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Iran starts mass-producing 2 new defensive missiles

Press TV – February 6, 2010
anti-armor missile Toofan-5

Iran has launched production lines for two new missiles as a part of its plans to boost defensive capabilities against any possible attack.

Defense Minister Ahmad Vahidi on Saturday inaugurated the production line for an anti-armor missile Toofan-5 and an anti-helicopter missile Qaem.

“By the mass production and delivery of these modern weapons to the armed forces, the country’s defense capabilities will increase both in ground and aerial war,” the minister said.

The Toofan-5, which is among the most advanced of anti-armor missiles, is equipped with two warheads and can destroy armored vehicles, tanks and personnel carriers, Vahidi said.

The Qaem missile is also of a class of semi-heavy guided missiles and can destroy low-altitude aerial targets that fly at low speed. Being laser guided, the Qaem missile is also resistant to electronic warfare, Vahidi pointed out.

February 6, 2010 Posted by | Economics | Leave a comment

The Dangerous Myth of Energy Independence

October 2008 – Robin M. Mills writes in an op-ed for Informed Comment

A pernicious myth has recently re-emerged: that oil is ‘running out’, that global production will soon peak and enter inexorable decline. What is the proper response to ‘peak oil’ – to attempt energy self-sufficiency, or to take military control of oil producing regions before the Chinese or Russians get there?

The current high energy prices emerge from a long period of low prices and under-investment, itself the fruit of the breakdown of international energy relationships in the oil crises of 1973-4 and 1978-80. Contrary to vocal ‘peak oil’ claims, high prices are not due to a lack of resources in the ground. There remains vast potential around the world for increasing recovery from existing fields, discovering new oil, as recently in deepwater Brazil, or in the largely untouched US offshore, and for ‘unconventional’ sources such as Canada’s famous ‘oil sands’, biofuels, synthetic fuels from natural gas and coal, and others.

Ideas about forestalling an oil crisis by ‘energy independence’, or by military action, are therefore mistaken. Indeed, such ‘solutions’ are likely to create the crisis they seek to mitigate. ‘Energy independence’ for the United States was touted by Nixon in 1974, by Ford in 1975, by Carter in 1977, by Reagan in 1981, by Bush Senior in 1991, by Clinton in 1992 and by Bush Junior in 2003, during which time American oil imports doubled. ‘Peak oil’ ideas, recent high oil prices and fears of Middle East hostilities seem to have made the quest more urgent. Campaigns encourage American consumers to boycott Middle Eastern ‘terrorist oil’, and laws are proposed to sue OPEC. When Arab countries, even staunch US allies, attempt to recycle their oil earnings into the faltering American economy, politicians whip up media storms to keep them out.

Such a climate, with elements of paranoia, racism and Islamophobia, is profoundly harmful to the proper objective of energy policy: not independence, but security. Energy security is achieved when suppliers find markets, and markets find supply, at prices permitting both of them economic stability and growth. This requires a complex web of inter-relationships between producers and consumers. As the oil company Chevron observes in its advertising, ‘There are 193 countries in the world. None of them are energy independent’, a fact well illustrated by the USA’s recent deal to supply nuclear power technology to the oil-rich United Arab Emirates. In a global market, like that for oil, no country can wall itself off – compare the flourishing state of energy-poor Japan or Singapore with the poverty of isolated Burma or North Korea. Attempts by a major nation to achieve energy self-sufficiency are very distorting to economic competitiveness, as is clear from the contradictory blunders of 1970s US energy policy.

It is even worse when bad relations with major energy suppliers, and conflicting messages about future energy policy, discourage much-needed investment. If one side believes they are buying oil from terrorists, and the other thinks they are selling to neo-imperialists, it is not surprising that oil prices are high, investment is lacking and most of world oil reserves are monopolised by state companies. In fact, the Middle Eastern nations have generally been very reliable suppliers, and use of a mythical ‘oil weapon’ is very unlikely – any régime would be reliant on its oil earnings to sustain the economy, while strategic reserves in the industrialised countries give some ‘staying power’ to outlast an embargo. Moreover, while terrorists might manage to penetrate the strong defences of an oil facility and mount a spectacular attack, it is unlikely that they could achieve major, long-running disruptions in global energy supplies.

Policies to encourage US domestic production, increase efficiency and introduce alternative energy sources are desirable, often for environmental rather than energy security reasons, but they have to be pursued with vigour and resolution. With its ‘pork barrel’ subsidies and the interminable, inconclusive debates over whether to open new exploration areas, build new pipelines and terminals for clean natural gas, extend support for renewable energy and increase mileage standards, United States energy policy has been more erratic and hostile to increasing output than most of the Middle Eastern countries. Promises to ‘jawbone’ OPEC into supplying more oil sit very oddly with the US’s uniquely comprehensive moratoria on offshore oil and gas production.

Because of the abundance of oil and other energy sources, an era of ‘resource wars’, predicted by some, is far from inevitable, and certainly not a desirable policy outcome even for the likely ‘winners’ of such wars. We should certainly not fall into the monomaniac trap of seeing every geopolitical conflict as rooted in oil policy. Military ‘control’ of oil is not achievable or cost-effective, as the Iraq war shows, and as we know already from the Japanese experience in World War II, and Saddam Hussein’s attack on Iran. The expenditure on such wars vastly exceeds the value of any oil ‘secured’, and while production can struggle along in war-torn areas, it is impossible to develop major new fields. ‘Police actions’ to deal with specific threats are entirely reasonable, as long as they are multi-lateral and proportional to the danger posed. It would be nice, although possibly a lot to ask, for them to be carried out competently.

Thus grandiose military adventures destroy the co-operation which is essential for global energy trade. ‘Energy independence’ is a chimera, expensive, unachievable, and swimming against the tide of greater global economic integration. The world is not running out of oil, but we need a rational and balanced dialogue about how to co-operate on bringing that abundant energy to consumers. If the profound misunderstanding of, and hostility towards, the Middle East, continues, the house of energy security is being built on sand.

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ROBIN M. MILLS is an oil industry professional with a background in both geology and economics. Currently, he is Senior Evaluation Manager for Dubai Energy. Previously, he worked for Shell. Mills is a member of the International Association for Energy Economics and Association of International Petroleum Negotiators. He holds a Master’s Degree in Geological Sciences from Cambridge University

http://www.juancole.com/2008/09/mills-dangerous-myth-of-energy.html

February 3, 2010 Posted by | Economics, Islamophobia, Malthusian Ideology, Phony Scarcity, Timeless or most popular, Wars for Israel | Leave a comment

The Crisis is Not Over

By Paul Craig Roberts | February 2, 2010

Is the financial crisis over? Is the recovery for real and, if not, what are Americans’ prospects? The short answer is that the financial crisis is not over, the recovery is not real, and the U.S. faces a far worse crisis than the financial one. Here is the situation as I understand it:

The global crisis is understood as a banking crisis brought on by mindless deregulation of the U.S. financial arena. Investment banks leveraged assets to highly irresponsible levels, issued questionable financial instruments with fraudulent investment grade ratings, and issued the instruments through direct sales to customers rather than through markets.

The crisis was initiated when the U.S. allowed Lehman Brothers to fail, thus threatening money market funds everywhere. The crisis was used by the investment banks, which controlled U.S. economic policy, to secure massive subsidies to their profits from a taxpayer bailout and from the Federal Reserve. How much of the crisis was real and how much was hype is not known at this time.

As most of the derivative instruments had never been priced in the market, and as their exact composition between good and bad loans was unknown (the instruments are based on packages of securitized loans), the mark-to-market rule drove the values very low, thus threatening the solvency of many financial institutions. Also, the rule prohibiting continuous shorting had been removed, making it possible for hedge funds and speculators to destroy the market capitalization of targeted firms by driving down their share prices.

The obvious solution was to suspend the mark-to-market rule until some better idea of the values of the derivative instruments could be established and to prevent the abuse of shorting that was destroying market capitalization. Instead, the Goldman Sachs people in charge of the U.S. Treasury and, perhaps, the Federal Reserve as well, used the crisis to secure subsidies for the banks from U.S. taxpayers and from the Federal Reserve. It looks like a manipulated crisis as well as a real one due to greed unleashed by financial deregulation.

The crisis will not be over until financial regulation is restored, but Wall Street has been able to block re-regulation. Moreover, the response to the crisis has planted seeds for new crises. Government budget deficits have exploded. In the U.S. the fiscal year 2009 federal budget deficit was $1.4 trillion, three times higher than the 2008 deficit. President Obama’s budget deficits for 2010 and 2011, according to the latest report, will total $2.9 trillion, and this estimate is based on the assumption that the Great Recession is over. Where is the U.S. Treasury to borrow $4.3 trillion in three years?

This sum greatly exceeds the combined trade surpluses of America’s trading partners, the recycling of which has financed past U.S. budget deficits, and perhaps exceeds total world savings.

It is unclear how the 2009 budget deficit was financed. A likely source was the bank reserves created for financial institutions by the Federal Reserve when it purchased their toxic financial instruments. These reserves were then used to purchase the new Treasury debt. In other words, the budget deficit was financed by deterioration in the balance sheet of the Federal Reserve. How long can such an exchange of assets continue before the Federal Reserve has to finance the government’s deficit by creating new money?

Similar deficits and financing problems have affected the EU, particularly its financially weaker members. To conclude: the initial crisis has planted seeds for two new crises: rising government debt and inflation.

A third crisis is also in place. This crisis will occur when confidence is lost in the U.S. dollar as world reserve currency. This crisis will disrupt the international payments mechanism. It will be especially difficult for the U.S. as the country will lose the ability to pay for its imports with its own currency. U.S. living standards will decline as the ability to import declines.

The financial crisis is essentially a U.S. crisis, spread abroad by the sale of toxic financial instruments. The rest of the world got into trouble by trusting Wall Street. The real American crisis is much worse than the financial crisis. The real American crisis is the offshoring of U.S. manufacturing, industrial, and professional service jobs such as software engineering and information technology.

Jobs offshoring was initiated by Wall Street pressures on corporations for higher earnings and by performance-related bonuses becoming the main form of managerial compensation. Corporate executives increased profits and obtained bonuses by substituting cheaper foreign labor for U.S. labor in the production of goods and services marketed in the U.S.

Jobs offshoring is destroying the ladders of upward mobility that made the U.S. an opportunity society and eroding the value of a university education. For the first decade of the 21st century, the U.S. economy has been able to create net new jobs only in domestic nontradable services, such as waitresses, bartenders, sales, health and social assistance and, prior to the real estate collapse, construction. These jobs are lower paid than the jobs were that have been offshored, and these jobs do not produce goods and services for export.

Jobs offshoring has increased the U.S. trade deficit, putting more pressure on the dollar’s role as reserve currency. When offshored goods and services return to the U.S., they add to imports, thus worsening the trade imbalance.

The policy of jobs offshoring is insane. It is shifting U.S. GDP growth to the offshored locations, such as China, thus halting growth in U.S. consumer incomes. For the past decade, U.S. households substituted an increase in indebtedness for the lack of growth in income in order to continue increasing their consumption. With their home equity refinanced and spent, real estate values down, and credit card debt at unsustainable levels, it is no longer possible for the U.S. economy to base its growth on a rise in consumer debt. This fact is a brake on U.S. economic recovery.

Stimulus packages cannot substitute for the growth in real income. As so many high value-added, high productivity U.S. jobs have been offshored, there is no way to achieve real growth in U.S. personal incomes. Stimulus spending simply adds to government debt and pressure on the dollar, and sows seeds for high inflation.

The U.S. dollar survives as reserve currency because there is no apparent substitute. The euro has its own problems. Moreover, the euro is the currency of a non-existent political entity. National sovereignty continues despite the existence of a common currency on the continent (but not in Great Britain). If the dollar is abandoned, then the result is likely to be bilateral settlements in countries’ own currencies, as Brazil and China now are doing. Alternatively, John Maynard Keynes’ bancor scheme could be implemented, as it does not require a reserve currency country. Keynes’ plan is designed to maintain a country’s trade balance. Only a reserve currency country can get its trade and budget deficits so out of balance as the U.S. has done. The prospect of U.S. default and/or inflation and decline in the dollar’s exchange value is a threat to the reserve system.

The threats to the U.S. economy are extreme. Yet, neither the Obama administration, the Republican opposition, economists, Wall Street, nor the media show any awareness. Instead, the public is provided with spin about recovery and with higher spending on pointless wars that are hastening America’s economic and financial ruin.

Paul Craig Roberts was Assistant Secretary of the U.S. Treasury in the Reagan administration. His latest book, How The Economy Was Lost, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

Source

February 3, 2010 Posted by | Economics | Leave a comment

Offshoring strikes refining industry, workers strike back

Total Workers Threaten to Seize Flanders Refinery in Jobs Row

By Tara Patel

Feb. 3 (Bloomberg) — Unions representing Total SA refinery workers threatened to take control of an idled plant near the northern French city of Dunkirk if it isn’t restarted.

They also called for strikes later this month as a labor dispute over the future of the industry in France escalates ahead of regional elections.

Management of Total, Europe’s largest refinery, have until Feb. 15 to restart the Flanders refinery or “we will take possession of the site,” the CGT, FO and Sud Chimie unions said in a joint e-mailed statement. The CGT union also called for 48- hour strikes at French refineries during the week of Feb. 15.

Total plans to halt refining operations at the Flanders plant permanently after the recession eroded demand for oil products. The refinery was idled in September. The French company, which last year said it may sell refining assets in Europe, will announce a final decision on the future of the site before the end of June.

Total delayed a final decision after the government, which faces regional elections next month, urged the company to protect the local economy and jobs with a plan for a “substitute” business activity.

Union members held noisy demonstrations at Total headquarters in the La Defense business district two days ago amid talks with management about the future of Flanders.

Hundreds of workers with drums and horns crowded into the building’s atrium and smashed a glass security barrier. This led security personnel to seal off access for more than four hours to elevators leading to upper storeys, where the office of Chief Executive Officer Christophe de Margerie is located.

Job Guarantees

Total has said it would guarantee “each employee a job at Total that is a fit with his or her competencies” as well as “helping to secure” the future of local contractors. The complex employs 376 workers and has about 400 sub-contractors.

Union leaders including Charles Foulard of the CGT have said the dispute has wider implications beyond Flanders of protesting Total’s strategy to gradually pull out of refining in France, where it operates six of the country’s 12 plants, in favor of overseas expansion.

The company is among several European refiners to lower operating rates, idle plants and seek to sell others in a bid to save costs and maintain profit after the recession cut fuel use. European refining margins dropped to their lowest level in at least two years in December, according to data on the Web site of the Union Francaise des Industries Petrolieres trade group.

Total will create a Refining Operations Technical Support Center and training school at the Flanders facility, allowing it to keep two-thirds of the refinery jobs, it said. The Paris- based company is also in talks to invest in a planned liquefied natural gas terminal near the Port of Dunkirk as it seeks to maintain jobs.

CGT representatives have also said Total won’t restart the idled crude-distillation unit at Gonfreville. The unit was scheduled to close in 2012, according to a plan announced in March.

Total plans to reduce Gonfreville’s capacity by 25 percent to 12 million tons a year while raising the proportion of diesel output and lowering surplus gasoline. The proposal would lead to the loss of 555 refining and petrochemical jobs in France.

February 3, 2010 Posted by | Economics | Leave a comment

Report Sees Bonanza for U.S., Iran if Sanctions Scrapped

By Abid Aslam | November 24, 2008

WASHINGTON, (IPS) – Think of it as a stimulus package without deficit spending: Were the United States to normalise trade relations with Iran and were the Islamic Republic to liberalise its economy, Washington could cut its fuel costs and add tens of billions of dollars to its economy, say U.S. exporters.

Such moves could lower world oil prices by as much as 10 percent, the National Foreign Trade Council (NFTC) says in a report aimed at the incoming administration of President-elect Barack Obama.

Obama, who is to take office in January, has signaled willingness to explore new approaches to his country’s long standoff with Iran. During his election campaign, opponents lambasted Obama for favouring appeasement at a time when Washington seeks to tighten the screws on Tehran for its alleged support of terrorism and nuclear ambitions.

Few, if any, expect a radical shift in U.S. policy under Obama but presidential transitions always are seen as opportunities for some degree of change.

In this case, says NFTC president Bill Reinsch, the lobby seeks to persuade the incoming administration that “broad unilateral sanctions intended to change the behaviour of problematic regimes often miss that target, but do succeed in generating a number of significant economic consequences.”

According to the NFTC, if the United States were to scrap its unilateral sanctions and, in turn, Iran were to lift prohibitions against foreign investment, particularly in its oil sector, the Middle Eastern nation could boost its crude oil production by about 50 percent and lower world prices by about 10 percent. This would cut the cost of U.S. oil imports by 38 billion — 76 billion dollars a year.

The pro-trade group further estimates that economic liberalisation in Iran would boost that country’s overall trade by up to 61 billion dollars, adding 32 percent to its gross domestic product (GDP). In turn, U.S. non-oil trade and trade in services with Iran also would shoot up, by about 46 billion dollars or 0.4 percent of U.S. GDP.

“Opening Iran’s marketplace to foreign investment could also be a boon to competitive U.S. multinational firms operating in a variety of manufacturing and service sectors,” says the NFTC study.

The Bush administration, which recently has worked through the United Nations to force Iran to stop enriching uranium, last month imposed sweeping new unilateral sanctions designed to cut off key Iranian military and banking institutions from the U.S. financial system.

Israel and the United States say Iran is enriching uranium in order to build nuclear weapons. Tehran has repeatedly said its purposes are peaceful. Washington also has placed Iran on its list of states sponsoring terrorism, chiefly militant factions in Iraq, Afghanistan, Lebanon, and the Gaza Strip.

Under U.S. law domestic and foreign firms are barred from investing more than 20 million dollars in Iran. For its part, Tehran has taken over the operation of its strategic oil and gas sector, which accounts for roughly 40 percent of the national economy. Governments that have voiced support for the U.S. stance have not curbed their firms’ involvement in Iran. Washington has not prosecuted non-U.S. companies for allegedly breaking the law. Federal lawmakers have been weighing measures to force authorities here to pursue foreign sanctions violators.

The NFTC has long opposed unilateral sanctions and has assailed as futile the Iran measures already in place and those under consideration by legislators.

“As with all economic embargoes, the efficacy of the sanctions in forcing political change is controversial,” write report authors Dean DeRosa and Gary Hufbauer, both economists. “In economic terms, however, both sides lose from the geopolitical standoff.”

Hufbauer has spent decades analysing the use of sanctions. In a report earlier this year, he and colleagues at the Peterson Institute for International Economics think tank examined more than 200 cases over the past one hundred years, including those against Iran. They found that the economic restrictions had contributed to achieving foreign policy goals only about one-third of the time. Most of these instances involved only partial success.

Critically, the study released in July found that sanctions tended to work when aimed against friendly and democratic countries, but not when they were brought to bear on adversaries and autocrats. In recent years, the record for multilateral sanctions has been better than that for unilateral U.S. sanctions, it added.

Not that the alternatives have been attractive. Said Hufbauer and colleagues: “Our success rate of one-third overall indicates that in about two-thirds of the cases the foreign policy goal was not achieved or, if it was achieved, other means were decisive — usually military force.”

http://www.ipsnews.net/news.asp?idnews=44832



February 1, 2010 Posted by | Economics, Wars for Israel | Leave a comment

Auditor: TARP rescue failing to meet key goals

AFP | February 1, 2010

Washington – The 700-billion-dollar US government effort to rescue the financial system has failed to meet key goals such as sparking lending and curbing risky activities by banks, a special auditor said Sunday.

The special inspector general for the Troubled Asset Relief Program said in a report to Congress that it is too soon to measure the overall success of the program passed at the height of the financial crisis in October 2008.

The quarterly report said that because of TARP, “there are clear signs that aspects of the financial system are far more stable than they were at the height of the crisis in the fall of 2008.”

But the report also stated that “many of TARP’s stated goals… have simply not been met” and that the potential for a new crisis looms without major reforms.

“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car,” the report said.

The program has fallen short in key areas such as boosting credit, curbing home foreclosures and deterring the risky behavior of financial firms that are considered “too big to fail,” said the report from inspector general Neil Barofsky.

Despite the explicit goal to increase financing to US businesses and consumers, “lending continues to decrease,” said the report from inspector general Neil Barofsky.

It also noted that TARP has failed to live up to the “explicit purpose” stated by Congress of “preserving homeownership and promoting jobs.

“The TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation,” it said.

“Whether these goals can effectively be met through existing TARP programs is very much an open question at this time.”

The report said that by coming to the aid of the troubled housing market, the US government effectively “has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor.”

More broadly, the report said the underlying problems that led to the financial crisis remain, including the continued existence of financial firms that are “too big to fail” and engaging in practices that can destabilize the system.

“The substantial costs of TARP — in money, moral hazard effects on the market, and government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or 10 years’ time,” the document said.

“It is hard to see how any of the fundamental problems in the system have been addressed to date.” – AFP

February 1, 2010 Posted by | Corruption, Deception, Economics | Leave a comment

‘Iran, Iraq have signed 100 economic agreements’

Press TV – January 31, 2010

Iran and Iraq have signed one hundred memorandums of understanding since 2003 to boost their economic cooperation, an Iranian official says.

The plenipotentiary envoy of the Trade Promotion Organization of Iran (TPOI) to Iraq noted that the high number of agreements reflects the two countries’ determination to enhance the level of their economic ties.

“Iran has exported $15 billion of goods to Iraq since the fall of Saddam Hussein,” Mehr news agency quoted Kheirollah Khadem as saying.

Khadem noted that Iran has formed a committee under the supervision of the Iranian President’s Office to review and implement initiatives to enhance the level of economic ties between the two neighboring countries.

He added that Iran also plans to further activate the Arvandroud Special Economic Zone near the border with Iraq to facilitate trade between the two countries.

January 31, 2010 Posted by | Economics, Wars for Israel | Leave a comment

Russia finds ‘strategic oil deposit’ in East Siberia

January 29, 2010

MOSCOW, RUSSIA: Russian oil producer Rosneft uncovered a giant oil field in East Siberia with more than 1 billion barrels of oil, the Russian natural resources minister said. Russian Natural Resources Minister Yuri Trutnev said Rosneft made an “important” oil discovery in the Irkutsk Oblast near Mongolia, Russia’s state-run news agency RIA Novosti reports.

“We can report today that we have opened the Sevastyanovo oil field, with reserves of over 1.1 billion barrels,” he said. “This is a strategic deposit.” Trutnev said the amount of natural resources recovered from Russia in 2009 exceeded national expectations.

Russia extracted roughly 3.6 billion barrels of oil in 2009. Discoveries for 2009 eclipsed 4.5 billion barrels.The Sevastyanovo oil field is located in Irkutsk Oblast near the route for the East Siberia-Pacific Ocean oil pipeline that links to Asian markets.

Trutnev made the announcement during a meeting with Russian Prime Minister Vladimir Putin.

(EUNewsNet.com and OfficialWire) – Source

January 30, 2010 Posted by | Economics, Malthusian Ideology, Phony Scarcity | Leave a comment

Roubini Calls U.S. Growth ‘Dismal and Poor,’ Predicts Slowing

By Simon Kennedy and Erik Schatzker

Jan. 30 (Bloomberg) — New York University Professor Nouriel Roubini, who anticipated the financial crisis, called the fourth quarter surge in U.S. economic growth “very dismal and poor” because it relied on temporary factors.

Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.

“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”

Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges.

“It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said.

To contact the reporter on this story: Simon Kennedy in Davos at skennedy4@bloomberg.net

January 30, 2010 Posted by | Economics | Leave a comment

Secret Banking Cabal Emerges From AIG Shadows

By David Reilly

Jan. 29 (Bloomberg) — The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.

Saving the System

Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system.

The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.

This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.

Geithner’s Bosses

The New York Fed is one of 12 Federal Reserve Banks that operate under the supervision of the Federal Reserve’s board of governors, chaired by Ben Bernanke. Member-bank presidents are appointed by nine-member boards, who themselves are appointed largely by other bankers.

As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”

And yet the New York Fed played an integral role in the government’s bailout of banks, often receiving surprisingly free rein to act as it saw fit.

Consider AIG. Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop.

“I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said.

Bernanke’s Denials

Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks.

You have to wonder then who really was in charge of our nation’s financial future if AIG posed as grave a threat as Geithner claimed.

Questions about the New York Fed’s accountability grew after Geithner on Nov. 24, 2008, was named by then-President- elect Barack Obama to be Treasury Secretary. Geither said he recused himself from the bank’s day-to-day activities, even though he never actually signed a formal letter of recusal.

That left issues related to disclosures about the deal in the hands of the bank’s lawyers and staff, rather than a top executive. Those staffers didn’t want details of the swaps purchase to become public.

New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.

That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.

Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.”

Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.

This belies the culture of secrecy obviously pervasive within the New York Fed. Committee Chairman Edolphus Towns noted during the hearing that the bank initially refused to disclose even the names of other banks that benefited from its actions, arguing this information would somehow harm AIG.

‘Penchant for Secrecy’

“In fact, when the information was finally released, under pressure from Congress, nothing happened,” Towns said. “It had absolutely no effect on AIG’s business or financial condition. But it did have an effect on the credibility of the Federal Reserve, and it called into question the Fed’s penchant for secrecy.”

Now, I’m not saying Congress should be meddling in interest-rate decisions, or micro-managing bank regulation. Nor do I think we should all don tin-foil hats and start ranting about the Trilateral Commission.

Yet when unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil.

(David Reilly is a Bloomberg News columnist. The opinions expressed are his own.)

January 29, 2010 Posted by | Corruption, Deception, Economics | Leave a comment

Zardari books fast train to Turkey

By Syed Fazl-e-Haider | Asia Times | January 29, 2010

KARACHI, Pakistan – Turkey and Pakistan agreed this week to undertake a US$20 billion project to upgrade a railway link from Islamabad to Istanbul, basically to transport cargo more efficiently between the two countries and ultimately on to Europe.

During a meeting in Istanbul, visiting President Asif Ali Zardari of Pakistan and his Turkish counterpart, Abdullah Gul, discussed the upgrade of the rail route. Three Turkish companies have shown interest in the five-year project that envisages cutting travel time between Islamabad and Istanbul, via Tehran, from the current 11 days or more to three to four days.

The move follows an agreement in November to increase the level of bilateral trade between the two countries to $2 billion from the existing $741 million in a couple of years. Analysts believe that the 6,566 kilometer rail project from Islamabad to Istanbul, with 1,990km of track in Pakistan, 2,570km in Iran and 2,006km in Turkey, will open new avenues of bilateral cooperation as well as strengthening trade and economic ties.

Zardari was on a four-day visit of Turkey, ending on Wednesday, to attend a trilateral summit with Afghan President Hamid Karzai and the Istanbul summit on Afghanistan, involving Afghanistan and its six immediate neighbors. He also held discussions on bilateral matters with Turkish leaders. Zardari floated the Islamabad-Istanbul cargo train idea last year when an experimental train was run on the route on his initiative on August 14.

“The cargo rail link could provide a speedier option to expand economic ties between the two countries as well as with Iran,” Associated Press of Pakistan reported Zardari as saying. “This rail link will strengthen Pakistan’s economy as well as people-to-people ties not only with brotherly Muslim countries but also onwards to Europe.”

The existing track between the two countries requires considerable improvement if it is to be used for timely cargo services. The August trial trip of a container train service from Islamabad reached Istanbul in two weeks, traveling from Islamabad through the southwestern Pakistani province of Balochistan then on to Iran. Islamabad is also looking to start a passenger train service on the route.

The two sides have worked to negotiate a preferential trading agreement, aimed to increase trade and investments, especially in transport, telecommunications, manufacturing, tourism and other industries. While Pakistan exports rice, leather, textiles and fabric sports goods, and medical equipment, Turkey exports wheat, diesel, lentils, chemicals, transport vehicles, machinery and energy products to Pakistan.

Many Turkish private firms have invested significantly in industrial and construction projects, developing highways, pipelines and canals in Pakistan.

During a two-day visit to Pakistan in October, Turkish Prime Minister Recep Tayyip Erdogan vowed to upgrade his country’s strategic partnership with Pakistan and strengthen economic cooperation. The two nations signed a joint declaration to strengthen relations in trade, investment, agriculture, industry, culture, education and defense and agreed to increase their trade from $741 million a year to $2 billion in a couple of years.

Erdogan, who was accompanied by an 80-member delegation of business executives, termed the present trade volume insignificant and committed the Turkish Cooperation and Development Agency to boost bilateral trade.

In November, the countries agreed to move forward the timeline for signing a preferential trade agreement and abolish the requirement for visas for businessmen traveling between the two countries.

Zardari reportedly impressed on the business community of Turkey not only the importance of enhancing trade relations with Pakistan but also the lucrative investment opportunities in his country.

Islamabad needs foreign investment to bolster its strife-torn economy. Foreign direct investment (FDI) into the country dropped 57%, to US$1.01 billion, in the six months to June compared with a year earlier, according to the central bank. That continued a decline in FDI to $3.72 billion in the fiscal year that ended in June from $5.4 billion 12 months earlier.

Turkey and Pakistan are founding members of the Economic Cooperation Organization (ECO), the only forum with representation of all the countries bordering Afghanistan. Analysts stress the need to make efforts to establish inter-regional oil and gas pipelines as well as power grids from energy-rich to energy-deficient states. Free trade is central to regional economic integration as it can unlock latent energies and transform socio-economic landscapes.

Pakistan has served as a route for international trade for ECO countries. During the Cold War period and after the collapse of the Soviet Union in the early 1990s, this route was disrupted by political instability and the security crises in Afghanistan. The prevailing situation in Afghanistan hinders any revival of economic, trade and cultural relations between the newly independent states in Central Asia and other Asian countries.

The ECO can only become a coherent organization if it creates inter-dependencies and synergies, especially in areas of energy, transportation and trade. Completion of the Gwadar port in Balochistan province in Pakistan will help to revive transit facilities and trade links among the member countries and it offers tremendous prospects for regional trade, as it lies outside traditional areas of conflict. Pakistan has repeatedly offered ECO member countries port and transit facilities at Gwadar to establish trade links with the world that would benefit the entire region. (The members of the ECO are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan.)

Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com

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January 29, 2010 Posted by | Economics | Leave a comment

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