Wednesday, November 19, 2008

Bernanke Says Federal Reserve Won't Reveal Details on Loans

By Steve Matthews and Craig Torres

Nov. 18 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the central bank won't disclose details of the $2 trillion in emergency loans of taxpayer funds because doing so would stigmatize banks needing the money.

``Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,'' Bernanke said today to the House Financial Services Committee. ``We think that's counterproductive.''

Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bank rescue plan. Two months later, as the Fed lends far more than that in separate lending programs that don't require lawmakers' approval, Bernanke said too much disclosure would harm the borrowers.

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``First, the success of this depends on banks being willing to come and borrow when they need short-term cash,'' Bernanke said in response to questioning from Representative Spencer Bachus of Alabama, the committee's senior Republican.

``There is a concern that if the name is put in the newspaper that such-and-such bank came to the Fed to borrow overnight for a perfectly good reason, that others might begin to worry is this bank creditworthy and that might create a stigma, a problem, and might cause banks to be unwilling to borrow, and that would be counterproductive.''

`Very Safe' Loans

Bernanke said the central bank would not lose money on its lending, which is backed by assets.

``We take collateral, we haircut it, it is a short-term loan, it is very safe, we have never lost a penny in these various lending programs,'' he said.

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities, some with lower ratings. The Fed collects interest on all its loans.

At a Sept. 23 Senate Banking Committee hearing in Washington, Paulson called for transparency in the purchase of distressed assets.

``We need oversight,'' Paulson told lawmakers. ``We need protection. We need transparency. I want it. We all want it.''

At a joint House-Senate hearing the next day, Bernanke also stressed the importance of openness in the program. ``Transparency is a big issue,'' he said.

The Bloomberg lawsuit argues that the collateral lists ``are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression.''

Tuesday, November 18, 2008

30 reasons for Great Depression 2 by 2011

New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster

By Paul B. Farrell, MarketWatch
Last update: 7:19 p.m. EST Nov. 17, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- By 2011? No recovery? No new bull? "Hey Paul, why do you keep talking about a bigger crash coming by 2011?" Readers ask that often. So here's a sequel to my predictions of 2000 and 2004, with a look three years ahead:

First. Dot-com crash

We pinpointed the dot-com crash at its peak, in a March 20, 2000 column: "Next crash? Sorry, you won't see it coming." Bulls-eye: The dot-com bubble popped. The economy went into a 30-month recession. The stock market lost $8 trillion. And today, over eight years later, the market is still roughly 40% below its 2000 peak. See previous Paul B. Farrell.

Factor in inflation and the average stock has lost well over 50% of its value. Stocks have proven to be a very big loser, a bad investment for Americans, thanks to Wall Street's selfish greed, plus the complicity and naiveté of politicians, press and public.

Second. Subprime meltdown

We reported on warnings of another crash coming as early as 2004, wrote a sequel, also titled "Next crash? Sorry, you won't see it coming." Yes, we were early, but in good company. We wrote many more warning columns. Few listened.

Subsequent events, notably former Fed Chairman Alan Greenspan's admission of his failures in congressional testimony, prove that if he and other Reaganomic ideologues weren't so myopic and intransigent about proving their free-market deregulation theories, they could have acted earlier and prevented today's colossal mess. Instead, their ideology kept the bubble blowing, delayed the pop, making matters worse.

So once again, as history proves over and over, ideology trumps common sense, reality and the facts. Greed drives ideologues to blow bubbles. They pop. Crashes happen. The public is collateral damage.

Third. Megabubble cycles

We also detailed the broader, accelerating macroeconomic sweep of cycles last summer in columns like "20 reasons new megabubble pops in 2011." We summarized a long list of major warnings from financial periodicals -- Forbes, Fortune, the Wall Street Journal, Economist -- and from the voices of Warren Buffett, Bill Gross, a sitting Fed governor and a former Commerce secretary. Multiple warnings "hiding in plain sight," beginning with a Fed governor warning Greenspan in 2000 about subprime risk.

But the big shocker came from the new Treasury secretary two years before the meltdown: Bloomberg News reports that shortly after leaving Wall Street as Goldman Sachs' CEO, Henry Paulson was at Camp David warning the president and his staff of "over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street's face and affect the whole economy."

Yes, they knew. And still both Paulson, a Wall Street insider, and Greenspan's successor, Ben Bernanke, a Princeton scholar of the Great Depression, stayed trapped in denial and kept happy-talking the public for months after the meltdown began in mid-2007. Get it? While they could have put the brakes on this meltdown years ago, our leaders were prisoners of their distorted, inflexible views of conservative Reaganomics ideology.

As a result, once again the "best and the brightest" failed America and now they and their buddies in Washington and Corporate America are setting up the Crash of 2011.

Now it's time for my 2008 update, a look into the future where things will get far worse during the next presidential term. And given human behavior, especially in the deep recesses of Wall Street's "greed is good" DNA, it seems inevitable that no matter how well-intentioned the new president may be Wall Street and Washington's 41,000 special-interest lobbyists will drive America into the Great Depression 2.

30 'leading edge' indicators of the coming Great Depression 2

Every day there is more breaking news, proof Wall Street's greed is already back to "business as usual" and in denial, grabbing more and more from the new "Bailouts-R-Us" bonanza of free taxpayer cash and credits, like two-year-olds in a toy store at Christmas -- anything to boost earnings, profits and stock prices, and keep those bonuses and salaries flowing, anything to blow a new bubble.

Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:
  1. America's credit rating may soon be downgraded below AAA
  2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"
  3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse
  4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets
  5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year
  6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers
  7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money
  8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states
  9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt
  10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps
  11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up
  12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns
  13. Fed also plans to provide billions to $3.6 trillion money-market fund industry
  14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars
  15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion
  16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs
  17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown
  18. Big three automakers near bankruptcy; unions, workers, retirees will suffer
  19. Corporate bond market, both junk and top-rated, slumps more than 25%
  20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall
  21. Unemployment heading toward 8% plus; more 1930's photos of soup lines
  22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists
  23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai
  24. Despite global recession, U.S. trade deficit continues, now at $650 billion
  25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities
  26. Now 46 million uninsured as medical, drug costs explode
  27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt
  28. Outgoing leaders handicapping new administration with huge liabilities
  29. The "antitaxes" message is a new bubble, a new version of the American
    dream offering a free lunch, no sacrifices, exposing us to more false promises
Will the next meltdown, the third of the 21st Century, trigger a second Great Depression? Or will the 2007-08 crisis simply morph into a painful extension of today's mess to 2011 and beyond, with no new bull market, no economic recovery as our new president hopes?

Perhaps some of the first 29 problems may be solved separately, but collectively, after building on a failed ideology, they spell disaster. So listen closely to "leading indicator" No. 30:

At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"

We see the Great Depression 2. Why? Wall Street's self-interested greed. They are their own worst enemy ... and America's too. End of Story

Wednesday, November 12, 2008

The first barons of banking

Abu Dhabi Media Company FZLLC. http://www.thenational.ae/

Nobleman: Baron David de Rothschild, the head of the Rothschild bank. The Rothschilds have helped the British government since financing Wellington's army to fight the French in 1815. Galen Clarke / The National

Among the captains of industry, spin doctors and financial advisers accompanying British prime minister Gordon Brown on his fund-raising visit to the Gulf this week, one name was surprisingly absent. This may have had something to do with the fact that the tour kicked off in Saudi Arabia. But by the time the group reached Qatar, Baron David de Rothschild was there, too, and he was also in Dubai and Abu Dhabi.

Although his office denies that he was part of the official party, it is probably no coincidence that he happened to be in the same part of the world at the right time. That is how the Rothschilds have worked for centuries: quietly, without fuss, behind the scenes.

“We have had 250 years or so of family involvement in the finance business,” says Baron Rothschild. “We provide advice on both sides of the balance sheet, and we do it globally.”

The Rothschilds have been helping the British government – and many others – out of a financial hole ever since they financed Wellington’s army and thus victory against the French at Waterloo in 1815. According to a long-standing legend, the Rothschild family owed the first millions of their fortune to Nathan Rothschild’s successful speculation about the effect of the outcome of the battle on the price of British bonds. By the 19th century, they ran a financial institution with the power and influence of a combined Merrill Lynch, JP Morgan, Morgan Stanley and perhaps even Goldman Sachs and the Bank of China today.

In the 1820s, the Rothschilds supplied enough money to the Bank of England to avert a liquidity crisis. There is not one institution that can save the system in the same way today; not even the US Federal Reserve. However, even though the Rothschilds may have lost some of that power – just as other financial institutions on that list have been emasculated in the last few months – the Rothschild dynasty has lost none of its lustre or influence. So it was no surprise to meet Baron Rothschild at the Dubai International Financial Centre. Rothschild’s opened in Dubai in 2006 with ambitious plans to build an advisory business to complement its European operations. What took so long?

The answer, as many things connected with Rothschilds, has a lot to do with history. When Baron Rothschild began his career, he joined his father’s firm in Paris. In 1982 President Francois Mitterrand nationalised all the banks, leaving him without a bank. With just US$1 million (Dh3.67m) in capital, and five employees, he built up the business, before merging the French operations with the rest of the family’s business in the 1990s.

Gradually the firm has started expanding throughout the world, including the Gulf. “There is no debate that Rothschild is a Jewish family, but we are proud to be in this region. However, it takes time to develop a global footprint,” he says.

An urbane man in his mid-60s, he says there is no single reason why the Rothschilds have been able to keep their financial business together, but offers a couple of suggestions for their longevity. “For a family business to survive, every generation needs a leader,” he says. “Then somebody has to keep the peace. Building a global firm before globalisation meant a mindset of sharing risk and responsibility. If you look at the DNA of our family, that is perhaps an element that runs through our history. Finally, don’t be complacent about giving the family jobs.”

He stresses that the Rothschild ascent has not been linear – at times, as he did in Paris, they have had to rebuild. While he was restarting their business in France, his cousin Sir Evelyn was building a British franchise. When Sir Evelyn retired, the decision was taken to merge the businesses. They are now strong in Europe, Asia especially China, India, as well as Brazil. They also get involved in bankruptcy restructurings in the US, a franchise that will no doubt see a lot more activity in the months ahead.

Does he expect governments to play a larger role in financial markets in future? “There is a huge difference in the Soviet-style mentality that occurred in Paris in 1982, and the extraordinary achievements that politicians, led by Gordon Brown and Nicolas Sarkozy, have made to save the global banking system from systemic collapse,” he says. “They moved to protect the world from billions of unemployment. In five to 10 years those banking stakes will be sold – and sold at a profit.”

Baron Rothschild shares most people’s view that there is a new world order. In his opinion, banks will deleverage and there will be a new form of global governance. “But you have to be careful of caricatures: we don’t want to go from ultra liberalism to protectionism.”

So how did the Rothschilds manage to emerge relatively unscathed from the financial meltdown? “You could say that we may have more insights than others, or you may look at the structure of our business,” he says. “As a family business, we want to limit risk. There is a natural pride in being a trusted adviser.”

It is that role as trusted adviser to both governments and companies that Rothschilds is hoping to build on in the region. “In today’s world we have a strong offering of debt and equity,” he says. “They are two arms of the same body looking for money.”

The firm has entrusted the growth of its financing advisory business in the Middle East to Paul Reynolds, a veteran of many complex corporate finance deals. “Our principal business franchise is large and mid-size companies,” says Mr Reynolds. “I have already been working in this region for two years and we offer a pretty unique proposition.

“We work in a purely advisory capacity. We don’t lend or underwrite, because that creates conflicts. We are sensitive to banking relationships. But we look to ensure financial flexibility for our clients.”

He was unwilling to discuss specific deals or clients, but says that he offers them “trusted, impartial financing advice any time day or night”. Baron Rothschilds tends to do more deals than their competitors, mainly because they are prepared to take on smaller mandates. “It’s not transactions were are interested in, it’s relationships. We are looking for good businesses and good people,” says Mr Reynolds. “Our ambition is for every company here to have a debt adviser.”

Baron Rothschild is reluctant to comment on his nephew Nat Rothschild’s public outburst against George Osborne, the British shadow Chancellor of the Exchequer. Nat Rothschild castigated Mr Osborne for revealing certain confidences gleaned during a holiday in the summer in Corfu.

In what the British press are calling “Yachtgate”, the tale involved Russia’s richest man, Oleg Deripaska, Lord Mandelson, a controversial British politician who has just returned to government, Mr Osborne and a Rothschild. Classic tabloid fodder, but one senses that Baron Rothschild frowns on such publicity. “If you are an adviser, that imposes a certain style and culture,” he says. “You should never forget that clients want to hear more about themselves than their bankers. It demands an element of being sober.”

Even when not at work, Baron Rothschild’s tastes are sober. He lives between Paris and London, is a keen family man – he has one son who is joining the business next September and three daughters – an enthusiastic golfer, and enjoys the “odd concert”. He is also involved in various charity activities, including funding research into brain disease and bone marrow disorders.

It is part of Rothschild lore that its founder sent his sons throughout Europe to set up their own interlinked offices. So where would Baron Rothschild send his children today?

“I would send one to Asia, one to Europe and one to the United States,” he said. “And if I had more children, I would send one to the UAE.”

Monday, November 10, 2008

UK's Brown: Now is the time to build global society

07:03 PM EST

LONDON (Reuters) - The international financial crisis has given world leaders a unique opportunity to create a truly global society, Britain's Prime Minister Gordon Brown will say in a keynote foreign policy speech on Monday.

In his annual speech at the Lord Mayor's Banquet, Brown -- who has spearheaded calls for the reform of international financial institutions -- will say Britain, the United States and Europe are key to forging a new world order.

"The alliance between Britain and the U.S. -- and more broadly between Europe and the U.S. -- can and must provide leadership, not in order to make the rules ourselves, but to lead the global effort to build a stronger and more just international order," an excerpt from the speech says.

Brown and other leaders meet in Washington next weekend to discuss longer term solutions for dealing with economic issues following a series of coordinated moves on interest rates and to recapitalize banks in the wake of the financial crisis.

"Uniquely in this global age, it is now in our power to come together so that 2008 is remembered not just for the failure of a financial crash that engulfed the world but for the resilience and optimism with which we faced the storm, endured it and prevailed," Brown will say in his speech on Monday evening.

"...And if we learn from our experience of turning unity of purpose into unity of action, we can together seize this moment of change in our world to create a truly global society."

According to a summary of the speech released by his office, Brown will set out five great challenges the world faces.

These are: terrorism and extremism and the need to reassert faith in democracy; the global economy; climate change; conflict and mechanisms for rebuilding states after conflict; and meeting goals on tackling poverty and disease.

Brown will also identify five stages for tackling the economy, starting with recapitalizing banks so they can resume lending to families and businesses, and better international co-ordination of fiscal and monetary policy.

He also wants immediate action to stop the spread of the financial crisis to middle-income countries, with a new facility for the International Monetary Fund, and agreement on a global trade deal, as well as reform of the global financial system.

"My message is that we must be: internationalist not protectionist; interventionist not neutral; progressive not reactive; and forward looking not frozen by events. We can seize the moment and in doing so build a truly global society."

(Reporting by Jodie Ginsberg; Editing by Janet Lawrence)

Wednesday, November 05, 2008

Russia welcomes Barack Obama with deployment of nuclear-capable missiles

The Kremlin gave Barack Obama a glacial welcome to the world stage when Dmitry Medvedev, the Russian president, ordered the deployment of nuclear-capable missiles on Nato's borders for the first time since the Cold War.

Russian president Dimitry Medvedev - Russia welcomes Barack Obama with deployment of nuclear-capable missiles
Mr Medvedev said he was ordering the deployment in retaliation to a missile defence shield that the United States wants to build in central Europe Photo: AP

In what appeared to be a deliberate attempt to rattle the president-elect, Mr Medvedev said that short-range Iskander surface-to-surface missiles would be stationed in Russia's baltic exclave of Kaliningrad, which borders EU states Poland and Lithuania.

Delivering his most aggressively anti-American speech yet, Mr Medvedev said he was ordering the deployment in retaliation to a missile defence shield that the United States wants to build in central Europe by 2011.

In comments likely to unnerve the Obama camp, the Russian leader even hinted that he was prepared to use the missiles to destroy the shield, which is to be erected in Poland and the Czech Republic.

"I have approved a new configuration for the military forces of our country," Mr Medvedev said in his first ever annual address to the two houses of the Russian parliament. "To neutralise – if necessary – the anti-missile system, an Iskander missile system will be deployed in the Kaliningrad region."

Although the Iskander is normally equipped with conventional warheads, it can be modified to carry a nuclear payload.

Russia has been threatening to move Iskander missiles to Kalinigrad since April last year, but until now no specific order had been given.

Mr Medvedev's speech had been postponed twice and commentators in Moscow say it is no accident that the Kremlin decided it should be delivered on the day the United States presidential election results were announced.

They suggested that Russia was deliberately attempting to test Mr Obama's mettle. Some analysts say that Kremlin hardliners are worried that the Democrat could seek to restore the notion of the United States as a "soft power" prepared to seek international consensus in its foreign policy.

For Kremlin hawks, such a policy could undermine their attempts to project the US as a threat to Russian sovereignty, thus undermining the justification for the authoritarian policies of Vladimir Putin, the country's powerful prime minister.

For much of his speech, President Medvedev, who was shoehorned into office by Mr Putin, sounded as abrasive as his predecessor at his most vituperative.

Seeking to cast Washington as the architect of the global financial crisis, he lashed out at the "erroneous, egotistical and sometimes even dangerous decisions of some members of the global community" – the traditional euphemism for the United States.

He also blamed the United States for August's war in the Caucasus, which saw Russia invade Georgia and destroy much of its infrastructure after the escalation of a conflict in a Moscow-backed breakaway region of the country.

The US, Mr Medvedev said, pursued a foreign policy that was "selfish, cannot stand criticism and prefers unilateral decisions." "The conflict in the Caucasus was used as a pretext for sending Nato warships to the Black Sea and then for foisting America's anti-missile systems on Europe," he told legislators.

The US sent naval vessels to the Black Sea after the August conflict ended to deliver humanitarian aid to Georgia. The ships have since left the area.

Breaking with tradition, Mr Medvedev failed to congratulate senator Obama on his victory. But he did urge the president-elect to take steps to improve US-Russia relations, which he said were badly damaged.

Ordinary Russians were sneering about the entire election, which was characterized in the frequently chauvinistic popular media as a contest between a senile grandfather and a black man of dubious credentials and intellect. American voters were portrayed as "popcorn and hamburger eating idiots" by one newspaper.

Several tabloids incorrectly reported that the main message of Mr Obama's final campaign speech was a call on young African Americans not to let their underpants show above the waistline of the jeans.

Many also questioned the US belief in democracy, claiming that it had plunged the world into turmoil.

"Russia does not need this Western operetta show," the Tvoi Dyen tabloid wrote. "We realised back in 1612, there is so much more important than difference of opinion."

Great expectations: Barack Obama and the world

Last Updated: Wednesday, November 5, 2008 | 12:32 AM ET

Barack Obama in Germany in July 2008: 'The walls must come down'Barack Obama in Germany in July 2008: 'The walls must come down' (Markus Schreiber/Associated Press)

Americans selected Barack Obama as their new president because 85 per cent of them told pollsters they didn't like the direction the country was heading. His first and vast challenge will be to try to change that direction.

Obama was also the world's choice by a wide margin. But my swing through several European capitals this autumn told me that, deep down, non-Americans didn't really believe he would in the end be America's choice.

The fact that he was — that America did, in the quiet of the polling booth, decisively select the candidate of colour — has offered the U.S. that rare second chance to redefine itself to the world.

It has been said that there are only two global superpowers today: the U.S. and world opinion. In the immediate aftermath of 9/11, the two became largely aligned in empathy until George W. Bush squandered that asset.

Today, they are aligned again, this time in admiration.

Many Europeans I spoke with didn't believe Obama would be elected because "it couldn't happen here," in the UK or France or Spain, they said. The Chinese public were said to be both fascinated and envious of his campaign, Geoff York reported in the Globe and Mail.

Well, today's election is going to give a huge adrenaline shot to repressed democrats and human rights defenders the world over in ways that the Bush "freedom agenda" couldn't, simply because of the force of the Obama example.

The new president inherits daunting domestic and foreign challenges but also an enormous fund of good will on almost every continent. For the short term, anyway, he is going to seem like the "world's president."

What is likely to change?

Obviously, the first to go will be George W. Bush and almost everything he stands for. Was this decent man as bad a president as people think? His Texan style didn't travel well, but the record? Darn near as bad.

I blame Vice-President Dick Cheney for much of this: the stealth and manipulation, the adversarial fixation on strengthening executive prerogative and stifling Congress as well as the laws of the land; the obsession to get Saddam Hussein and the blithe disregard of facts. But all that is past history now.

Turning the page, consider as gone the belief that military force alone can produce pleasing political outcomes. Or that U.S.-style unilateralism is a winning option.

Republican John McCain retained an "almost religious belief" in American exceptionalism and the merits of using military force to protect U.S. interests and values, Nicholas Lemann wrote in the New Yorker.

Obama won't have to declaim that America is exceptional. His very election shows that it is.

But gone will be the "with us or against us" bombast of the past so many years. Obama is more than a unifier. He is a cross-cultural figure.

Cultural anthropologists, whose stock is rising as U.S. agencies and military realize they don't really understand other peoples very well, should be thrilled.

An includer

Gone, too, should be that instinctive, pre-judging hostility to other countries such as Iran.

Obama's administration will undoubtedly support a community of democracies and of democrats but is unlikely to see these grouping as a made-in-America venture, one more coalition to line up against a growing list of adversaries, as McCain had seemed wont to do.

On the diplomatic circuit, every indication is that Obama is not a "great-power relationship" sort of leader either.

He is, by most accounts, a consensus seeker and while he will likely reach out to individual partners on a one-on-one, confidence-sharing basis, his preferred arenas will be multilateral — and large.

Forget about the G8. The preferred forums are likely to be the G15 or even the G20 because he is a big tent kind of guy.

Keeping a big stick

Economic recovery will be an uphill climb but with a more deeply Democratic Congress, an Obama administration can likely produce a quick stimulation package that, coupled this time with a sense of a fresh start, may have some real impact on a fretful American psychology.

Should that happen, it would only underpin Obama's leadership clout in the world.

But don't expect a president Obama to lighten up much on homeland security, or at least not until Americans tell him the cost of doing cross-border business is too high. (So, Canadians, grow up and renew your passports early. Service has improved at least.)

Also unlikely to change will be the core U.S. military budget, though some expensive programs like the provocative anti-missile defence system may get the chop.

As a liberal, Obama can't risk reducing U.S. military power or being seen to let America's guard down. Indeed, he has demonstrated a willingness to use force if necessary to go after the sanctuaries of really bad guys with or without local permission.

Would he have authorized last week's raid on a Syrian arms export depot? Probably. But he might actually have tried talking first to Syrian President Bashar al-Assad.

The golden rule

North Korea won't change its spots overnight, nor will Iran knuckle under on the nuclear file. Nor will Iraq's Sunnis and Shias learn to love each other, or Israelis and Palestinians settle their scores, or the Taliban decide to celebrate Karzai-style democracy just because of Barack Obama.

So U.S. forces will likely be staying for a while in Iraq, though increasingly in the background.

In fact, there may well be spoiler-type pushback from upstaged brittle leaders like Russia's Vladimir Putin — unless Obama finds a way to get to them first, which he very well might.

Everybody who knows him passes the same message: that he reaches out to consult before he moves and follows the golden rule. He listens to and tries to understand others, which is why he is likely to drop the childish and dangerous practice of not talking with adversaries.

If one of Putin's main grievances is that Russia isn't taken seriously anymore by the U.S., then Obama ought to show that is not the case. Political leaders are human and attention counts.

That goes double for domestic politicians. I expect to see a return to the sort of attention former presidents like Lyndon Johnson, Ronald Reagan and Bill Clinton lavished on members of Congress.

I expect to see the U.S. recommit to the goal of effective multilateralism in world affairs, where the rule is diplomacy first and military action only as a very last resort.

I expect to see the United Nations regain its rightful place in U.S. esteem. Obama has been explicit about the need to build an international consensus on the big challenges that individual governments cannot handle on their own, including counterterrorism, nuclear proliferation, and climate change and oil dependence.

I anticipate he will resubmit to Congress for ratification such multilateral initiatives as joining the International Criminal Court and the Comprehensive Test Ban Treaty, despised by neo-conservative unilateralists. Indeed, I expect a major emphasis on negotiated nuclear disarmament, including that of America itself.

And Canada?

If you go to the Obama website and his campaign speeches, you won't find much about Canada — indeed, you won't find anything.

That may hurt those Canadians with the narrow soul of a deputy minister, but it's good news. We are not a U.S. problem!

But is Obama a problem for Canada? Wasn't he said to want to renegotiate NAFTA, the free trade agreement, to, implicitly, get a better deal for American workers?

That was probably campaign cover because some rust-belt Americans don't think NAFTA works for their country. But the recent global downturn turns the heat up on that file.

If there are issues to renegotiate, then let's be adults and think big about sharing a continent, and get down to it. That is the best way to get on the U.S. agenda.

With Obama in the White House, Stephen Harper's Conservative government may feel challenged by having, in Washington, a non-divisive social reformer and listener (hear that, 24 Sussex?) who believes in multilateralism, a once Canadian trait that we may have to relearn.

Will Obama press Canada to keep combat forces in Afghanistan past 2011? His first calls to add brigades there will likely be to others. Later, he'll listen to why we finally want to stand down and should probably respect the disproportionate contribution Canadians have made.

There will, however, be a problem on climate change, especially if there is no real effort to mitigate the environmental impact of developing the oilsands or to develop technologies that are not part of the carbon problem.

There may well be some sourpuss Canadian pundits who will disparage Obama's victory and put him down as a lightweight liberal floating on an ephemeral sea of rhetoric. Pay them no mind.

The rest of us should just celebrate the fact that our neighbour and closest friend has chosen the kind of leader that Canadians can instantly recognize because he operates in what used to be a very Canadian way of seeing and dealing with the world.

Monday, November 03, 2008

Lies and Audiotape: Morgan Chase Exec Brags Bailout Is for Takeovers, Restructuring, Not Lending

Executive Intelligence Review

Oct. 26, 2008 (EIRNS)—In an internal bank conference call last week, a JP Morgan Chase executive, unaware that his conversation would be heard and published by a reporter, confirmed exactly what Lyndon LaRouche has said about the Hank Paulson bail-out: It has nothing remotely to do with extending lending to the U.S. economy, but is concerned with the Mussolini-like corporatist restructuring of the U.S. banking system, turning over the "smaller banks" to the totally bankrupt big banks, so that they can digest the smaller banks' assets, and survive perhaps a few more weeks.

New York Times reporter Joe Nocera obtained the call-in phone number on which the Oct. 17 Morgan Chase conference call took place, only 4 days after JP Morgan CEO Jamie Dimon had agreed to take $25 billion in a U.S. government capital injection. In an article in the Oct. 25 Times, entitled "So When Will Banks Give Loans?" Nocera quoted the unnamed JP Morgan Chase executive who gave the conference call, as follows:

"Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase," he began. "What we do think it will help us do, is perhaps be a little bit more active on the acquisition side, or opportunistic side, for some banks who are still struggling. And I would not assume that we are done on the acquisition side, just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way. And obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop." [emphasis added]

Later during the call, the executive showed what a fig-leaf is Paulson's claim that the capital injection part of the bail-out plan would start up lending to the economy. The executive explained "loan dollars are down significantly." He added, "We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side."