C.I.A. Closes Unit Focused on Capture of bin Laden - New York Times

C.I.A. Closes Unit Focused on Capture of bin Laden - New York Times

July 4, 2006
C.I.A. Closes Unit Focused on Capture of bin Laden
By MARK MAZZETTI

WASHINGTON, July 3 — The Central Intelligence Agency has closed a unit that for a decade had the mission of hunting Osama bin Laden and his top lieutenants, intelligence officials confirmed Monday.

The unit, known as Alec Station, was disbanded late last year and its analysts reassigned within the C.I.A. Counterterrorist Center, the officials said.

The decision is a milestone for the agency, which formed the unit before Osama bin Laden became a household name and bolstered its ranks after the Sept. 11 attacks, when President Bush pledged to bring Mr. bin Laden to justice "dead or alive."

The realignment reflects a view that Al Qaeda is no longer as hierarchical as it once was, intelligence officials said, and a growing concern about Qaeda-inspired groups that have begun carrying out attacks independent of Mr. bin Laden and his top deputy, Ayman al-Zawahiri.

Agency officials said that tracking Mr. bin Laden and his deputies remained a high priority, and that the decision to disband the unit was not a sign that the effort had slackened. Instead, the officials said, it reflects a belief that the agency can better deal with high-level threats by focusing on regional trends rather than on specific organizations or individuals.

"The efforts to find Osama bin Laden are as strong as ever," said Jennifer Millerwise Dyck, a C.I.A. spokeswoman. "This is an agile agency, and the decision was made to ensure greater reach and focus."

The decision to close the unit was first reported Monday by National Public Radio.

Michael Scheuer, a former senior C.I.A. official who was the first head of the unit, said the move reflected a view within the agency that Mr. bin Laden was no longer the threat he once was.

Mr. Scheuer said that view was mistaken.

"This will clearly denigrate our operations against Al Qaeda," he said. "These days at the agency, bin Laden and Al Qaeda appear to be treated merely as first among equals."

In recent years, the war in Iraq has stretched the resources of the intelligence agencies and the Pentagon, generating new priorities for American officials. For instance, much of the military's counterterrorism units, like the Army's Delta Force, had been redirected from the hunt for Mr. bin Laden to the search for Abu Musab al-Zarqawi, who was killed last month in Iraq.

An intelligence official who was granted anonymity to discuss classified information said the closing of the bin Laden unit reflected a greater grasp of the organization. "Our understanding of Al Qaeda has greatly evolved from where it was in the late 1990's," the official said, but added, "There are still people who wake up every day with the job of trying to find bin Laden."

Established in 1996, when Mr. bin Laden's calls for global jihad were a source of increasing concern for officials in Washington, Alec Station operated in a similar fashion to that of other agency stations around the globe.

The two dozen staff members who worked at the station, which was named after Mr. Scheuer's son and was housed in leased offices near agency headquarters in northern Virginia, issued regular cables to the agency about Mr. bin Laden's growing abilities and his desire to strike American targets throughout the world.

In his book "Ghost Wars," which chronicles the agency's efforts to hunt Mr. bin Laden in the years before the Sept. 11 attacks, Steve Coll wrote that some inside the agency likened Alec Station to a cult that became obsessed with Al Qaeda.

"The bin Laden unit's analysts were so intense about their work that they made some of their C.I.A. colleagues uncomfortable," Mr. Coll wrote. Members of Alec Station "called themselves 'the Manson Family' because they had acquired a reputation for crazed alarmism about the rising Al Qaeda threat."

Intelligence officials said Alec Station was disbanded after Robert Grenier, who until February was in charge of the Counterterrorist Center, decided the agency needed to reorganize to better address constant changes in terrorist organizations.

Slow economy raises recession fears

Wire Report

WASHINGTON - The worst economic growth in four years is raising concern that troubles in the U.S. housing market will spread and throw the country into a recession before the year is out.

The economy practically crawled at a 1.3 percent pace in the opening quarter of 2007, the Commerce Department reported Friday. That was even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.

The main culprit in the slowdown: the housing slump, which made some businesses act cautiously. The bloated trade deficit also played a role.

Consumers largely carried the economy in the first quarter. But will they stay resilient in light of the troubled housing market, fallout from risky mortgages and rising energy prices?

"The No. 1 question is can the consumer continue to play Atlas while the housing market crumbles around him?" said Richard Yamarone, economist at Argus Research. Others worry about businesses' appetite to spend and invest - also important ingredients for a healthy economy.

Friday's report brought some of these uncertainties to the fore. For now, though, economists believe the risk of a recession is low. Former Federal Reserve Chairman Alan Greenspan has put the chance of a recession this year at one in three.

Federal Reserve Chairman Ben Bernanke, however, has said he doesn't believe the economic expansion, now in its sixth year, is in danger of fizzling out. Neither does the Bush administration.

Many analysts, including those at the Federal Reserve, forecast the economy to perk up enough to grow at a modest pace through the rest of the year without tipping into a recession. But at the same time, they see rising risks that the economy will deteriorate further, perhaps into a prolonged period of high inflation and weak growth.

"It was a quarter that was beset by the worst of both worlds, more inflation and less economic growth," said Stuart Hoffman, chief economist at PNC Financial Services, who called the combination "a hint of stagflation-lite."

Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech Thursday night that "economic growth has unexpectedly slowed from 'middling' to a crawl," and that she sees "significantly increased risks to the outlook, for both growth and inflation."

The reading on gross domestic product in the first quarter was the weakest since a 1.2 percent pace in the opening quarter of 2003. GDP measures the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.

The performance was even weaker than the 1.8 percent economists had forecast.

"The economy went through a very soggy period," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "The biggest risk to the economy is if the housing market doesn't stabilize. That could force consumers and businesses to cut back sharply in spending. Those risks seem to be limited at this juncture," she said.

The stock market, which rallied earlier in the week on a series of strong corporate profit reports, showed little reaction Friday to the economic figures. The Dow Jones industrials rose 15.44 points to 13,120.94, the third record close in as many days. But the market's enthusiasm could ebb if economic growth remains modest and earnings weaken.

Analysts worry most about the strength of consumer spending, which accounts for 70 percent of the economy and which kept the economy afloat by rising at a robust 3.8 percent annual rate in the first quarter.

Forecasters expect unemployment to edge higher this year from a low 4.4 percent rate in March. Analysts also note that American households are coping with heavy debt service, softening home values and rising gasoline prices.

If consumer spending falters, the economy could stall or even contract, some observers said.

"If energy and food prices continue on their recent upward path, then it is very likely that the economy will be facing a recession before the end of the year," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

Although the economy slowed in the first quarter, inflation picked up. That could complicate the Fed's work of keeping the economy and inflation on an even keel.

"This is a knife's edge scenario," observed John Silvia, chief economist at Wachovia Economics Group.

An inflation gauge tied to the GDP report and closely watched by the Fed showed that core prices - excluding food and energy - rose at a rate of 2.2 percent in the first quarter, up from 1.8 percent in the fourth quarter.

Republicans and Democrats had divergent views of the GDP report.

"We knew that the housing market would go through an adjustment. The positive news here is that our economy has been able to grow in spite of that very sharp reduction," Commerce Secretary Carlos Gutierrez said in an interview with The Associated Press.

But Sen. Charles Schumer, D-N.Y., called the sick housing market and the swollen trade deficit - which played in the first-quarter's slowdown - "body blows" to the economy that "must be countered by sound economic policy from the Bush administration."

The biggest factor behind the first quarter slowdown was the crumbling housing market. Investment in home building was cut by 17 percent on an annualized basis. Such investment had been slashed at an even deeper 19.8 percent pace in the fourth quarter.

"The report tells me housing is probably going to be in a more prolonged and deeper recession," said Stuart Hoffman, chief economist at PNC Financial Services Group.

Weak investment by businesses in inventories also held back GDP. So did the trade deficit, shaving 0.52 percentage point off GDP.

Another negative factor was a 6.6 percent drop, on an annualized basis, in federal defense spending.

However, consumers whose shopping is indispensable to a booming economy boosted their spending at a 3.8 percent pace. That was a solid showing although it was slightly weaker than the 4.2 percent rate in the fourth quarter.

A key reason consumers have remained resilient, even in the face of the painful housing slump, is that the jobs markets has managed to stay in good shape.

The nation's unemployment rate dropped in March to 4.4 percent, matching a five-year low. However, economists predict that rate will climb - perhaps to close to 5 percent by the end of this year - as economic activity cools.

In other economic news, employers' costs to hire and retain workers grew 0.8 percent in the first quarter, down slightly from a 0.9 percent increase in the fourth quarter, the Labor Department reported.

Wages and salaries went up 1.1 percent, a figure that hasn't been higher since 2001. That's good news for workers and should support consumer spending. Benefit costs, however, edged up just 0.1 percent, the least since the first quarter of 1999.

The IMF Fiddles while the Dollar Burns

AEI
Among the more surrealistic spectacles of the IMF's recently concluded Spring Meetings was the IMF, the supposed guardian of the international financial system, assuring the world that there was little to fear from today's unparalleled global payment imbalances. For the IMF made this assurance at the very time that the dollar's decline appears to be gathering pace, as suggested by its plumbing almost daily new lows against the Australian dollar, the British pound, and the Euro. It also made these assurances at the same time that the key global surplus countries, China and Japan, show no sign of adjusting policies to share at least some of the burden of the dollar's decline.

The IMF's apparent equanimity about global payment imbalances is rooted in its remarkably sanguine world economic outlook. For notwithstanding the gathering clouds in the US housing market, the IMF persists in the view that the US will have the softest of soft landings. In the face of all historic evidence to the contrary, the IMF also takes the view that, even were there to be a hard US economic landing, the rest of the world would somehow make up for any lost momentum in the US economy.

The most immediate risk to the IMF's rosy global economic outlook is that the US housing market is far from bottoming out and that falling home prices will prove to be a continuing drag on the US economy. After all, between 2000 and 2006, US home prices were supported by a host of unusually accommodating factors that fueled a spectacular and unprecedented 80 percent increase in home prices at the national level. This rise in housing prices, coupled with a veritable explosion in Mortgage Equity Withdrawals, provided the underpinning for US households to run down their saving rate from 7 percent of household income in 2000 to virtually zero today.

The IMF now chooses to turn a blind eye to the growing evidence that the US housing market bubble has burst and that housing prices have started to fall. It also chooses to overlook the growing evidence that the factors that had earlier fueled that bubble are now beginning to work in reverse. Indeed, the IMF seems oblivious to the fact that the Federal Reserve has now normalized interest rates after a long period of unusually accommodative interest rates and that the orgy of sub-prime mortgage lending has been stopped in its tracks. Compounding the housing market's present sea of troubles, overall mortgage lending standards are being tightened, while the resetting of Adjustable Rate Mortgages threatens to further crimp housing demand.

A significant US housing-led economic slowdown must carry the threat that the pace of the dollar's decline accelerates, especially given the United States' record need for foreign financing. For a start, the relative interest rate differential that presently favors the US dollar will be eroded as the Federal Reserve is forced to cut interest rates to support a flagging US economy. More important still, the dollar would be hit by the fact that, in any housing-led downturn, US financial assets, including equities and mortgage backed securities, would likely lose their appeal to foreign investors.

Any disorderly decline in the US dollar could intensify protectionist pressures and could pose a serious threat to global financial markets by disrupting the US bond market. This would be all the more so the case should the Asian countries continue to shirk from bearing their share of the burden of a falling dollar and should that burden continue to fall disproportionately on regions like Australia, the Euro area, and the United Kingdom.

Seemingly oblivious to the mounting risks of a disorderly unwinding of global payment imbalances, the IMF had little to offer at its Spring Meetings by way of leadership towards a coordinated policy response to those risks. In its supposed exercise of multilateral exchange rate surveillance, the IMF cobbled together well-worn policy plans from its bilateral consultations over the past year with the United States, Europe, Japan, China and Saudi Arabia. Aside from being at the most general of levels, those policy plans offered virtually nothing new by the way of policy initiatives.

Equally disconcerting is the IMF's virtual silence on the exchange rate manipulation that is so much in evidence in Asia's major economies. Judging by today's Asian economies, it would seem as if each country is free to do as it likes with its exchange rate without raising real objections from the IMF. Indeed, China massively and persistently intervenes in its exchange market to the tune of US$250 billion a year to prevent any meaningful appreciation of its currency. And it does so without incurring the IMF's wrath. For its part, Japan persists with a policy mix of a tightening fiscal policy and extraordinarily low interest rates that ensures a continued weakening in the Japanese yen.

This all has to leave one wondering how far the IMF has strayed from its original mandate as the guardian of the international exchange rate system. It also has to leave one wondering whether the IMF's periodic gatherings still serve much purpose.

Saudi says Qaeda threat not over despite arrests

RIYADH, April 28 (Reuters) - The arrest of 172 suspected militants did not end the al Qaeda-linked threat in Saudi Arabia, the interior minister was quoted on Saturday as saying.

Prince Nayef told the Arabic-language al-Riyadh daily a Saudi man was held on suspicion of being the spiritual leader of the largest of the seven cells which were smashed, foiling a plot to attack oil facilities and military bases.

"We cannot say that we are finished from these deviants," Prince Nayef said. "But efforts will continue. The eyes...are wide open and efforts are under way to purify our country from every evil."

The Interior Ministry said on Friday it had foiled an al Qaeda-linked plot to attack oil facilities, military bases and public figures, arresting 172 people, including some who it said had trained to use aircraft for suicide attacks.

Most of those arrested were Saudis, and security sources said others were from Yemen, Nigeria and other countries. Police seized weapons, computers and more than 20 million riyals ($5 million) in cash.

Islamist militants swearing allegiance to al Qaeda launched a violent campaign to topple the U.S.-allied Saudi monarchy in 2003, carrying out suicide bomb attacks on foreigners and government installations, including the oil industry.

Saudi Arabia is the world's top oil exporter, supplying about 7 million barrels a day to world markets. It holds nearly a quarter of the world's oil reserves.

SCEPTICISM

Thomas Hegghammer, a Norway-based counter-terrorism expert, said the men were arrested over a period of nine months.

"I don't see it as one big plot... These guys were picked up over a period of nine months, and I suspect they include many different groups involved in a variety of activities," he said.

Such activities might include recruiting militants for Iraq and Internet propaganda, he said.

The last announced break-up of a major cell was in December.

"We're seeing a new communication strategy from the Interior Ministry. Instead of announcing arrests as they happen -- which projects an image of continuous instability -- they save them up and present them in bulk," Hegghammer said.

One Western diplomat has suggested that the authorities, who have not yet provided names and other details of the detainees, were trying to play up their anti-terrorism efforts before the West and emphasise the militant danger to the Saudi public.

Most of the 19 al Qaeda militants who commandeered hijacked planes in the Sept. 11 attack on the United States were Saudis.

Prince Nayef said members of the largest cell swore allegiance to their leader at the Kaaba, a sacred site inside the Grand Mosque in Mecca, Islam's holiest city.

"Unfortunately, he is a Saudi. He was arrested along with the group," he said, without giving further details.

LOYALTY VIOLATED

Saudi Arabia's top official cleric, Grand Mufti Sheikh Abdel-aziz Al al-Sheikh said in a statement the oath was a violation of the principle of loyalty to the Saudi royal family.

"Their brazen oath to their leader and preparations involving arming themselves is a revolt against the ruler," he said, describing this as "the most grave of sins".