Arts Educational Festival
Visual artists, performers, writers, filmmakers and educators showcase their work
at a FREE community arts educational exhibit and festival in Humboldt Park.
WHAT: Puerto Rican, Latino and Humboldt Park painters, designers, printmakers, craft makers, musicians, author/poets, actors, video/filmmakers and arts educators will showcase their artwork at Barrio Art Fest 2007 (BAF07). Different to most arts festivals, BAF07 is a multidisciplinary educational art exhibit and festival where artists interact with the public through art workshops, demonstrations, book signing/readings, film screenings and performances. Located in Chicago’s Humboldt Park, visitors can explore art installations, experience live performances, participate in art educational workshops, observe artisans’ craft demonstrations, and enjoy the latest work of media and film artists in the screening room. BAF07 is an arts and cultural experience for all ages through the presentation of the best traditional arts to the most engaging conceptual and experimental art forms. BAF07 is a FREE event for the whole Chicago community.
WHEN: Saturday, August 18, 2007
11 a.m. – 6 p.m.
WHERE: Humboldt Park Field House - 1440 N. Sacramento (Humboldt Blvd) Chicago, IL
FREE parking across the street at the Boathouse 1359 N. Sacramento.
Facilities and parking are wheelchair and handicap accessible.
MORE: BAF07 is presented by the Institute of Puerto Rican Arts & Culture (IPRAC) in collaboration with the Chicago Park District and the Division Street Business Development Association. Sponsored by the City of Chicago Cultural Outreach Program, LISC, Chicago Children’s Museum, Comcast, La Voz de Paseo Boricua Newspaper, ALTAVISTA Graphics, Hoy Newspapers, Dr. Pepper and DejaBlue.
IPRAC is an arts and educational institution devoted to the promotion, integration and advancement of the Puerto Rican arts and culture. IPRAC brings to the community visual arts and exhibition programming that furthers the Puerto Rican arts tradition through curatorial and exhibition programs.
For information call IPRAC’s program office 773-486-8345 or email: FelixJorge@msn.com or JorgeFelix@iprac.org
# # #
BAF07 – add: Page 2 – Artist’s Listing ; Page 3 – Program
BAF07 is an Arts Educational and cultural festival showcasing the work of Puerto Rican, Latino and Humboldt Park artists through art exhibits, performances, workshops, screening and demonstrations.
1. BAF07 ARTISTS
Abraham Santiago-painting
Adam Schlacter-film
Alexis Kent-painting
Alonso Mayo-film
Ana Ubides-pastry art
Andrés Ramírez-film
Anna Fong-fashion design
Army of Juan-performance hip-hop
Association House-art program
Batey Urbano-spoken word
BCA-Lowell Elementary-film
BCA-Pedro Albizu High School-film
Betty García-film
Carlos T. Mock-author
Cecelia Colón-collage
chicagOriginal-breakdancing-skateboard
Cooperative Image Group-media art
Cuca-craft
Daniel López-ceramic
Dennis Avelar-film
Don Ángel de León-"gallito &trompo"
Edgar Torres-ceramic
Eduardo Arocho-poet
Elaine Soloway-author
Elizabeth Negrón-jewelry
Francisco Rosado-drawing sessions
Güiro Orchestra-performance folk
Ivette & Juan Diaz-performance
Jason Martínez-DJ workshop
Joe Caballero-film
John Vergara-mosaic design
José Efraín Rivera-film
José Virola-craft
Josué Pellot-installation
JR Lizardi-photography
Juan Diaz-animation
Judy Veramendi-author & playwright
Julio Flores-kite-making workshop
Koidde-painting & drawing
Leo Negrón-painting & craft
Lolita Colón-doll making
Lucy Gómez-photography
Luis Tubens-poet
Luz Letamendi-photography
Manelick Gutiérrez del Río-art installation
Marcos Medina-silversmith
María I. Cruz Storniolo-painting
Mariana Maldonado--painting
Michael Báez-film
Migdalia Galarza-drawing
Miguel A. Cajigas-craft
Millie Vásquez-jewelry
Moses Pérez-caricature & calligraphy
Nelly Román-art workshop
Nuestro Tambó- "bomba & plena"
Patricia Pérez-painting
Patricia Reyes-fashion & printmaking
Paul Jarrett-film
Pedro A. Pagán-calligraphy
People's Theater-performance
Pocket Circus-performance
Urban Theater- performance
Valerie "Cocoa" Alduen-mosaics
Vanessa Claudio-film
Yorumba-performance Latin jazz
2. BAF07 EXHIBIT OUTDOOR
INSTALLATION - SPACE INTERVENTION - EXPERIMENTAL
Cooperative Image Group-media art
Josué Pellot-art performance
Manelick Gutiérrez del Río-art installation
3. BAF07 STAGE THEATER
Association House-art program
Batey Urbano-spoken word
People's Theater-spoken word
Pocket Circus-clown acrobats
Urban Theater- spoken word
4. BAF07 BOOK READINGS/SIGNING
Abraham Santiago-author “Acappella Street Corner Vocal Groups: A Brief History and Biography of 1960's Singing Groups”
Carlos T Mock-author “Papi Chulo, a Legend, a Novel, and the Puerto Rican Identity”
Eduardo Arocho-poet “Highway Island”
Elaine Soloway-author “The Division Street Princess”
Judy Veramendi-playwright “The empty Chalices”
Luis Tubens-poet “From a rooftop in Logan Square”
5. BAF07 STAGE MUSIC-DANCE
Army of Juan-hip-hop
chicagOriginal-break dancing
Güiro Orchestra-folk traditional
Ivette & Juan Diaz-pop
Jason Martínez-DJ
Nuestro Tambó-"bomba music
Yorumba-Latin jazz
6. BAF07 INTERACTIVE STUDIO
WORKSHOPS – DEMONSTRATIONS - GAMES
Andrés Ramírez-film making
Cecelia Colón-collage
chicagOriginal-skateboarding clinic
Don Ángel de León-"gallito & trompo" games
Elizabeth Negrón-bead jewelry
Francisco Rosado-drawing sessions
Jason Martínez-DJ workshop
Julio Flores-kite making
Lolita Colón-doll making
Luz Letamendi-photo coloring
Marcos Medina-silver jewelry
Moses Pérez-caricature drawing
Nelly Román-art for children
Patricia Pérez-"sol Taíno" sculpture
Patricia Reyes-t-shirt printing
7. BAF07 MOVIE ROOM
“Aerosol” by José Efraín Rivera
"Avocado Project" by BCA-Lowell Elementary
“Baby Express” by Dennis Avelar
"Broken" by David Wendelman
"Green Card" by Alonso Mayo
"Firecracker" by Betty García
"Fresh Paint" by Francisco Rosado
"Fugitivo 51" by Andrés Ramírez
"La Casita Project" by BCA-Pedro Albizu High School
"My Backyard was a Mountain" by Adam Schlacter
“Racket” by Michael Baez
“Stolen Lives” by Paul Jarrett
“Sweet Tooth” by Michael Baez
“United or Divided” by Vanessa Claudio
"Wednesday Afternoon" by Alonso Mayo
“Wind’s Gate” by Juan Diaz
“Wish” by Joe Caballero
8. BAF07 CREDITS
festival coordinator:
Jorge Félix
curators:
Leo Negrón, craft
Jesse Charbonier Rodríguez, film
Jorge Félix, community, contemporary
collaborators:
Enrique Salgado
Nereida Avilés
administration:
Jackie Reyes
graphic design & photography:
Luis Chávez
August 2007 Jorge Félix
(773) 620-8608 - felixjorge@msn.com
INSTITUTE OF PUERTO RICAN ARTS & CULTURE PRESENTS BARRIO ART FEST 2007 (BAF07)
Humboldt Park’s Arts Educational Festival
Visual artists, performers, writers, filmmakers and educators showcase their work
at a FREE community arts educational exhibit and festival in Humboldt Park.
WHAT: Puerto Rican, Latino and Humboldt Park painters, designers, printmakers, craft makers, musicians, author/poets, actors, video/filmmakers and arts educators will showcase their artwork at Barrio Art Fest 2007 (BAF07). Different to most arts festivals, BAF07 is a multidisciplinary educational art exhibit and festival where artists interact with the public through art workshops, demonstrations, book signing/readings, film screenings and performances. Located in Chicago’s Humboldt Park, visitors can explore art installations, experience live performances, participate in art educational workshops, observe artisans’ craft demonstrations, and enjoy the latest work of media and film artists in the screening room. BAF07 is an arts and cultural experience for all ages through the presentation of the best traditional arts to the most engaging conceptual and experimental art forms. BAF07 is a FREE event for the whole Chicago community.
WHEN: Saturday, August 18, 2007
11 a.m. – 6 p.m.
WHERE: Humboldt Park Field House - 1440 N. Sacramento (Humboldt Blvd) Chicago, IL
FREE parking across the street at the Boathouse 1359 N. Sacramento.
Facilities and parking are wheelchair and handicap accessible.
MORE: BAF07 is presented by the Institute of Puerto Rican Arts & Culture (IPRAC) in collaboration with the Chicago Park District and the Division Street Business Development Association. Sponsored by the City of Chicago Cultural Outreach Program, LISC, Chicago Children’s Museum, Comcast, La Voz de Paseo Boricua Newspaper, ALTAVISTA Graphics, Hoy Newspapers, Dr. Pepper and DejaBlue.
IPRAC is an arts and educational institution devoted to the promotion, integration and advancement of the Puerto Rican arts and culture. IPRAC brings to the community visual arts and exhibition programming that furthers the Puerto Rican arts tradition through curatorial and exhibition programs.
For information call IPRAC’s program office 773-486-8345 or email: FelixJorge@msn.com or JorgeFelix@iprac.org
# # #
BAF07 – add: Page 2 – Artist’s Listing ; Page 3 – Program
BAF07 is an Arts Educational and cultural festival showcasing the work of Puerto Rican, Latino and Humboldt Park artists through art exhibits, performances, workshops, screening and demonstrations.
1. BAF07 ARTISTS
Abraham Santiago-painting
Adam Schlacter-film
Alexis Kent-painting
Alonso Mayo-film
Ana Ubides-pastry art
Andrés Ramírez-film
Anna Fong-fashion design
Army of Juan-performance hip-hop
Association House-art program
Batey Urbano-spoken word
BCA-Lowell Elementary-film
BCA-Pedro Albizu High School-film
Betty García-film
Carlos T. Mock-author
Cecelia Colón-collage
chicagOriginal-breakdancing-skateboard
Cooperative Image Group-media art
Cuca-craft
Daniel López-ceramic
Dennis Avelar-film
Don Ángel de León-"gallito &trompo"
Edgar Torres-ceramic
Eduardo Arocho-poet
Elaine Soloway-author
Elizabeth Negrón-jewelry
Francisco Rosado-drawing sessions
Güiro Orchestra-performance folk
Ivette & Juan Diaz-performance
Jason Martínez-DJ workshop
Joe Caballero-film
John Vergara-mosaic design
José Efraín Rivera-film
José Virola-craft
Josué Pellot-installation
JR Lizardi-photography
Juan Diaz-animation
Judy Veramendi-author & playwright
Julio Flores-kite-making workshop
Koidde-painting & drawing
Leo Negrón-painting & craft
Lolita Colón-doll making
Lucy Gómez-photography
Luis Tubens-poet
Luz Letamendi-photography
Manelick Gutiérrez del Río-art installation
Marcos Medina-silversmith
María I. Cruz Storniolo-painting
Mariana Maldonado--painting
Michael Báez-film
Migdalia Galarza-drawing
Miguel A. Cajigas-craft
Millie Vásquez-jewelry
Moses Pérez-caricature & calligraphy
Nelly Román-art workshop
Nuestro Tambó- "bomba & plena"
Patricia Pérez-painting
Patricia Reyes-fashion & printmaking
Paul Jarrett-film
Pedro A. Pagán-calligraphy
People's Theater-performance
Pocket Circus-performance
Urban Theater- performance
Valerie "Cocoa" Alduen-mosaics
Vanessa Claudio-film
Yorumba-performance Latin jazz
2. BAF07 EXHIBIT OUTDOOR
INSTALLATION - SPACE INTERVENTION - EXPERIMENTAL
Cooperative Image Group-media art
Josué Pellot-art performance
Manelick Gutiérrez del Río-art installation
3. BAF07 STAGE THEATER
Association House-art program
Batey Urbano-spoken word
People's Theater-spoken word
Pocket Circus-clown acrobats
Urban Theater- spoken word
4. BAF07 BOOK READINGS/SIGNING
Abraham Santiago-author “Acappella Street Corner Vocal Groups: A Brief History and Biography of 1960's Singing Groups”
Carlos T Mock-author “Papi Chulo, a Legend, a Novel, and the Puerto Rican Identity”
Eduardo Arocho-poet “Highway Island”
Elaine Soloway-author “The Division Street Princess”
Judy Veramendi-playwright “The empty Chalices”
Luis Tubens-poet “From a rooftop in Logan Square”
5. BAF07 STAGE MUSIC-DANCE
Army of Juan-hip-hop
chicagOriginal-break dancing
Güiro Orchestra-folk traditional
Ivette & Juan Diaz-pop
Jason Martínez-DJ
Nuestro Tambó-"bomba music
Yorumba-Latin jazz
6. BAF07 INTERACTIVE STUDIO
WORKSHOPS – DEMONSTRATIONS - GAMES
Andrés Ramírez-film making
Cecelia Colón-collage
chicagOriginal-skateboarding clinic
Don Ángel de León-"gallito & trompo" games
Elizabeth Negrón-bead jewelry
Francisco Rosado-drawing sessions
Jason Martínez-DJ workshop
Julio Flores-kite making
Lolita Colón-doll making
Luz Letamendi-photo coloring
Marcos Medina-silver jewelry
Moses Pérez-caricature drawing
Nelly Román-art for children
Patricia Pérez-"sol Taíno" sculpture
Patricia Reyes-t-shirt printing
7. BAF07 MOVIE ROOM
“Aerosol” by José Efraín Rivera
"Avocado Project" by BCA-Lowell Elementary
“Baby Express” by Dennis Avelar
"Broken" by David Wendelman
"Green Card" by Alonso Mayo
"Firecracker" by Betty García
"Fresh Paint" by Francisco Rosado
"Fugitivo 51" by Andrés Ramírez
"La Casita Project" by BCA-Pedro Albizu High School
"My Backyard was a Mountain" by Adam Schlacter
“Racket” by Michael Baez
“Stolen Lives” by Paul Jarrett
“Sweet Tooth” by Michael Baez
“United or Divided” by Vanessa Claudio
"Wednesday Afternoon" by Alonso Mayo
“Wind’s Gate” by Juan Diaz
“Wish” by Joe Caballero
8. BAF07 CREDITS
festival coordinator:
Jorge Félix
curators:
Leo Negrón, craft
Jesse Charbonier Rodríguez, film
Jorge Félix, community, contemporary
collaborators:
Enrique Salgado
Nereida Avilés
administration:
Jackie Reyes
graphic design & photography:
Luis Chávez
Talk to the bad men too
Talk to the bad men too
By Chris Dodd
Copyright The Financial Times Limited 2007
Published: August 13 2007 18:57 | Last updated: August 13 2007 18:57
In the 1980s I travelled many times to Nicaragua, where I met President Daniel Ortega. At the height of the cold war, I was subject to criticism in some quarters for meeting a leader with ties to the Soviets. But my goal wasn’t to become friends with the Sandinista president, it was to press him to renounce violence as a political tool and allow the people of Nicaragua to choose their next leader.
Despite opposition from the Reagan administration, Congress voted to restrict US funding of the Contra rebel forces and Mr Ortega later agreed to elections. In 1990 Violeta Cha morro won and Mr Ortega respected the results by stepping down. As a result, Nicaragua today has an imperfect demo cracy but a democracy nonetheless.
At the recent CNN/YouTube Democratic presidential debate, we were all asked whether, as president, we would meet leaders of Syria, Cuba, Venezuela, Iran and North Korea without preconditions. With American security at stake and our reputation in the world in tatters, it was a chance for us to demonstrate how we might use diplomacy to help America lead on the global stage in the 21st century.
But rather than using this opportunity to showcase to the country their diplomatic bona fides, two candidates – senators Barack Obama and Hillary Clinton – have chosen to squabble and make irresponsible statements.
To be sure, there was little disagreement on the stage about the Bush administration’s diplomatic failures. In six years, Mr Bush and Dick Cheney have weakened America by refusing to meet representatives of certain nations, irrespective of their importance to US interests and security.
However, we were not asked whether as president we would try to correct the failed Bush-Cheney course – how could we not? Rather, we were asked how we would use our experience and judgment to plot a new course.
John F. Kennedy famously said that we should never negotiate out of fear, but never fear to negotiate. This was something his one-time rival, Richard Nixon, understood, when he went to China and met Mao Zedong. Reagan also understood this, calling the Soviet Union the “Evil Empire” in one breath and meeting Mikhail Gorbachev in the next. Theirs was a generation that gave us the Marshall plan, Nato, arms control agreements and the UN – institutions that helped ensure 60 years of relative peace and security.
Our leaders created systems and structures for the postwar world because the world’s problems could not have been tackled without inter national co-operation and US leadership. This international architecture strengthened America’s global leadership and enhanced US security.
This administration, on the other hand, is walking away from those institutions, treating diplomacy as if it were a gift to our enemies.
But with due respect to senators Clinton and Obama, on this question they are not only wrong to turn this into a political debate; they are also wrong on the substance. The notion that America should treat these five countries the same is naive at best, irresponsible at worst.
Meeting Iran’s Mahmoud Ahmadi-Nejad would be a mistake; no leader who denies the Holocaust ever took place and actively calls for the destruction of Israel should be rewarded with a face-to-face meeting with a US president – although in a Dodd administration this would not preclude American diplomats from meeting other high level Iran ian officials.
In contrast to Iran, I would be open to meeting other difficult leaders. Indeed, I have already met Fidel Castro and Hugo Chávez as a US senator on the foreign relations committee. I have also met Bashar al-Assad, because engaging with him was – and is – in America’s interest.
What is not in America’s interest is letting the actions of bad actors fester. For all its flaws, Syria should play an important role in stabilising Iraq, and a constructive role in achieving a two-state solution for Israel and the Palestinians. Syria can also enhance Israel’s security by applying pressure on Hamas and Hezbollah while ceasing interference in the political life of Lebanon. Likewise, by engaging with Mr Chávez in Venezuela – to whom we are somehow losing a PR war – we can re-establish US leadership in our own hemisphere and shine a light on the importance of upholding democratic institutions and practices in his country. And while no one likes Kim Jong-il, if we can de nuclearise the Korean peninsula by engaging with him, we should.
Responsible leadership engages with the world. It does not needlessly provoke nuclear powers by declaring in favour of specific military actions, as Senator Obama did recently.
The next president must understand that diplomacy is essential to repairing our nation’s fractured world relationships. He or she must recognise that the choice between coddling tyrannical leaders or going to war with them is a false choice when the US is no longer acting alone. When the US is once again a leading, strong moral voice in the world, it will be the terrorists and the tyrants who are isolated, not the US. And if my colleagues would stop scoring political points in the media for a moment to recognise that, they would probably realise that that is one point on which we all agree.
The writer is a Democratic US senator from Connecticut and presidential candidate
By Chris Dodd
Copyright The Financial Times Limited 2007
Published: August 13 2007 18:57 | Last updated: August 13 2007 18:57
In the 1980s I travelled many times to Nicaragua, where I met President Daniel Ortega. At the height of the cold war, I was subject to criticism in some quarters for meeting a leader with ties to the Soviets. But my goal wasn’t to become friends with the Sandinista president, it was to press him to renounce violence as a political tool and allow the people of Nicaragua to choose their next leader.
Despite opposition from the Reagan administration, Congress voted to restrict US funding of the Contra rebel forces and Mr Ortega later agreed to elections. In 1990 Violeta Cha morro won and Mr Ortega respected the results by stepping down. As a result, Nicaragua today has an imperfect demo cracy but a democracy nonetheless.
At the recent CNN/YouTube Democratic presidential debate, we were all asked whether, as president, we would meet leaders of Syria, Cuba, Venezuela, Iran and North Korea without preconditions. With American security at stake and our reputation in the world in tatters, it was a chance for us to demonstrate how we might use diplomacy to help America lead on the global stage in the 21st century.
But rather than using this opportunity to showcase to the country their diplomatic bona fides, two candidates – senators Barack Obama and Hillary Clinton – have chosen to squabble and make irresponsible statements.
To be sure, there was little disagreement on the stage about the Bush administration’s diplomatic failures. In six years, Mr Bush and Dick Cheney have weakened America by refusing to meet representatives of certain nations, irrespective of their importance to US interests and security.
However, we were not asked whether as president we would try to correct the failed Bush-Cheney course – how could we not? Rather, we were asked how we would use our experience and judgment to plot a new course.
John F. Kennedy famously said that we should never negotiate out of fear, but never fear to negotiate. This was something his one-time rival, Richard Nixon, understood, when he went to China and met Mao Zedong. Reagan also understood this, calling the Soviet Union the “Evil Empire” in one breath and meeting Mikhail Gorbachev in the next. Theirs was a generation that gave us the Marshall plan, Nato, arms control agreements and the UN – institutions that helped ensure 60 years of relative peace and security.
Our leaders created systems and structures for the postwar world because the world’s problems could not have been tackled without inter national co-operation and US leadership. This international architecture strengthened America’s global leadership and enhanced US security.
This administration, on the other hand, is walking away from those institutions, treating diplomacy as if it were a gift to our enemies.
But with due respect to senators Clinton and Obama, on this question they are not only wrong to turn this into a political debate; they are also wrong on the substance. The notion that America should treat these five countries the same is naive at best, irresponsible at worst.
Meeting Iran’s Mahmoud Ahmadi-Nejad would be a mistake; no leader who denies the Holocaust ever took place and actively calls for the destruction of Israel should be rewarded with a face-to-face meeting with a US president – although in a Dodd administration this would not preclude American diplomats from meeting other high level Iran ian officials.
In contrast to Iran, I would be open to meeting other difficult leaders. Indeed, I have already met Fidel Castro and Hugo Chávez as a US senator on the foreign relations committee. I have also met Bashar al-Assad, because engaging with him was – and is – in America’s interest.
What is not in America’s interest is letting the actions of bad actors fester. For all its flaws, Syria should play an important role in stabilising Iraq, and a constructive role in achieving a two-state solution for Israel and the Palestinians. Syria can also enhance Israel’s security by applying pressure on Hamas and Hezbollah while ceasing interference in the political life of Lebanon. Likewise, by engaging with Mr Chávez in Venezuela – to whom we are somehow losing a PR war – we can re-establish US leadership in our own hemisphere and shine a light on the importance of upholding democratic institutions and practices in his country. And while no one likes Kim Jong-il, if we can de nuclearise the Korean peninsula by engaging with him, we should.
Responsible leadership engages with the world. It does not needlessly provoke nuclear powers by declaring in favour of specific military actions, as Senator Obama did recently.
The next president must understand that diplomacy is essential to repairing our nation’s fractured world relationships. He or she must recognise that the choice between coddling tyrannical leaders or going to war with them is a false choice when the US is no longer acting alone. When the US is once again a leading, strong moral voice in the world, it will be the terrorists and the tyrants who are isolated, not the US. And if my colleagues would stop scoring political points in the media for a moment to recognise that, they would probably realise that that is one point on which we all agree.
The writer is a Democratic US senator from Connecticut and presidential candidate
The credit crunch quandary
The credit crunch quandary
By David Hale
Copyright The Financial Times Limited 2007
Published: August 13 2007 18:54 | Last updated: August 13 2007 18:54
The events of the past week demonstrate how far the process of financial globalisation has gone. The European Central Bank injected more than €155bn ($212bn) of liquidity into markets because unemployed workers in Detroit are defaulting on home loans they ob tained during 2006 that did not require any down payment, principal repayment or documentation of income. In the 1980s those defaults would have led to a run on the local bank. In the current decade the loans have been securitised, repackaged in a collateralised debt obligation bond and sold to a hedge fund that bought it on leverage.
The shutdown of several hedge funds has scared the markets. There is no way to predict how many will fail because the markets for securities with subprime loans are illiquid and non-transparent. Hedge funds have valued the securities using models that give them considerable discretion in when to recognise losses. The subprime market began to implode in late 2006 but hedge funds did not recognise any losses on their securities until June. The losses have been so shocking that asset prices have declined sharply even for higher-quality securities.
The subprime debacle resulted from excessive risk-taking by lenders. There was a housing boom in the US from 2001 to 2006. Lenders responded by sharply expanding loans to marginal borrowers. At the peak, six months ago, there were more than $1,300bn of subprime loans or about 13 per cent of the total mortgage stock. This recklessness was encouraged by great demand on Wall Street for low-quality loans to package in CDOs. The rating agencies facilitated the boom by giving high credit scores to securities with loans of dubious quality. The rating agencies collaborated with brokerage firms to produce high-risk securities, as they earned fees from structured finance deals three times higher than on conventional bonds. In the first quarter, structured finance products rose to 46 per cent of Moody’s revenues.
Ben Bernanke, US Federal Reserve chairman, has suggested the losses from the subprime fiasco could be $50bn-$100bn, or less than 1 per cent of US gross domestic product. Such a loss would be modest compared with 2.5 per cent of GDP lost in the savings and loan scandals of the early 1990s. The problem with the Bernanke forecast is that it will require some good luck. The final cost will depend on house prices. The credit crunch could cause house prices to fall by 10 per cent. In this case, the losses on subprime loans could be twice the Bernanke estimate.
As the US residential housing stock market is worth more than $20,000bn, the economy can cope with a $100bn- $200bn loss. The problem for the Fed is the shock waves from recent events. During the past four weeks, interest rates on conventional home loans have increased by 100 basis points and on subprime loans by 300 basis points to 11 per cent. This did not result from monetary policy but from lenders seeking to protect themselves from rapidly deteriorating credit quality. The rise in yields will further depress home sales and cause housing starts to fall further. Residential construction has already declined from 6.2 per cent of GDP in late 2005 to 4 per cent in the second quarter of this year. It could easily decline to 3 per cent by early 2008. Fannie Mae has said it is prepared to help lessen the risk of credit crunch by expanding its balance sheet. The Bush administration is reluctant to let it do so because of the accounting scandals that occurred two years ago, but the Democrats will demand that Fannie Mae increase its lending because it was created to play such a role.
The Fed is in a quandary. It is reluctant to ease because it thinks the US economy can still achieve 2-3 per cent output growth at a time when the core inflation rate is above 2 per cent. There had been no weakness in consumer spending until the second quarter and many analysts blame gas prices, not the slumping housing market. But with mortgage yields rising there is a risk of a prolonged housing downturn. The Chicago futures market is projecting that house prices could fall by 3-4 per cent over the next year. The risk is growing of a 10 per cent drop. There has been no national decline in US house prices since 1933. If they fall by 10 per cent in a presidential election year, the pressure on the Fed to ease could become irresistible. Presidential candidates could appeal for votes by promising to appoint a pro-housing Fed chairman when Mr Bernanke’s term ends in 2009. If he wants a second term, he would then have to let home prices determine monetary policy.
The writer is is an economist and founder of Hale Advisors in Chicago
By David Hale
Copyright The Financial Times Limited 2007
Published: August 13 2007 18:54 | Last updated: August 13 2007 18:54
The events of the past week demonstrate how far the process of financial globalisation has gone. The European Central Bank injected more than €155bn ($212bn) of liquidity into markets because unemployed workers in Detroit are defaulting on home loans they ob tained during 2006 that did not require any down payment, principal repayment or documentation of income. In the 1980s those defaults would have led to a run on the local bank. In the current decade the loans have been securitised, repackaged in a collateralised debt obligation bond and sold to a hedge fund that bought it on leverage.
The shutdown of several hedge funds has scared the markets. There is no way to predict how many will fail because the markets for securities with subprime loans are illiquid and non-transparent. Hedge funds have valued the securities using models that give them considerable discretion in when to recognise losses. The subprime market began to implode in late 2006 but hedge funds did not recognise any losses on their securities until June. The losses have been so shocking that asset prices have declined sharply even for higher-quality securities.
The subprime debacle resulted from excessive risk-taking by lenders. There was a housing boom in the US from 2001 to 2006. Lenders responded by sharply expanding loans to marginal borrowers. At the peak, six months ago, there were more than $1,300bn of subprime loans or about 13 per cent of the total mortgage stock. This recklessness was encouraged by great demand on Wall Street for low-quality loans to package in CDOs. The rating agencies facilitated the boom by giving high credit scores to securities with loans of dubious quality. The rating agencies collaborated with brokerage firms to produce high-risk securities, as they earned fees from structured finance deals three times higher than on conventional bonds. In the first quarter, structured finance products rose to 46 per cent of Moody’s revenues.
Ben Bernanke, US Federal Reserve chairman, has suggested the losses from the subprime fiasco could be $50bn-$100bn, or less than 1 per cent of US gross domestic product. Such a loss would be modest compared with 2.5 per cent of GDP lost in the savings and loan scandals of the early 1990s. The problem with the Bernanke forecast is that it will require some good luck. The final cost will depend on house prices. The credit crunch could cause house prices to fall by 10 per cent. In this case, the losses on subprime loans could be twice the Bernanke estimate.
As the US residential housing stock market is worth more than $20,000bn, the economy can cope with a $100bn- $200bn loss. The problem for the Fed is the shock waves from recent events. During the past four weeks, interest rates on conventional home loans have increased by 100 basis points and on subprime loans by 300 basis points to 11 per cent. This did not result from monetary policy but from lenders seeking to protect themselves from rapidly deteriorating credit quality. The rise in yields will further depress home sales and cause housing starts to fall further. Residential construction has already declined from 6.2 per cent of GDP in late 2005 to 4 per cent in the second quarter of this year. It could easily decline to 3 per cent by early 2008. Fannie Mae has said it is prepared to help lessen the risk of credit crunch by expanding its balance sheet. The Bush administration is reluctant to let it do so because of the accounting scandals that occurred two years ago, but the Democrats will demand that Fannie Mae increase its lending because it was created to play such a role.
The Fed is in a quandary. It is reluctant to ease because it thinks the US economy can still achieve 2-3 per cent output growth at a time when the core inflation rate is above 2 per cent. There had been no weakness in consumer spending until the second quarter and many analysts blame gas prices, not the slumping housing market. But with mortgage yields rising there is a risk of a prolonged housing downturn. The Chicago futures market is projecting that house prices could fall by 3-4 per cent over the next year. The risk is growing of a 10 per cent drop. There has been no national decline in US house prices since 1933. If they fall by 10 per cent in a presidential election year, the pressure on the Fed to ease could become irresistible. Presidential candidates could appeal for votes by promising to appoint a pro-housing Fed chairman when Mr Bernanke’s term ends in 2009. If he wants a second term, he would then have to let home prices determine monetary policy.
The writer is is an economist and founder of Hale Advisors in Chicago
Learn from the fall of Rome, US warned
Learn from the fall of Rome, US warned
By Jeremy Grant in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 00:06 | Last updated: August 14 2007 00:06
The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.
David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.
These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.
Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.
“Sound familiar?” Mr Walker said. “In my view, it’s time to learn from history and take steps to ensure the American Republic is the first to stand the test of time.”
Mr Walker’s views carry weight because he is a non-partisan figure in charge of the Government Accountability Office, often described as the investigative arm of the US Congress.
While most of its studies are commissioned by legislators, about 10 per cent – such as the one containing his latest warnings – are initiated by the comptroller general himself.
In an interview with the Financial Times, Mr Walker said he had mentioned some of the issues before but now wanted to “turn up the volume”. Some of them were too sensitive for others in government to “have their name associated with”.
“I’m trying to sound an alarm and issue a wake-up call,” he said. “As comptroller general I’ve got an ability to look longer-range and take on issues that others may be hesitant, and in many cases may not be in a position, to take on.
“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.
The fiscal imbalance meant the US was “on a path toward an explosion of debt”.
“With the looming retirement of baby boomers, spiralling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks,” said Mr Walker, a former senior executive at PwC auditing firm.
Current US policy on education, energy, the environment, immigration and Iraq also was on an “unsustainable path”.
“Our very prosperity is placing greater demands on our physical infrastructure. Billions of dollars will be needed to modernise everything from highways and airports to water and sewage systems. The recent bridge collapse in Minneapolis was a sobering wake-up call.”
Mr Walker said he would offer to brief the would-be presidential candidates next spring.
“They need to make fiscal responsibility and inter-generational equity one of their top priorities. If they do, I think we have a chance to turn this around but if they don’t, I think the risk of a serious crisis rises considerably”.
By Jeremy Grant in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 00:06 | Last updated: August 14 2007 00:06
The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.
David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.
These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.
Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.
“Sound familiar?” Mr Walker said. “In my view, it’s time to learn from history and take steps to ensure the American Republic is the first to stand the test of time.”
Mr Walker’s views carry weight because he is a non-partisan figure in charge of the Government Accountability Office, often described as the investigative arm of the US Congress.
While most of its studies are commissioned by legislators, about 10 per cent – such as the one containing his latest warnings – are initiated by the comptroller general himself.
In an interview with the Financial Times, Mr Walker said he had mentioned some of the issues before but now wanted to “turn up the volume”. Some of them were too sensitive for others in government to “have their name associated with”.
“I’m trying to sound an alarm and issue a wake-up call,” he said. “As comptroller general I’ve got an ability to look longer-range and take on issues that others may be hesitant, and in many cases may not be in a position, to take on.
“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.
The fiscal imbalance meant the US was “on a path toward an explosion of debt”.
“With the looming retirement of baby boomers, spiralling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks,” said Mr Walker, a former senior executive at PwC auditing firm.
Current US policy on education, energy, the environment, immigration and Iraq also was on an “unsustainable path”.
“Our very prosperity is placing greater demands on our physical infrastructure. Billions of dollars will be needed to modernise everything from highways and airports to water and sewage systems. The recent bridge collapse in Minneapolis was a sobering wake-up call.”
Mr Walker said he would offer to brief the would-be presidential candidates next spring.
“They need to make fiscal responsibility and inter-generational equity one of their top priorities. If they do, I think we have a chance to turn this around but if they don’t, I think the risk of a serious crisis rises considerably”.
US core producer price inflation softens
US core producer price inflation softens
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 15:02 | Last updated: August 14 2007 15:02
The US economy appeared to be gaining strength as global demand for US exports rose to a record high, while the prices of wholesale goods cooled, according to figures which contained positive signals for growth and inflation.
The US trade deficit narrowed unexpectedly by 1.7 per cent to $58.1bn in June from $59.2n, the Commerce Department said on Tuesday. The politically-sensitive imbalance with China grew.
Core producer prices excluding volatile food and fuel prices rose 0.1 per cent, the smallest gain in three months and less than expected.
The cooling in core prices is likely to add to calls from Wall Street for the Federal Reserve to cut interest rates and help alleviate an international credit crisis that has shaken financial markets in recent days.
Policymakers have maintained a hawkish stance on inflation despite mounting risks to growth from a collapse in the subprime mortgage market and an increase in the cost of borrowing for some households and companies.
Over the last 12 months, core producer prices rose 2.3 per cent, compared to economists’ forecast of 2.5 per cent.
But economists said elevated energy costs would remain an important source of inflationary pressure, and overall prices rose 4 per cent from a year ago.
The price of gasoline rose 3.2 per cent, and natural gas costs rose 2.7 per cent.
Prices for raw materials rose 1.2 per cent, following a 0.3 per cent gain in June.
On Wednesday, the Labor Department will publish consumer prices, which are forecast to show core inflation steady at 0.2 per cent, according to a Bloomberg survey.
Economists said a weaker dollar and faster growth in Asia and Europe was also increasing demand for US goods.
Figures showed exports rose 1.5 percent to $134.5bn in June, led by shipments of semiconductors and autos.
The improvement in exports outpaced a rise in imports of 0.5 per cent rise to $192.7bn, the highest ever.
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: August 14 2007 15:02 | Last updated: August 14 2007 15:02
The US economy appeared to be gaining strength as global demand for US exports rose to a record high, while the prices of wholesale goods cooled, according to figures which contained positive signals for growth and inflation.
The US trade deficit narrowed unexpectedly by 1.7 per cent to $58.1bn in June from $59.2n, the Commerce Department said on Tuesday. The politically-sensitive imbalance with China grew.
Core producer prices excluding volatile food and fuel prices rose 0.1 per cent, the smallest gain in three months and less than expected.
The cooling in core prices is likely to add to calls from Wall Street for the Federal Reserve to cut interest rates and help alleviate an international credit crisis that has shaken financial markets in recent days.
Policymakers have maintained a hawkish stance on inflation despite mounting risks to growth from a collapse in the subprime mortgage market and an increase in the cost of borrowing for some households and companies.
Over the last 12 months, core producer prices rose 2.3 per cent, compared to economists’ forecast of 2.5 per cent.
But economists said elevated energy costs would remain an important source of inflationary pressure, and overall prices rose 4 per cent from a year ago.
The price of gasoline rose 3.2 per cent, and natural gas costs rose 2.7 per cent.
Prices for raw materials rose 1.2 per cent, following a 0.3 per cent gain in June.
On Wednesday, the Labor Department will publish consumer prices, which are forecast to show core inflation steady at 0.2 per cent, according to a Bloomberg survey.
Economists said a weaker dollar and faster growth in Asia and Europe was also increasing demand for US goods.
Figures showed exports rose 1.5 percent to $134.5bn in June, led by shipments of semiconductors and autos.
The improvement in exports outpaced a rise in imports of 0.5 per cent rise to $192.7bn, the highest ever.
Mattel recalls millions of Chinese-made toys
Mattel recalls millions of Chinese-made toys
© Reuters Limited
Tues Aug 14, 16.29 BST
Mattel Inc., the largest US toy company, recalled millions more Chinese-made toys on Tuesday due to hazards from small, powerful magnets and lead paint, sending its shares down as much as 6 percent.
The toymaker’s second recall this month came as Mattel launched a national advertising campaign to assure consumers it is on top of product safety.
The new recall includes 7.3 million Polly Pocket dolls and accessories with magnets.
The U.S. Consumer Product Safety Commission said there had been reports of three children swallowing more than one magnet and suffering intestinal perforations that required surgery.
When more than one magnet is swallowed, the magnets can attract each other and cause intestinal perforation or blockage, which can be fatal.
Also recalled on Tuesday due to magnet dangers were 1 million Doggie Day Care, 683,000 Barbie and Tanner play sets, and 345,000 Batman and One Piece play sets. No injuries were reported from those items.
About 253,000 Pixar Sarge die-cast toy cars with lead paint were also recalled. No injuries were reported in connection with the toys.
Lead has been linked to health problems in children, including brain damage.
Earlier this month Mattel’s Fisher-Price unit recalled about 1.5 million preschool toys made by China-based contract manufacturer Lida Toy Co. because the paint on the toys might contain excessive amounts of lead. The global recall included products based on popular preschool characters from ”Sesame Street” and ”Dora the Explorer.”
”The safety of children is our primary concern, and we are deeply apologetic to everyone affected,” Mattel Chief Executive Robert Eckert said in a statement on Tuesday. ”Mattel has rigorous procedures, and we will continue to be vigilant and unforgiving in enforcing quality and safety.”
The earlier recall was Mattel’s largest since 1998, when it recalled 10 million Power Wheels vehicles made by Fisher-Price, and the company said it expected to take a $30 million charge from the action.
News of the second recall came as an owner of the Chinese toy factory at the center of the first recall was reported to have committed suicide.
Mattel took out a full-page ad in Tuesday’s Wall Street Journal, New York Times and USA Today, featuring a picture of three children playing together and a letter to ”Fellow Parents” from Eckert.
”Nothing is more important than the safety of our children,” the Mattel CEO wrote. ”Our long record of safety at Mattel is why we’re one of the most trusted names with parents. And I am confident that the actions we are taking now will maintain that trust.”
Mattel shares were down 82 cents, or 3.5 percent, to $22.75 in morning trade on the New York Stock Exchange after falling as low as $22.10 earlier in the session.
© Reuters Limited
Tues Aug 14, 16.29 BST
Mattel Inc., the largest US toy company, recalled millions more Chinese-made toys on Tuesday due to hazards from small, powerful magnets and lead paint, sending its shares down as much as 6 percent.
The toymaker’s second recall this month came as Mattel launched a national advertising campaign to assure consumers it is on top of product safety.
The new recall includes 7.3 million Polly Pocket dolls and accessories with magnets.
The U.S. Consumer Product Safety Commission said there had been reports of three children swallowing more than one magnet and suffering intestinal perforations that required surgery.
When more than one magnet is swallowed, the magnets can attract each other and cause intestinal perforation or blockage, which can be fatal.
Also recalled on Tuesday due to magnet dangers were 1 million Doggie Day Care, 683,000 Barbie and Tanner play sets, and 345,000 Batman and One Piece play sets. No injuries were reported from those items.
About 253,000 Pixar Sarge die-cast toy cars with lead paint were also recalled. No injuries were reported in connection with the toys.
Lead has been linked to health problems in children, including brain damage.
Earlier this month Mattel’s Fisher-Price unit recalled about 1.5 million preschool toys made by China-based contract manufacturer Lida Toy Co. because the paint on the toys might contain excessive amounts of lead. The global recall included products based on popular preschool characters from ”Sesame Street” and ”Dora the Explorer.”
”The safety of children is our primary concern, and we are deeply apologetic to everyone affected,” Mattel Chief Executive Robert Eckert said in a statement on Tuesday. ”Mattel has rigorous procedures, and we will continue to be vigilant and unforgiving in enforcing quality and safety.”
The earlier recall was Mattel’s largest since 1998, when it recalled 10 million Power Wheels vehicles made by Fisher-Price, and the company said it expected to take a $30 million charge from the action.
News of the second recall came as an owner of the Chinese toy factory at the center of the first recall was reported to have committed suicide.
Mattel took out a full-page ad in Tuesday’s Wall Street Journal, New York Times and USA Today, featuring a picture of three children playing together and a letter to ”Fellow Parents” from Eckert.
”Nothing is more important than the safety of our children,” the Mattel CEO wrote. ”Our long record of safety at Mattel is why we’re one of the most trusted names with parents. And I am confident that the actions we are taking now will maintain that trust.”
Mattel shares were down 82 cents, or 3.5 percent, to $22.75 in morning trade on the New York Stock Exchange after falling as low as $22.10 earlier in the session.
Housing woes continue to dog Home Depot
Housing woes continue to dog Home Depot
By Victoria Kim
Copyright The Financial Times Limited 2007
Published: August 14 2007 14:25 | Last updated: August 14 2007 15:01
Home Depot on Tuesday reported weak second-quarter earnings, confirming its earlier outlook, and said it expected grim market conditions to continue into 2008.
Poor sales led the second-largest US retailer to report earnings down 15 per cent to $1.6bn, or 81 cents per share, from $1.9bn or 90 cents per share a year earlier. Sales in stores that were open for at least a year fell by 5.2 per cent.
The worst depression in the housing market in 16 years continues to present a “tough selling environment” for the home improvement retailer, chairman and chief executive Frank Blake said.
“We believe the housing and home improvement markets will remain soft into 2008.”
The company reiterated its outlook of a 12 to 15 per cent fall in earnings in fiscal year 2007.
The Atlanta based company, along with home-builder DR Horton and home appliances retailer Sears, last month issued profit warnings, confirming investors’ fears that the housing market downturn was hurting profits for a range of companies.
Home Depot also appeared to be hit by the credit crunch caused by mortgage market woes, when it announced last week the sale price for its wholesale unit was being renegotiated and might be lowered from $10.3bn. The company announced in June it was selling HD Supply and has been in talks with private equity groups.
The supply unit, which was built through acquisitions by the former chief executive Bob Nardelli before he was ousted in January, generated earnings of $66m or 3 cents per share.
Excluding profits from the unit pending sale, the company’s earnings were $1.5bn or 77 cents per diluted share, above analysts’ expectations at 72 cents per share.
Home Depot shares were down 1.5 per cent at $34.71 in early trade
By Victoria Kim
Copyright The Financial Times Limited 2007
Published: August 14 2007 14:25 | Last updated: August 14 2007 15:01
Home Depot on Tuesday reported weak second-quarter earnings, confirming its earlier outlook, and said it expected grim market conditions to continue into 2008.
Poor sales led the second-largest US retailer to report earnings down 15 per cent to $1.6bn, or 81 cents per share, from $1.9bn or 90 cents per share a year earlier. Sales in stores that were open for at least a year fell by 5.2 per cent.
The worst depression in the housing market in 16 years continues to present a “tough selling environment” for the home improvement retailer, chairman and chief executive Frank Blake said.
“We believe the housing and home improvement markets will remain soft into 2008.”
The company reiterated its outlook of a 12 to 15 per cent fall in earnings in fiscal year 2007.
The Atlanta based company, along with home-builder DR Horton and home appliances retailer Sears, last month issued profit warnings, confirming investors’ fears that the housing market downturn was hurting profits for a range of companies.
Home Depot also appeared to be hit by the credit crunch caused by mortgage market woes, when it announced last week the sale price for its wholesale unit was being renegotiated and might be lowered from $10.3bn. The company announced in June it was selling HD Supply and has been in talks with private equity groups.
The supply unit, which was built through acquisitions by the former chief executive Bob Nardelli before he was ousted in January, generated earnings of $66m or 3 cents per share.
Excluding profits from the unit pending sale, the company’s earnings were $1.5bn or 77 cents per diluted share, above analysts’ expectations at 72 cents per share.
Home Depot shares were down 1.5 per cent at $34.71 in early trade
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