Wednesday, April 02, 2008

Bernanke gloomier about near-term prospects

U.S. economy could even contract in the first half, Fed chief says

By Greg Robb, MarketWatch
Last update: 2:24 p.m. EDT April 2, 2008

WASHINGTON (MarketWatch) -- The outlook for U.S. economic growth has worsened since January and the possibility of a recession can't be ruled out, Federal Reserve Chairman Ben Bernanke said Wednesday.

"It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke said in testimony prepared for the Joint Economic Committee of Congress.

"Clearly, the U.S. economy is going through a very difficult period," he said. Real GDP measures the value of all final goods and services produced by a country, adjusted for the rate of inflation.
Bernanke clung to the distinction that the "contraction" may not turn into a "recession." But economists said this was exceedingly rare.

The rule of thumb is that a recession is two quarters of negative real GDP growth. But the National Bureau of Economic Research has the formal role of naming a recession and their deliberations are more technical, elaborate, and, consequently, slow.

The financial markets' turmoil is already dampening growth, Bernanke said, leading the central bank to cut its near-term forecast once again. The Fed has been steadily reducing its outlook for growth this year. The current forecast is growth in a range of 1.3% to 2.0% over the four quarters of the year.

In light of the markets' recent turbulence," the uncertainty of this new gloomier forecast is quite high and risks remain to the downside," Bernanke said.

'Clearly, the U.S. economy is going through a very difficult period.'
— Ben Bernanke, Federal Reserve
In spite of the Fed's string of interest-rate cuts and extraordinary efforts to push cash out to commercial and investment banks, "financial markets remain under considerable stress," he said.

His statement supports the view that the Fed is not done cutting interest rates. The central bank has lowered its target overnight lending rate to 2.25% from 5.25% last fall, the largest percentage decline on record.
Despite the new forecast, Bernanke's language suggested the U.S. central bank wants to slow down the pace of its rate cuts.

"Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year," he said.

Bernanke did not back away from the view that the economy would pick up in the second half of this year. Growth could even expand at a faster pace than trend growth in 2009, he said. Trend growth is the rate the economy can grow without fueling inflation pressures. Economists generally put this rate around a 2.75% growth rate.

It is also important what Bernanke did not say.

He failed to repeat the key dovish statement that the FOMC would "act in a timely manner" to support growth.

Another factor arguing for a slower pace of rate cuts is inflation: Bernanke said that rising prices remain a concern.

More importantly, the public seems to be expecting prices to continue to rise in coming months. This has been a key focus of monetary policy. They have said that once consumers expect rising prices to continue, these higher prices tend to stick.

Defense of Bear Stearns bailout

On another important subject, Bernanke defended the Fed and Treasury Department's bailout of Bear Stearns Cos. before the lawmakers.

Bernanke disclosed publicly for the first time that Bear Stearns advised the Fed and Treasury on March 13 that its liquidity position had so deteriorated that it would have to file for Chapter 11 bankruptcy the next day unless alternative sources of funds become available.

On March 14, the Fed stepped in and effectively put a force field around Bear Stearns' assets, preventing a fire sale. The following weekend, the Treasury and Fed engineered the sale of Bear Stearns to J.P. Morgan Chase & Co. , one of the nation's largest institutions.

Bernanke said the prospect of Bear Stearns having to declare bankruptcy was untenable.

"With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The company's failure could also have cast doubt on the financial positions of some of Bear Stearns' thousands of counterparties and perhaps of companies with similar businesses," he said.

The Fed didn't receive any early-warning notice that Bear Stearns was teetering on the brink of collapse until the company disclosed to the government that it would be forced to file for bankruptcy in 24 hours, Bernanke said.

The Fed had relied on the Securities and Exchange Commission's finding that Bear Stearns had adequate capital, he said.

Bernanke said the short notice of possible bankruptcy was not normal.

"Normally, we would have more warning and we would have more time to develop a more effective response," Bernanke said.

The collateral that the Fed accepted from Bear Stearns in return for a $29 billion loan could be sold to recover the full amount of the loan, according to Blackrock Inc. , the asset manager hired by the Fed to control those assets, Bernanke said.

Members of the committee were generally supportive of the Fed and Treasury decision to save Bear Stearns from bankruptcy. But they called for similar help for "Main Street" as opposed to "Wall Street."

Bernanke said the Fed's decision to open its key lending window to investment banks and other steps have helped address some of the strains in financial markets.

Downturn's attendant woes

In his discussion of the economy, Bernanke said the U.S. unemployment rate is likely to rise in coming months as companies cut back their hiring plans.

At the same time, he said, there's been no sign of a bottom in the housing market's downturn, with construction expected to fall further.

Hopes that major trading partners will be able to keep the U.S. economy afloat have faded a bit, as Bernanke said the outlook for foreign economic growth has diminished somewhat in recent months.

Congress could help rescue the housing sector by repairing the mortgage market and not just focusing on keeping existing home loans from going bad, Bernanke said.

"Going forward, for the housing market to recover, it would be helpful for the mortgage markets to be working more effectively and more efficiently," Bernanke said.

The depressed housing market remains at the center of the U.S. economy's current difficulties and some of the "worst problems" are in the mortgage area, Bernanke said.

In particular, the nonconforming segment of the mortgage market "continues to function poorly," he said.

Bernanke also said that reform of Fannie Mae ) and Freddie Mac would be a good step and that these two firms should raise additional capital. End of Story

FBI Focusing on 'About Four' Suspects in 2001 Anthrax Attacks

Friday, March 28, 2008



WASHINGTON — The FBI has narrowed its focus to "about four" suspects in the 6 1/2-year investigation of the deadly anthrax attacks of 2001, and at least three of those suspects are linked to the Army’s bioweapons research facility at Fort Detrick in Maryland, FOX News has learned.

Among the pool of suspects are three scientists — a former deputy commander, a leading anthrax scientist and a microbiologist — linked to the research facility, known as USAMRIID.

The FBI has collected writing samples from the three scientists in an effort to match them to the writer of anthrax-laced letters that were mailed to two U.S. senators and at least two news outlets in the fall of 2001, a law enforcement source confirmed.

The anthrax attacks began shortly after the Sept. 11, 2001, terror attacks, further alarming a nation already reeling from the deaths of 3,000 Americans. Five people were killed and more than a dozen others were infected by the deadly spores in the fall of 2001.

A leading theory is that the anthrax was stolen from Fort Detrick and then sealed inside the letters. A law enforcement source said the FBI is essentially engaged in a process of elimination.

Much of the early public focus fell on a Fort Detrick scientist named Steven Hatfill, who is suing federal authorities for identifying him as a person of interest. Now the FBI is focusing on other scientists at the facility.

"Fort Detrick is run by the United States Army. It's the most secure biological warfare research center in the United States," a bioterrorism expert told FOX News.

Asked to comment on the likelihood that the anthrax originated at the facility, the expert said:

"It's not suprising, except that it would underscore that there was serious security deficiencies that existed at one time at Fort Detrick — the ability of researchers to smuggle out some type of very sophisticated anthrax weapon and in some quantity. And, nevertheless, it was possible."

In December 2001, an Army commander tried to dispel the possibility of a connection to Fort Detrick by taking the media on a rare tour of the base. The commander said the Army used only liquid anthrax, not powder, for its experiments.

"I would say that it does not come from our stocks, because we do not use that dry material," Maj. Gen. John Parker said. The letters that were mailed to the media and Sens. Tom Daschle and Patrick Leahy all contained powdered anthrax.

But in an e-mail obtained by FOX News, scientists at Fort Detrick openly discussed how the anthrax powder they were asked to analyze after the attacks was nearly identical to that made by one of their colleagues.

"Then he said he had to look at a lot of samples that the FBI had prepared ... to duplicate the letter material," the e-mail reads. "Then the bombshell. He said that the best duplication of the material was the stuff made by [name redacted]. He said that it was almost exactly the same … his knees got shaky and he sputtered, 'But I told the General we didn't make spore powder!'"

Asked for comment, an Army spokeswoman referred all calls to the FBI. The FBI would not comment about the pool of suspects, but a spokeswoman said the investigation clearly remains a priority.


Pentagon Releases Declassified Memo Justifying Harsh Interrogation Tactics


WASHINGTON (AP) -- The Pentagon made public a now-defunct legal memo that approved the use of harsh interrogation techniques against terror suspects, saying that President Bush's wartime authority trumps any international ban on torture.

The Justice Department memo, dated March 14, 2003, outlines legal justification for military interrogators to use harsh tactics against al-Qaida and Taliban detainees overseas - so long as they did not specifically intend to torture their captives.

Even so, the memo noted, the president's wartime power as commander in chief would not be limited by the U.N. treaties against torture.

"Our previous opinions make clear that customary international law is not federal law and that the president is free to override it at his discretion," said the memo written by John Yoo, who was then deputy assistant attorney general for the Office of Legal Counsel.

The memo also offered a defense in case any interrogator was charged with violating U.S. or international laws.

"Finally, even if the criminal prohibitions outlined above applied, and an interrogation method might violate those prohibitions, necessity or self-defense could provide justifications for any criminal liability," the memo concluded.

The memo was rescinded in December 2003, a mere nine months after Yoo sent it to the Pentagon's top lawyer, William J. Haynes. Though its existence has been known for years, its release Tuesday marked the first time its contents in full have been made public.

Haynes, the Defense Department's longest-serving general counsel, resigned in late February to return to the private sector. He has been hotly criticized for his role in crafting Bush administration policies for detaining and trying suspected terrorists that some argue led to prisoner abuses at the detention center in Guantanamo Bay, Cuba.

Yoo's memo became part of a debate among the Pentagon's civilian and military leaders about what interrogation tactics to allow at overseas facilities and whether U.S. troops might face legal problems domestically or in international courts.

Also of concern was whether techniques used by U.S. interrogators might someday be used as justification for harsh treatment of Americans captured by opposing forces.

The Justice Department has opened an internal investigation into whether its top officials improperly authorized or reviewed the CIA's use of waterboarding, which simulates drowning, when interrogating terror suspects. It was unclear whether the Yoo memo, which focuses only on military interrogators, will be part of that inquiry.

The declassified memo was released as part of an American Civil Liberties Union lawsuit to force the Bush administration to turn over documents about the government's war on terror. The document also was turned over to lawmakers.

Justice Department spokesman Brian Roehrkasse said its release "represents an accommodation of Congress' oversight interest in the area of wartime interrogations."

Jameel Jaffer, director of the ACLU's national security project, said Yoo's legal reasoning puts "literally no limit at all to the kinds of interrogation methods that the president can authorize."

"The whole point of the memo is obviously to nullify every possible legal restraint on the president's wartime authority," Jaffer said. "The memo was meant to allow torture, and that's exactly what it did."

The 81-page legal analysis largely centers on whether interrogators can be held responsible for torture if torture is not the intent of the questioning. And it defines torture as the intended sum of a variety of acts, which could include acid scalding, severe mental pain and suffering, threat of imminent death and physical pain resulting in impaired body functions, organ failure or death.

The "definition of torture must be read as a sum of these component parts," the memo said.

The memo also includes past legal defenses of interrogations that Yoo wrote are not considered torture, such as sleep deprivation, hooding detainees and "frog crouching," which forces prisoners to crouch while standing on the tips of their toes.

"This standard permits some physical contact," the memo said. "Employing a shove or slap as part of an interrogation would not run afoul of this standard."

The memo concludes that foreign enemy combatants held overseas do not have defendants' rights or protections from cruel and unusual punishment that U.S. citizens have under the Constitution. It also says that Congress "cannot interfere with the president's exercise of his authority as commander in chief to control the conduct of operations during a war."

Senate Judiciary Committee Chairman Patrick Leahy said the memo "reflects the expansive view of executive power that has been the hallmark of this administration." He called for its release four months ago.

"It is no wonder that this memo ... could not withstand scrutiny and had to be withdrawn," said Leahy, D-Vt. "This memo seeks to find ways to avoid legal restrictions and accountability on torture and threatens our country's status as a beacon of human rights around the world."

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Arlen Specter Discusses Able Danger, the Anthrax Attacks and the Patriot Act

911 Blogger | April 1, 2008

NOTE: At the end of the video, Arlen Specter claims that the Patriot Act wasn’t passed until 2006 when it was actually passed October 29, 2001.

Questions posed by members of Philly 9/11 Truth to Senator Arlen Specter about the pre-9/11 military intelligence program Able Danger and the post-9/11 anthrax attacks were responded to with a fair degree of candidacy.

The Warren Commission member asserted that as chairman of the Senate Judiciary Committee investigation into the US military SOCOM program Able Danger that the inquiry, “like the song Oklahoma, we went about as far as we could go.” Perhaps he meant to say, “like Oklahoma City in 1995, we went about as far as we could go” before his handlers tightened his leash.

Unexpectedly, when questioned about the anthrax attacks, Specter conceded that al Qaeda was not responsible. “Coincidentally”, a few days after this event and a follow up by We Are CHANGE NYC stories such as the following began to appear in the media ( http://www.foxnews.com/story/0,2933,342852,00.html ). Perhaps we are being preempted so that this condemning piece of evidence loses its potency in the mind of the public.


Poll: Iran, Iraq, China Top US Enemies

The Guardian
April 1, 2008

WASHINGTON (AP) - China has replaced North Korea as one of the top three U.S. enemies, according to a poll of Americans.

Iran topped the list, with 25 percent naming it when asked which country is the greatest U.S. enemy, according to the Gallup Poll. Iraq came next at 22 percent, then China with 14 percent.

North Korea was named by 9 percent - half the number who cited it a year earlier. Pyongyang agreed last year to disable its nuclear facilities in exchange for aid, though disputes have continued over implementing the deal.

China, a growing economic rival of the U.S., was cited by 11 percent as top enemy a year ago.

Gallup first asked the question in early 2001, before the terrorist attacks of Sept. 11. At the time, Iraq was seen as the biggest foe, followed by China and Iran.

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