Mar
25
China calls for new global currency
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BEIJING – China is calling for a new global currency to replace the dominant dollar, showing a growing assertiveness on revamping the world economy ahead of next week’s London summit on the financial crisis.
The surprise proposal by Beijing’s central bank governor reflects unease about its vast holdings of U.S. government bonds and adds to Chinese pressure to overhaul a global financial system dominated by the dollar and Western governments. Both the United States and the European Union brushed off the idea.
The world economic crisis shows the “inherent vulnerabilities and systemic risks in the existing international monetary system,” Gov. Zhou Xiaochuan said in an essay released Monday by the bank. He recommended creating a currency made up a basket of global currencies and controlled by the International Monetary Fund and said it would help “to achieve the objective of safeguarding global economic and financial stability.”
Zhou did not mention the dollar by name. But in an unusual step, the essay was published in both Chinese and English, making clear it was meant for a foreign audience.
China has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any response to the crisis that might weaken the dollar and the value of Beijing’s estimated $1 trillion in Treasuries and other U.S. government debt.
Mar
24
Fed, Treasury chief to get grilled on AIG
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WASHINGTON – The Federal Reserve’s chairman and the secretary of the treasury are making a rare joint appearance at a congressional hearing, ostensibly to take a scolding over the handling of bonuses at AIG, the giant insurance company that has become the symbol of reckless risk-taking on Wall Street.
But after venting their spleen yet again at a House hearing Tuesday, lawmakers also were expected to press Fed boss Ben Bernanke and Treasury Secretary Timothy Geithner on the new risks to taxpayers from their latest effort to save tottering banks and the U.S. economy: a plan to take over up to $1 trillion in dodgy mortgage securities with the help of private investors.
At the same time, Bernanke and Geithner are likely to once again call on Congress to enact legislation that would allow the government to safely dismantle a big financial institution, like American International Group Inc., to minimize any damage to the U.S financial system and the broader economy.
Obama last week said his administration soon will propose new financial industry oversight that includes a “resolution authority” with powers similar to those of the Federal Deposit Insurance Corp., which can seize control of banks, take over their bad assets and sell the good ones to competitors.
The proposal would give the treasury secretary the unprecedented power, after consulting with officials at the Fed, to take control of a major financial institution and run it. The treasury chief is an official of the administration, unlike the FDIC, which is an independent regulatory agency.
Mar
24
ATHENS, Greece – A Greek fisherman must have been expecting a monster of a catch when he brought up his nets in the Aegean Sea last week.
Instead, Greek authorities say his haul was a section of a 2,200-year-old bronze statue of a horseman.
A Culture Ministry announcement said Monday the accidental find was made in waters between the eastern islands of Kos and Kalymnos. The fisherman handed over the corroded metal figure to authorities, who have started the cleaning process.
Dating to the late 2nd century B.C., the statue represented a male rider wearing ornate breast armor over a short tunic and armed with a sheathed sword. The trunk of the horseman and his raised right arm have survived.
Mar
23
WASHINGTON – Congressional Republicans on Sunday predicted a doomsday scenario of crushing debt and eventual federal bankruptcy if President Barack Obama’s massive spending blueprint wins passage.
But a White House adviser dismissed the negative assessments, saying she is “incredibly confident” that the president’s policies will “do the job” for the economy.
In a TV interview, Obama himself laughed when discussing the dire state of parts of the economy – and ascribed his laughter to “gallows humor.”
White House Council of Economic Advisers chairwoman Christina Romer insisted that the nation’s flailing economy will be rebounding by 2010.
Administration officials – and the president himself – have taken a cheerier tone despite economic indicators that are anything but positive.
“I have every expectation, as do private forecasters, that we will bottom out this year and actually be growing again by the end of the year,” Romer said.
The president, in an interview that aired Sunday on CBS News’ “60 Minutes,” talked about the need to spend taxpayer money to save financial firms and the auto industry.
“I just want to say that the only thing less popular than putting money into banks is putting money into the auto industry,” Obama said with a laugh.
Interviewer Steve Kroft asked how that laughter might be perceived, given the economy’s troubles.
“There’s got to be a little gallows humor to get you through the day,” Obama said. “If you had said to us a year ago that the least of my problems would be Iraq, which is still a pretty serious problem, I don’t think anybody would have believed it.”
Mar
21
WASHINGTON – Knocked off balance by the bonuses brouhaha, President Barack Obama is relying on direct appeals to the public to refocus attention on his ambitious agenda and drive the debate.
The president has shouldered responsibility for the mess and, in his radio and Web address Saturday, sought to put the financial finger-pointing behind in favor of his policy pillars – deficit cutting, overhauling health care and energy, improving education.
He will use a flurry of events to make his case, including a network television interview airing Sunday and a prime-time news conference Tuesday. The administration also is expected, as early as Monday, to roll out its plan to rid banks of their toxic assets and speed the flow of loans.
Being heard above the din may prove difficult. Lawmakers are wrangling over taxing people who got big bonuses and worrying the president’s budget could generate $9.3 trillion in red ink over the next decade.
“I realize there are those who say these plans are too ambitious to enact,” Obama said in his weekend address. “To that I say that the challenges we face are too large to ignore. I didn’t come here to pass on our problems to the next president or the next generation – I came here to solve them.”
Over the past week, Obama sought to spread his message unfiltered to people, tapping his massive e-mail list to promote his agenda one on one and speaking to enthusiastic supporters at town hall meetings in California. But dominating all else was the disclosure that American International Group Inc. had paid out $165 million in bonuses to employees, including to traders in the financial unit that nearly collapsed the insurer.
Mar
21
SEATTLE – Washington Mutual’s holding company is suing federal regulators for billions of dollars, saying the firesale of the bank’s assets to JPMorgan Chase violated its rights.
The lawsuit was filed Friday in federal court against the Federal Deposit Insurance Corp., which seized the Seattle-based savings and loan in September. It was the largest bank failure in U.S. history.
Lawyers for the holding company, Washington Mutual Inc., argue that the bank was worth more than the $1.9 billion JPMorgan paid for it in a deal arranged by the FDIC. The lawsuit argues that if WaMu’s assets had been liquidated prudently, they would have been worth more than that.
An FDIC spokesman did not immediately return a call seeking comment Saturday.
Mar
21
TEHRAN, Iran – Iran’s supreme leader rebuffed President Barack Obama’s latest outreach on Saturday, saying Tehran was still waiting to see concrete changes in U.S. policy.
Ayatollah Ali Khamenei was responding to a video message Obama released Friday in which he reached out to Iran on the occasion of Nowruz, the Persian new year, and expressed hopes for an improvement in nearly 30 years of strained relations.
Khamenei holds the last word on major policy decisions, and how Iran ultimately responds to any concrete U.S. effort to engage the country will depend largely on his say.
In his most direct assessment of Obama and prospects for better ties, Khamenei said there will be no change between the two countries unless the American president puts an end to U.S. hostility toward Iran and brings “real changes” in foreign policy.
“They chant the slogan of change but no change is seen in practice. We haven’t seen any change,” Khamenei said in a speech before a crowd of tens of thousands in the northeastern holy city of Mashhad.
In his video message, Obama said the United States wants to engage Iran, but he also warned that a right place for Iran in the international community “cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization.”
Khamenei asked how Obama could congratulate Iranians on the new year and accuse the country of supporting terrorism and seeking nuclear weapons in the same message.
Khamenei said there has been no change even in Obama’s language compared to that of his predecessor.
“He (Obama) insulted the Islamic Republic of Iran from the first day. If you are right that change has come, where is that change? What is the sign of that change? Make it clear for us what has changed.”
Still, Khamenei left the door open to better ties with America, saying “should you change, our behavior will change too.”
Diplomatic ties between the U.S. and Iran were cut after the U.S. Embassy hostage-taking after the 1979 Islamic Revolution, which toppled the pro-U.S. shah and brought to power a government of Islamic clerics.
The United States cooperated with Iran in late 2001 and 2002 in the Afghanistan conflict, but the promising contacts fizzled – and were extinguished completely when Bush branded Tehran part of the “Axis of Evil.”
Khamenei enumerated a long list of Iranian grievances against the United States over the past 30 years and said the U.S. was still interfering in Iranian affairs.
He mentioned U.S. sanctions against Iran, U.S. support for Iraqi dictator Saddam Hussein during his 1980-88 war against Iran and the downing of an Iranian airliner over the Persian Gulf in 1988.
He also accused the U.S. of provoking ethnic tension in Iran and said Washington’s accusations that Iran is seeking nuclear weapons are a sign of U.S. hostility. Iran says its nuclear program is only for peaceful purposes, like energy production, not for building weapons.
Mar
20
MANAMA, Bahrain – Two U.S. Navy vessels – a nuclear-powered submarine and an amphibious ship – collided during the early morning hours Friday in the Strait of Hormuz between Iran and the Arabian peninsula, the U.S. Navy’s 5th Fleet reported.
There was no damage to the sub’s nuclear propulsion system, said Lt. Nate Christensen, a 5th Fleet spokesman.
The military said in a statement that the incident occurred around 1:00 a.m. local time on Friday (5 p.m. EDT, Thursday), when the USS Hartford, a submarine, and the USS New Orleans, an amphibious ship, collided.
According to the Bahrain-based 5th Fleet, 15 sailors aboard the Hartford were slightly injured but able to return to duty. No injuries were reported aboard the New Orleans.
Both ships were heading to port and were going in the same direction when the incident occurred in the narrow strait, said 5th Fleet spokesman, Lt. Nate Christensen. He said the incident occurred at night and the submarine was submerged at the time but that he could give no further details as the collision is still under investigation.
Both vessels are now heading to port for repairs and evaluation, but Christensen said that following standard security procedures he could not say where the vessels were headed.
Mar
18
WASHINGTON – Talking tougher by the hour, livid Democrats confronted beleaguered insurance giant AIG with an ultimatum Tuesday: Give back $165 million in post-bailout bonuses or watch Congress tax it away with emergency legislation. Republicans declared the Democrats were hardly blameless, accusing them of standing by while the bonus deal was cemented and suggesting that Treasury Secretary Timothy Geithner could and should have done more. While the White House expressed confidence in Geithner, it was clearly placing the responsibility for how the matter was handled on his shoulders.
Geithner sent a letter late Tuesday to congressional leaders informing them that he was working with the Justice Department to determine whether any of the AIG payments could be recovered. He cited a provision in the recent economic stimulus law that gave him authority to review compensation to the highest-paid employees of companies that already have received federal assistance.
Fresh details, meanwhile, pushed outrage over AIG ever higher: New York Attorney General Andrew Cuomo reported that 73 company employees received bonus checks of $1 million or more last Friday. This at a company that was failing so spectacularly that the government felt the need to prop it up with a $170 billion bailout.
The financial bailout program remains politically unpopular and has been a drag on Barack Obama’s new presidency, even though the plan began under his predecessor, George W. Bush. The White House is well aware of the nation’s bailout fatigue – anger that hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong pay the price.
White House officials, for the first time, on Tuesday night said Geithner told the White House about the bonus payments last Thursday, and senior aides informed the president later that day. The officials spoke on condition of anonymity to discuss internal details of the timeline involving AIG.
The administration wouldn’t be pleased to hear what Maria Panza-Villa, of Hillsboro, Ore., had to say. “Wasn’t Obama supposed to fix this?” asked the mother of two who said she has lost three jobs since November as one employer after another went under.
AIG chief executive Edward Liddy can expect a verbal pummeling Wednesday when he testifies before a House subcommittee.
On Capitol Hill late Tuesday, House Democrats directed three powerful committees to come up with legislation this week to authorize Attorney General Eric Holder to recover massive bonus payments made by companies like the ones paid last week by American International Group Inc.
Senate Democrats, meanwhile, suggested that if the AIG executives had any integrity, they would return the $165 million in bonus money. One leading Republican, Sen. Chuck Grassley, R-Iowa, even suggested they might honorably kill themselves, then said he didn’t really mean it.
Whatever the process, lawmakers of all stripes said, the money – generally “retention payments” to keep prized employees – belongs back in the government’s hands.
“Recipients of these bonuses will not be able to keep all of their money,” declared Senate Majority Leader Harry Reid in an unusually strong threat delivered on the Senate floor.
“If you don’t return it on your own, we will do it for you,” echoed Chuck Schumer of New York.
Not all Democratic leaders were racing in that direction. Penalizing people with the tax code could be inappropriate, declared Rep. Charlie Rangel, D-N.Y., chairman of the taxwriting Ways and Means Committee. He said, “It’s difficult for me to think of the code as a political weapon.”
Others saw the connection as reasonable and relevant. House Financial Services Committee Chairman Barney Frank, D-Mass., noted that the government, through the bailout, is now an 80 percent owner of the company and suggested that was grounds to sue to recover the bonuses.
Republicans said Obama and his administration should have leaned harder on AIG executives to reject the extra pay, raising some speculation over Geithner’s future.
“I don’t know if he should resign over this,” said Sen. Richard Shelby, R-Ala. “He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this.”
The administration quickly moved to quash talk of Geithner’s ouster. White House spokesman Robert Gibbs said Obama retains full confidence in his treasury secretary.
And White House chief of staff Rahm Emanuel categorically dismissed to The Associated Press any suggestion that Geithner is in trouble.
On Capitol Hill, there was a daylong rush to the microphones – a bipartisan campaign to out-outrage each other.
Grassley led the stampede with a statement Monday night on a radio show that AIG executives should either return the money or commit suicide in what he described as the Japanese style of taking responsibility. He spent much of Tuesday backtracking but still calling for corporate titans to take responsibility for grievous errors in judgment.
Other Republicans said Democratic leaders last month killed a plan that would have forced financial institutions to compensate taxpayers if they paid their executives large bonuses after receiving federal bailout money.
Sen. Olympia Snowe, R-Maine, a co-sponsor of the amendment to Obama’s stimulus bill, said striking it “left open an escape hatch of golden parachutes for top executives on Wall Street.”
AIG has received more than $170 billion from U.S. taxpayers. With bailouts in hand, AIG has paid out tens of billions of dollars to banks, municipal governments and other financial institutions around the world.
AIG is no stranger to controversy, nor is it the only publicly rescued company to give bonuses while being bailed out of financial ruin.
Merrill Lynch paid $3.6 billion in bonuses to its executives while its sale to Bank of America Corp., a big recipient of bailout money, was pending.
Morgan Stanley also came under fire Tuesday. Sen. Robert Menendez, D-N.J., urged Geithner to halt retention awards planned by the company’s joint brokerage venture with Citigroup. Both firms have received billions of dollars in government bailout funds. Morgan Stanley is reportedly planning to pay its brokers up to $3 billion in retention payments – a spokeswoman said the program amounts to a nine-year loan – to keep them from jumping to other firms.
Cuomo said AIG last week paid bonuses of $1 million or more to 73 employees, including 11 who no longer work there. Despite their company contracts, the AIG employees agreed to take 2009 salaries of $1 in exchange for receiving their bonus packages, he said.
Administration officials said Geithner did all that he legally could to avert the payments.
Geithner urged AIG’s Liddy last week to renegotiate the contracts that called for the bonuses.
“He recognized that you can’t just abrogate contracts willy-nilly, but he moved to do what could be done,” Larry Summers, Obama’s chief economic adviser, told the AP in an interview Tuesday.
In his letter to congressional leaders, Geithner said that any bonus payments that Treasury cannot recoup will be recovered by requiring AIG to repay the Treasury an amount equal to the remaining bonuses. He said Treasury also will deduct an amount equal to the payments from AIG’s latest $30 billion credit line from the government.
Though AIG’s bonus plans were disclosed last year, Congress’ outrage and threats have begun pouring forth only recently.
At least three Democratic bills and one Republican measure were introduced to crack down on the Treasury Department and stiffen rules for recipients of bailout funds. Two bills in the House aimed to impose a 100 percent tax on the bonuses.
In the Senate, the top two members of the Senate Finance Committee – a Republican and Democrat – announced a proposal to impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them.
The Internal Revenue Service currently withholds 25 percent from bonuses less than $1 million and 35 percent for bonuses more than $1 million.
The Obama administration said it was trying to put strict limits on how future government bailout dollars could be used, and Reid on Tuesday said he urged the administration to step up its pace on that.
Mar
18
CHICAGO - A so-called “smart drug” popular with young people may carry more of an addiction risk than thought, a small government study suggests. Scans of 10 healthy men showed that the prescription drug Provigil caused changes in the brain’s pleasure center, very much like potentially habit-forming classic stimulants. Modafinil, the drug’s generic name, is sometimes used as an illegal study aid by college students.
“It would be wonderful if one could take a drug and be smarter, faster or have more energy,” said Dr. Nora Volkow, director of the National Institute on Drug Abuse, who led the study with a Brookhaven National Laboratory scientist. “But that is like fairy tales. We currently have nothing that has those benefits without side effects.”
The study, appearing in Wednesday’s Journal of the American Medical Association, may bust the myth that the drug is safe for healthy people, experts said.
Provigil is approved to treat excessive daytime sleepiness caused by narcolepsy. On the market since 1999, it’s the flagship product of Cephalon Inc. of Frazer, Pa., and its sales approached $1 billion last year. The company is developing a spin-off called Nuvigil.
Modafinil’s reputation as a brain enhancer stems from an Air Force study that found it improved the performance of sleep-deprived fighter pilots. College students buy and sell it illegally, as they do Ritalin and Adderall, to stay alert while studying.
Several scientists recently wrote in the journal Nature that healthy people should have the right to boost their brains with pills like Provigil. One author of that commentary, brain scientist Martha Farah of the University of Pennsylvania, said the new study “goes to show that we need a little caution and a little humility when we’re messing around with our brain chemistry.”
“But even now, after all the years that it has been on the market, we are still learning things about it that are relevant to its safety,” Farah said.
The men in the study were 23 to 46 years old. They received either a dummy pill or modafinil. Effects were measured by PET scans, which showed that the drug increased dopamine, the brain’s “feel-good” neurotransmitters.
Modafinil once was thought to be safer than conventional stimulants because it was believed that it did not engage the brain’s dopamine system, which is linked with addiction. Studies in mice and monkeys suggested otherwise.
The new study is the first human evidence that a typical dose of modafinil affects dopamine in the brain as much as a dose of Ritalin, a controlled substance with clear potential for dependence.
Volkow said modafinil acts slowly when swallowed and is difficult to inject, making it less likely to be abused. Its high price, about $10 per pill compared to Ritalin at $2 per pill, also makes it less attractive to people seeking a high. That may change when generics become available in 2012, Volkow said.
Jeffry Vaught, chief science officer for Cephalon, said the company has seen no evidence the drug is highly abused.
“If abuse is a problem with modafinil, it’s minimal at best,” Vaught said. “We’re not seeing it used at rave scenes.”
Prescribing information for the drug warns of severe rashes and other side effects such as headache, nausea and anxiety. Cephalon doesn’t support the drug’s use as a cognitive enhancer.
“There’s no substitute for sleep,” Vaught said.