http://www.npr.org/templates/story/story.php?storyId=90840958
Auditor: Supervisors Covered Up Risky Loans
by Chris Arnold
Morning Edition, May 27, 2008 · Now that millions of people are facing foreclosure because they got into loans that never should have been approved, everybody's looking for someone to blame. Borrowers, or their brokers, lied on loan applications. Others got high interest rates they couldn't afford.
A big unanswered question is whether the Wall Street investment banks that were packaging these mortgages knew they were selling garbage loans to investors. A wave of litigation is starting against these firms. One former worker whose job was to catch bad loans says her supervisors covered them up.
Mortgage Quality Control
Tracy Warren is not surprised by the foreclosure crisis. She saw the roots of it firsthand every day. She worked for a quality-control contractor that reviewed subprime loans for investment banks before they were sold off on Wall Street.
It was her job to dig into the loans and ferret out problems. By 2006, they were easy to find.
"I'd see people who were hotel workers saying that they made, in California, making $15,000 a month so that they could qualify for a $500,000 home," Warren says. "If a hotel worker is making $15,000 a month changing sheets at the Days Inn, everybody would want to do it. It just really made no sense."
Warren has worked in the mortgage business for 25 years, the past five in quality control. Most recently, she was a contract worker for a company called Watterson-Prime, which did loan audits for investment banks. She says their biggest client was Bear Stearns, which recently all but collapsed because of its exposure to bad loans.
Putting Bad Apples Back in the Barrel
Warren thinks her supervisors didn't want her to do her job. She says that when she would reject, or kick out, a loan, they usually would overrule her and approve it.
"The QC reviewer who reviewed our kicks would say, 'Well, I thought it had merit.' And it was like 'What?' Their credit score was below 580. And if it was an income verification, a lot of times they weren't making the income. And it was like, 'What kind of merit could you have determined?' And they were like, 'Oh, it's fine. Don't worry about it.' "
After a while, Warren says, her supervisors stopped telling her when she had been overruled. She figured it out by going back later and pulling the loans up on her computer.
"I would look every couple of days, and just see, if it was a loan that I thought was a bad loan, I'd go back and see if it was pulled."
About 75 percent of the time, loans that should have been rejected were still put into the pool and sold, she says.
'A Smoking Gun'
Some legal experts say it's a pretty big deal that people like Warren are willing to talk.
"This is a smoking gun," says Christopher Peterson, a law professor at the University of Utah who has been studying the subprime mess and meeting with regulators. "It suggests that auditors working for Wall Street investment bankers knew how preposterous these loans were, and that could mean Wall Street liability for aiding and abetting fraud."
Bear Stearns had no comment.
The loan-auditing firm Watterson-Prime's parent company, Fidelity National Information Services, provided a statement. It says the company has no incentive to give loans a passing review if they fail to meet underwriting criteria and that it uses additional quality-control measures to further check up on loan reviews.
But Peterson says such breakdowns in quality control must have happened at a lot of companies. How else did millions of people wind up in loans that they can't pay?
"People have a tendency to think about economic trends as though they're an uncontrollable force that no one understands. This isn't the weather. These are people who are individually making decisions to approve and pass on fraudulent loans," he says.
Accountability on Wall Street
Peterson said auditors like Warren basically were hired to find the bad apples in the barrel and pull them out: borrowers with payments they couldn't afford, houses with inflated appraisals, people lying about their income.
But Warren says her bosses were taking a lot of those bad apples and putting them back in. And Peterson says he thinks the investment banks had a strong financial incentive to do that.
"They put the bad apples back in the barrel because they knew that they could sell the bad apples along with the good apples and, at least in the short term, nobody would know the difference. That's why they put them back in — because they made more money that way," Peterson says.
"There's a name for this — it's called 'passing the trash,' " says David Grais, an attorney getting ready to sue Wall Street firms on behalf of investors — big pension funds and others — who bought the bad loans.
"These were immensely profitable deals. One study showed that the investment banks were making a 40 percent return on equity every two months on these securitizations, which is an eye-popping number," he says.
Grais says many people on Wall Street make huge bonuses when their business unit is making big money. So the faster they could package up loans — good, bad or ugly ones — and sell them to investors, the more money that they made, he says.
Warren thinks her managers got bonuses for how quickly they reviewed loans, not for how many bad loans they caught.
Watterson-Prime disputes that. It says its managers, staff and contractors are compensated on an hourly or salary basis and never by the number of loans reviewed.
Report: Banks Agreed to Limit Loan Rejections
Other evidence is emerging.
A bankruptcy examiner in the case of the collapsed subprime lender New Century recently released a 500-page report, and buried inside it is a pretty interesting detail. According to the report, some investment banks agreed to reject only 2.5 percent of the loans that New Century sent them to package up and sell to investors.
If that's true, it would be like saying no matter how many bad apples are in the barrel, only a tiny fraction of them will be rejected.
"It's amazing if any investment bank agreed to a maximum number of loans they would kick back for defects. That means that they were willing to accept junk. There's no other way to put it," says Kurt Eggert, a law professor at Chapman University.
Meanwhile, the attorney general in New York and other prosecutors are taking a look at all of this. They, too, want to know whether Wall Street firms were covering up bad loans and selling them to investors.
Analysis: Lenders, Investors, Buyers Fed Loan Crisis
by Robert Smith and Adam Davidson
Morning Edition, May 27, 2008 · Co-host Robert Smith talks to NPR's Adam Davidson about how lenders, investors and buyers all contributed to the subprime mortgage crisis.
Davidson says everyone at every step of the chain acted irresponsibly, "taking on way more risk than was appropriate." He says he has interviewed dozens of homeowners, subprime home buyers who bought way more house than they could afford, who said they knew they were taking on more risk than was reasonable. And the mortgage brokers and mortgage banks knew, too.
Brokers didn't mind the extreme risk because they were passing on loans quickly to the banks; banks didn't mind because they were passing on the loans to Wall Street. Wall Street knew about the extreme risk but was passing it on to global investors, many of whom said they weren't paying enough attention because they trusted the credit rating agencies — but now those agencies admit that their models were flawed and faulty, Davidson says.
Many thought the reward would outweigh the risk, he says. Everyone "was making massive amounts of money — you're talking about 25-year-old kids who don't have a college degree making over a million a year."
Shady Practices Led to New Century Financial's Fall
by Carrie Kahn
Morning Edition, March 27, 2008 · Two years ago, New Century Financial was the country's second largest subprime mortgage lender. Now, it's in bankruptcy, and a new report mandated by the bankruptcy court shines light on the company's shady practices.
Business
New Century's Risky Lending Practices Detailed
by Chris Arnold
All Things Considered, March 26, 2008 · Before the mortgage company New Century went bankrupt last year, it was the second-largest sub-prime lender in the country. A court-appointed examiner released a new report Wednesday that finds widespread wrongdoing at the company and also alleges negligence by the company's auditor KPMG.
The report says New Century had a brazen obsession with selling more loans without due regard to the risks.
Michael J. Missal, the examiner appointed to dig into New Century's collapse as part of the bankruptcy process, says, "What we found was it really shows the embryo of the credit crisis and how easy it was to originate very risky loans and put them into the financial system."
In its quest for new customers, New Century made increasingly unwise loans, according to the report. Borrowers incomes weren't documented. Loans were offered for the full value of a house. Missal adds, "They took risky products — made them that much riskier — and essentially created a ticking time bomb that exploded in 2007 as the market was changing."
Missal was also charged with finding causes for lawsuits that creditors might pursue. He named New Century's accounting firm, KPMG:
"Their independent auditors, KPMG, were supposed to be there to test and be skeptical of the way New Century was doing business. I found that KPMG failed to do so and a cause of action may exist."
A spokesman for KPMG says the report needs to be reviewed.
Missal says executives at New Century also failed in their oversight responsibilities and engaged in improper accounting. He says top executives were paid millions of dollars in bonuses that were calculated based on inaccurate financial statements.
The SEC and Department of Justice are both investigating New Century.
A Lot of Blame to Share in Subprime Sinkhole
http://www.npr.org/templates/story/story.php?storyId=12847198
All Things Considered, August 16, 2007 · Robert Siegel talks with Financial Times reporter Saskia Scholtes about the article "As Subprime Bites, U.S. Investigators Look for Culprits."
Scholtes, and colleague Brooke Masters, found fraud at myriad levels of the market, from borrowers who overstate their incomes, to fraudulent companies that offer help to lie about income, to lenders who don't bother to check.
As subprime bites, US investigators look for culprits
By Brooke Masters and Saskia Scholtes
Wednesday Aug 8 2007 14:05
http://us.ft.com/ftgateway/superpage.ft?news_id=fto080820071539268198
At the height of the US subprime lending boom, taking out a mortgage could not have been easier. Low credit score and history of bankruptcy? No problem. Income too low to qualify for a mortgage? Inflate what you earn on a "stated income" loan. Nervous that your lender might check up on your "stated income"? Visit www.verifyemployment.net.
For a $55 fee, the operators of this small California company will help you get a loan by employing you as an "independent contractor". They provide payslips as "proof" of income and, for an additional $25, they also man the telephones to give you a glowing reference should your lender need it.
But perhaps the most absurd aspect of the US subprime mortgage market in recent years is that lenders became so generous with credit provision for out-of-pocket borrowers that very few checks were ever made.
That left the system extraordinarily vulnerable to widespread fraud, a possibility that federal and state prosecutors across the US have begun to look into. With the subprime crisis expected to cost investors between $50bn (£24bn, €36bn) and $100bn, according to the US Federal Reserve, these investigations could transform it from a market correction to a full-blown national scandal.
At the root of the subprime problem was easy credit: lenders and their brokers were often rewarded for generating new mortgages on the basis of volume, without being directly exposed to the consequences of borrowers defaulting. During several years of strong capital markets and strong investor appetite for high-yielding securities, lenders became accustomed to easily selling the risky home loans they made to Wall Street banks. The banks in turn packaged them into securities and sold them to investors around the globe.
Such ease of mortgage funding allowed thousands of borrowers to get away with fraudulently mis-stating their incomes, often with the encouragement of their brokers. More ambitious fraudsters appear to have taken out multiple mortgages and walked away with the cash.
Karen Gelernt, a partner at law firm Cadwalader, Wickersham & Taft, says: "The difficulty is getting a handle on the size of the problem, because there is no real mechanism for reporting fraud for most originators in this market. In fact, they had every incentive not to report."
Fraud has been detected up and down the financing chain: just as borrowers have lied to get better rates and larger loans, mortgage brokers and loan officers have lied to borrowers about the terms of their loans and may also have lied to the banks about the qualifications of the borrowers. Appraisers, likewise, have lied about the value of the properties involved.
"The recent rapid expansion of the subprime market was clearly accompanied by deterioration in underwriting standards and, in some cases, by abusive lending practices and outright fraud," Ben Bernanke, Fed chairman, recently told lawmakers. With mortgage rates rising and house prices falling, subprime borrowers have been defaulting at record rates.
The fallout is working its way up from the retail level – forcing people out of their homes and lenders into bankruptcy. Investment banks have lost revenue as investors back away from mortgage securities and a handful of high-profile hedge funds have collapsed – most notably two highly leveraged funds managed by
Bear Stearns (NYSE:BSC) . The crisis has contributed to turmoil in financial markets in recent weeks and could threaten the health of the US economy as lenders tighten access to credit, putting a drag on consumer spending.
For some, this rapid and dramatic unravelling of the subprime lending industry has echoes of the costly savings and loans crisis of the early 1980s – a meltdown that also had its origins in financial market innovation and inadequate oversight, and which many cite as a contributing factor in the 1990-91 economic recession. That crisis ended with a federal bail-out of $150bn and a handful of high-profile convictions for fraud.
This time around, the major losers have been hedge funds, which in theory are limited to wealthy investors. But some analysts believe the pain could spread – many pension funds and college endowments have turned to hedge funds to heat up their returns and some, including Harvard University, are starting to get their fingers burned. Harvard is estimated to have lost $350m of the $550m it invested in a hedge fund run by Jeffrey Larson, a former Harvard money manager, that collapsed recently as a result of positions related to the subprime market.
If the losses trickle down and end up hurting small investors, pressure may grow for a public bail-out. Rumours swept the market earlier this week that Fannie Mae (NYSE:FNM) and Freddie Mac, the government-backed mortgage agencies, might get the authority to make sweeping purchases of underpriced mortgage securities.
"The US mortgage landscape has become a top-of-mind political talking point, and we would not be surprised to see the usual 'flow like mud' legislative process fast-tracked with respect to items offering relief to the troubled mortgage market," says Louise Purtle, strategist at CreditSights, a research firm.
Most fraud in subprime lending appears to have been so-called "fraud for purchase" – lying about income so as to win a mortgage approval. In reviewing a sample of "no doc" loans that relied on borrowers' statements, the Mortgage Asset Research Institute recently found that almost all would-be home owners had exaggerated their income, with almost 60 per cent inflating it by more than 50 per cent.
These fraudulent borrowers are often difficult to uncover, says Ms Gelernt, because they often stretch to meet their minimum payments for some time before they eventually default. The time lag between initial fraud and default also makes a conviction hard to obtain, she adds, while mortgage investors also have little chance of recovering their losses from individual borrowers in these circumstances.
Many of the originators to blame for poor quality control standards may not be held to account either – with several such lenders already in bankruptcy. "There's a real problem in finding fraud after the fact because the money is already out the door and you won't get the recovery," says Ms Gelernt.
Loose lending standards also facilitated fraud for profit. US prosecutors around the country have broken up at least a dozen mortgage fraud rings and more cases are expected.
In one New York case, the FBI charged 26 people who used stolen identities, invented purchasers and inflated appraisals to obtain subprime loans on more than $200m of property. In an Ohio case, 49 per cent of the mortgages processed by a single broker never made even a first payment.
The fate of a series of North Carolina neighbourhoods built by Beazer Homes (NYSE:BZH) may offer a foretaste of the looming problem. Low income home-buyers around Charlotte have sued the builder alleging that its lending arm steered them into mortgages they could not afford, leading to widespread foreclosures.
The homeowners allege that sales agents misrepresented their personal data, including assets and income, to help them qualify for government-insured mortgages starting in 2002. By the beginning of this year, 10 Beazer subdivisions in Charlotte had foreclosure rates of 20 per cent or higher, compared with 3 per cent state-wide, according to a local newspaper analysis.
The FBI is probing Beazer for possible fraud and the US Housing and Urban Development is examining whether its sales practices violated government-insured mortgage rules. Beazer has defended its sales practices and says it has a "commitment to managing and conducting business in an honest, ethical and lawful manner". In June it announced that it had fired its chief accounting officer for allegedly attempting to destroy documents. The company's shares have lost 75 per cent of their value since the probes began.
Several state attorneys-general are also on the trail. Andrew Cuomo of New York state made headlines this spring with a series of subpoenas to property appraisal companies and has said publicly that he is probing the entire industry. Sources familiar with the office's work say the investigation is still at a relatively early stage.
Marc Dann, the Ohio attorney- general, is looking further up the funding chain. He has been outspoken in his criticism of the role the financial services industry may have played in the large numbers of foreclosures in his state. "There's a whole series of people that knew or should have known that there was fraud in the acquisition of these mortgages," Mr Dann told the Financial Times. "We're looking at ways to hold everybody who aided and abetted that fraud."
Mr Dann's office is looking at brokers, appraisers, rating agencies and securitisers and plans to use several legal methods to hold bad actors accountable. The Ohio attorney-general not only has criminal enforcement powers, but also represents the third-largest set of public pensions in the country and can thus file civil lawsuits on behalf of investors.
"But for the mechanism of packaging these loans, the fraud never would have existed," Mr Dann says. "We're following this trail from homeowner to bondholder." He says his investigation could take six months to a year to bear fruit.
The Securities and , for its part, is investigating whether Bear Stearns and other hedge fund managers were forthright about disclosing the rapidly declining value of their holdings.
Many of the mortgage-related securities bought by the hedge funds are rarely traded and difficult to value accurately. They are often valued in portfolios according to complex mathematical models because real market prices are not available, making it possible to disguise underperformance if models are not updated.
The SEC has not brought a case in the area so far, but current and former regulators note that it has previously won settlements from several mutual funds and banks that failed to revise the prices of illiquid assets during a falling market.
Private securities lawyers are also starting to file securities fraud lawsuits on behalf of investors who have lost out because of the subprime meltdown.
Jake Zamansky, a lawyer who negotiated an early settlement from Merrill Lynch in the scandal over skewed investment bank research, has filed an arbitration claim against Bear Stearns alleging the firm misled investors about its exposure to the mortgage-backed securities market.
The class action law firm of Bernstein Litowitz is also preparing a claim against Bear Stearns, alleging the firm made material mis-statements in the offering documents for its now defunct hedge funds.
"This was simply about a hedge fund strategy that failed," said a Bear Stearns spokesman. "We plan on defending ourselves vigorously against the allegations in these complaints."
Other hedge funds may also come under political or legal pressure over their role in the loan crisis.
Richard Carnell, a professor at Fordham law school, says it may be possible to hold the investment banks that securitised the mortgages at least partially responsible in the case of a major collapse of the market. "There are two things you can object to in the securitisers' conduct: failing to disclose material facts about the credit quality of the mortgages; and you can also criticise them for acting as an enabler for someone they know is a bad actor," he says.
But putting together a case will not be easy because the hedge funds and other investors who bought such securities are presumed to be sophisticated about financial matters. This means it will be harder for them to prove they were not properly warned about the risks involved.
In the case of the Bear Stearns funds, investors may face new hurdles to recovering any money through US lawsuits. Though the funds operated mostly in New York, they were incorporated in the Cayman Islands and that is where they have filed for bankruptcy. In what could be a test case for international bankruptcy laws, the liquidators have applied to the US courts asking them to block US lawsuits during the liquidation process.
Bear Stearns said in a statement: "Because the two funds are incorporated in the Cayman Islands, the funds' boards filed for liquidation there . . . The return to creditors and investors will be based on the underlying assets and liabilities of the funds not on the location of the filing."
Even if the US lawsuits do go forward, a case pending before the Supreme Court could also prove crucial to investors who hope to make a case that hedge funds and rating agencies enabled widespread fraud.
In Stoneridge Investment Partners v Scientific Atlanta, the court is considering whether investors can recover from firms – including accountants, lawyers and bankers – that help a public company commit fraud by participating in a "scheme to defraud". If the high court rules against "scheme liability", investors who lost money in the subprime market will have very few places to turn to try to get some of it back.
William Poole of the Federal Reserve Bank of St. Louis thinks that this may be what investors who lose money on subprime mortgage-linked securities deserve for not looking at them closely enough.
Criticising Wall Street underwriting standards recently, he said: "The punishment has been meted out to those who have done misdeeds and made bad judgments. We are getting good evidence that the companies and hedge funds that are being hit are the ones who deserve it.''
RISING PRICES OFFSET A BRITISH SUBPRIME SNIFFLE
Last month some of the most senior figures in the UK mortgage industry gathered at London's Royal Albert Hall for a glittering awards dinner, writes Jane Croft.
Entertainment was provided by British comedian Al Murray and a colourful troupe of can-can dancers. But in spite of the celebratory mood, the chatter soon turned to recent findings by the UK's Financial Services Authority on problems with subprime mortgages. The regulator had said it was "very concerned" about "the high level of subprime arrears in a benign market" and had uncovered "weaknesses" in lending practices.
The level of defaults has been much lower than across the Atlantic – partly because the UK subprime market is much smaller, accounting for around 8 per cent of mortgages compared with 20 per cent in the US.
However, a recent report by Standard & Poor's showed overall arrears and repossession rates in the British subprime sector rising. The rating agency's non-conforming Residential Mortgage Backed Securities (RMBS) index tracks the performance of subprime mortgages securitised into capital markets. It found 10.5 per cent of loans in the first quarter of 2007 were more than 90 days in arrears – up from 7 per cent in 2004.
This is still far below the US, where research by the Centre for predicts that one in five subprime mortgages made in the past two years will end in foreclosure.
A big concern raised by the FSA is whether UK mortgage brokers and lenders are properly assessing how much borrowers can afford to pay back each month. While he acknowledges there are key differences between the US and UK, Clive Briault, managing director of retail markets at the FSA, admitted recently that "we cannot completely ignore the parallels with our own market".
The FSA is also concerned that rising house prices are encouraging some over-indebted borrowers to increase their levels of debt by borrowing against their property.
In its review, the FSA examined 11 lenders and 485 case files at 34 mortgage brokers. It found that in a third of the files, brokers had made an "inadequate assessment" of the customers' ability to afford the loan. It also found failings amongst lenders that resulted in "the approval of potentially unaffordable mortgages".
Figures from the Council of last week showed that home repossessions jumped 30 per cent year-on-year, rising to 14,000 in the first half of 2007. The industry body said some of the increase was due to rising defaults on subprime mortgages. Indeed, a third of the possession hearings in one local study by the Citizens Advice Bureau last year were brought by subprime mortgage lenders.
The buoyancy of the UK market, at least, means there is still an escape route. "House prices have not been impacted as they have in the US," says Andrew South, an analyst at S&P. "That gives borrowers more refinancing options if they get into difficulties."
Friday, May 30, 2008
Oil speculation and more energy trading oversight
Recent stuff from CNN on energy trading and a probe into possible manipulation of oil prices (my emphasis/comments in red). An interesting snippet:
"But Beutel doesn't blame these funds for wanting to diversify their portfolio by investing in oil. If anyone is to blame, he says, it's the Federal Reserve, which has been predictably cutting interest rates since September to shore up credit markets. When interest rates fall, investors flock to commodities as an inflation hedge. "The Fed tipped their hand," he said. '[The big funds] were basically told by [Fed Chairman Ben] Bernanke that this is where the money is.'"
http://money.cnn.com/2008/05/30/news/economy/oil_cftc/index.htm?section=money_latest
Oil trading probe may uncover manipulation
But overall, any wrongdoing is likely to play a small part in soaring crude prices. Meanwhile, speculators aren't expected to hang.
NEW YORK (CNNMoney.com) -- Amid soaring oil prices that some say are caused by nothing more than rampant speculation, the government Thursday announced a wide ranging probe into oil price manipulation and said it would get more information on the effect investors are having on the market. The measures, undertaken by the Commodity Futures Trading Commission after pressure from angry lawmakers, do two things. First, they'll attempt to gather more information from index funds and other non-commercial users of oil. They'll also seek information on oil trades made outside the U.S. on exchanges like the IntercontinentalExchange Europe (ICE) where the CFTC has no oversight and has been unable to get more detailed information.
The second thing on the CFTC's agenda is an actual investigation into possible price manipulation - most likely by a commercial user of oil like a production company, shipping company, or storage company.
Recent investor interest in commodities is an issue of intense debate. Some say investors, who have been funneling money into oil and other commodities over the last several months amid rising inflation and falling stock prices, are unjustifiably driving up the price of oil and gas simply because they have no other place to put their money. Others say tight supply and strong demand are the real reasons behind this investor interest, and the market is functioning properly to limit demand and increase supply. CFTC has previously said that it has not found any evidence that speculators were artificially inflating prices.
"Data used by Commission staff show that price changes are largely unrelated to fund trading," according to written testimony before a Senate hearing earlier this month by CFTC Chief Economist Jeffrey Harris. "Broad-based manipulative forces are not driving the recent higher futures prices in commodities across-the-board."
Neither Harris nor any other economist at the CFTC could not be reached for comment. According to a chart presented in its congressional testimony it appears the CFTC used data from 2007 to reach its conclusion. But he said oil traders see this request for additional information as perhaps a precursor to broader regulation, like increasing the amount of contracts speculators are allowed to hold or raising the amount of money investors have to put down to buy those contracts. "The fear that this might happen may drive people out of the market," he said. "There could be a run for the gates."
Oil prices fell Thursday by over $4, one of the biggest declines in recent weeks. One expert attributed the slide to the investigation. "The traders now know that someone is looking over their shoulder," said Michael Greenberger, a professor at the University of Maryland and a former CFTC official. "Their phony sales are being watched, and in one day there was the biggest drop in 2 1/2 months." [If their trading is all legit and not manipulating the price, then why would they run for the hills at the first mention of "regulation"?]
If there is a run for the gates, he said prices may or may not fall, but liquidity would be reduced, leaving the market more vulnerable to manipulation by a single participant. And that's the second thing the CFTC is looking into - "practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts," the agency said in a statement.
This most likely means manipulation of the physical oil market, not typically done by speculators but rather by commercial players who might literally withhold oil from the market in an attempt to drive prices higher. The CFTC has found evidence of this in the past. BP recently settled a suit that alleged the company tried to corner the propane market to inflate prices in 2003 and 2004. BP agreed to pay a $303 million settlement. Haigh thinks it's likely CFTC will find evidence of this again given that the agency has been investigating for six months and has now chosen to make it public. But he stressed that a single player acting alone would in all likelihood not have a huge influence on prices. [Well, even if one or a few greedy bastards won't seriously impact prices, an example has to be made that such conduct is unacceptable]
"This investigation is just a way for the government to divert attention away from the fact that it hasn't created a viable energy policy," said Mike Fitzpatrick, an analyst at the brokerage MF Global in New York. "Ultimately, fundamentals rule the markets...this investigation is going to wind up producing nothing."
Not everyone agrees fundamentals rule the market. "There is a theory that the price of crude oil is being driven up not by supply and demand principles, but by speculators using what are called dark markets, markets that can't be watched by the public or regulators, to manipulate the price of crude," said Greenberger.
First Published: May 30, 2008: 2:57 PM EDT
Oil prices: Wall Street's gameIs $130 oil a bubble?
Oil prices: Wall Street's game
Big fund money is flowing into oil markets sending prices to levels never seen before. Is it profiteering or an essential way to ensure supply?
NEW YORK (CNNMoney.com) -- There's no question about it: A new breed of speculator is pouring money into the oil market. What's less certain is whether this new money is responsible for driving up prices or essential to a healthy market. Many blame record prices on Wall Street investors new to the oil market, saying they're bidding up gas prices to artificially high levels - and soaking drivers. As oil nears $130 a barrel, some say $10 to $70 of that price is due to Wall Street speculation.
But that's not the whole story. Nearly everyone agrees that speculators have always been essential to a functioning market and that oil prices could be much higher without them. What's harder to understand is the effect of new speculators flowing into commodities from big-money funds like university endowments, pensions and indexes. Some say they're a good influence. In addition to limiting demand, they make it easier to sell oil contracts and create a larger market where prices are less susceptible to big swings following individual trades - known as liquidity in financial speak. This camp says $130 oil is justified since demand is rising faster than supply.
Others say big-fund money is making it harder for traditional oil speculators to do their job. This camp says big funds distort traditional models used to predict prices and think $130 oil is a bubble ready to pop.
Traditionally, a futures speculator bets on the direction of commodity prices and then guarantees that commodity at that price to a client. This removes some of the risk - and greases the wheels of commerce. Speculators originated in the food market, and were intended to give farmers a set price in the spring to buy seed, according to Peter Beutel, an oil analyst at Cameron Hanover. For example, a speculator would offer a farmer $3.50 in April for a bushel of corn to be delivered and paid for in October - these are called futures contracts. The speculator hopes that by October corn will sell for $4, and he'll make money. The farmer can plant his fields certain that he's making $3.50 a bushel.
Conversely, a speculator might bet the price of corn will fall. He might offer to sell a bushel to a corn bread maker at $3.50 in April for corn to be delivered in October. If corn falls to $3 by October, the speculator comes out on top. The deal allows the bread maker to make long term business decisions, like how many employees to hire. Without this transparent marketplace, uncertainty would be priced into the product, resulting in higher costs for everyone. Although the lines between producer, consumer and speculator have been blurred in recent years, this same dynamic is at work in today's oil and gas markets.
"We're trying to get some type of cost certainty," said Brad Samples, a commodities analyst at Summit Energy in Louisville, Ky. Summit buys energy for clients who use lots of it. One client, Samples says, goes through about $15 million a year in diesel fuel, and it's Samples' job to make sure it gets a good deal at a consistent price.
When Samples buys a contract, he needs someone to sell it to him, usually a bank. To manage the financial risk, the bank will go out and sell that contract to someone else - in other words, a speculator. Sometimes that person might be someone like George Zivic, managing partner at Almanac Capital, a commodity investment firm. For him, the influx of big-fund money betting oil prices will move in one direction - in this case up - into the commodities market is a challenge. Before the new money, price movements were more predictable. For example, in the spring gasoline usually rises in tandem with crude, and Almanac and other related firms would look to make their money by betting on the difference between the two.
This year that hasn't happened - oil prices have greatly outpaced gasoline - and that's made making money in this market more difficult. He blames some of the schism on big-fund money betting oil prices will only go up. "When you have directional money, it makes the historical relationships distorted," he said. "There's no short term shortage of oil. $127 a barrel doesn't make sense."
Beutel, from the consultancy Cameron Hanover and a former NYMEX floor trader, goes even further in blaming big-fund money. "We want to see them out, they have no respect for our markets at all," he said.
But Beutel doesn't blame these funds for wanting to diversify their portfolio by investing in oil. If anyone is to blame, he says, it's the Federal Reserve, which has been predictably cutting interest rates since September to shore up credit markets. When interest rates fall, investors flock to commodities as an inflation hedge. "The Fed tipped their hand," he said. "[The big funds] were basically told by [Fed Chairman Ben] Bernanke that this is where the money is."
And if the money is there, why wouldn't the big funds take advantage of it? "We are following for us what is a prudent strategy to maximize investment returns, said Clark McKinley, a spokesman for CalPERS, California's pension fund for workers in the public sector. "Obviously, there's some unintended consequences."
Not everyone agrees big-fund money is playing a role in driving up prices, starting with the Commodity Futures Trading Commission, the government's own regulatory agency. Economists at the CFTC have testified that after studying all the numbers on who is trading what, there is no evidence speculators of any kind are significantly driving up the price of crude. 'You can't just point the finger at speculators," said Michael Haigh, head of U.S. commodities research at the investment bank Société Générale and a former economist at the CFTC. "Fundamentally, the markets are where they are supposed to be."
Haigh said that big-money funds are not just dumping their money onto the market - only betting prices will go up. He and others say these funds are sophisticated investors and take a variety of positions in the market. Deutsche Bank took a somewhat novel approach in investigating the role of speculative money. Analysts there looked at the price of commodities that do not trade in a futures market and came to basically the same conclusion. "The rally in non-exchange traded commodity prices since the end of 2002 has been similar if not greater in magnitude," the bank's analysts wrote in a research note. "We believe this refutes the claim that speculators have been the primary drivers of rising commodity prices during this cycle."
Members of Congress, their ears bent by angry motorists paying nearly $4 a gallon for gas, are considering increasing the amount of money investors have to put up front in order to buy oil futures. Some say this may work, as a lot of the investor interest in commodities is due to the fact that they can essentially gamble with a million dollars worth of oil by putting up $100,000 or less of their own money. In the stock market, they'd need to put up $500,000. But others say increasing these requirements - known as margin requirements - would merely drive oil trading into less regulated markets where information would be even harder to track.
The motorist organization AAA doesn't have an opinion on what Congress should do. But like many American drivers, they've certainly noticed that oil prices have shot up $50 a barrel since August at the same time that the stock market tanked, while the supply and demand picture for oil remained little changed. "After Israel invaded Lebanon, Hurricane Katrina, 9/11, all of these situations, we haven't seen prices rise to these levels," said AAA spokesman Geoff Sundstrom. "We have to wonder if the foundation behind these very high prices is nothing more than speculation."
First Published: May 16, 2008: 3:58 AM EDT
Why $120 oil is goodDrilling for oil in the Arctic
"But Beutel doesn't blame these funds for wanting to diversify their portfolio by investing in oil. If anyone is to blame, he says, it's the Federal Reserve, which has been predictably cutting interest rates since September to shore up credit markets. When interest rates fall, investors flock to commodities as an inflation hedge. "The Fed tipped their hand," he said. '[The big funds] were basically told by [Fed Chairman Ben] Bernanke that this is where the money is.'"
http://money.cnn.com/2008/05/30/news/economy/oil_cftc/index.htm?section=money_latest
Oil trading probe may uncover manipulation
But overall, any wrongdoing is likely to play a small part in soaring crude prices. Meanwhile, speculators aren't expected to hang.
NEW YORK (CNNMoney.com) -- Amid soaring oil prices that some say are caused by nothing more than rampant speculation, the government Thursday announced a wide ranging probe into oil price manipulation and said it would get more information on the effect investors are having on the market. The measures, undertaken by the Commodity Futures Trading Commission after pressure from angry lawmakers, do two things. First, they'll attempt to gather more information from index funds and other non-commercial users of oil. They'll also seek information on oil trades made outside the U.S. on exchanges like the IntercontinentalExchange Europe (ICE) where the CFTC has no oversight and has been unable to get more detailed information.
The second thing on the CFTC's agenda is an actual investigation into possible price manipulation - most likely by a commercial user of oil like a production company, shipping company, or storage company.
Recent investor interest in commodities is an issue of intense debate. Some say investors, who have been funneling money into oil and other commodities over the last several months amid rising inflation and falling stock prices, are unjustifiably driving up the price of oil and gas simply because they have no other place to put their money. Others say tight supply and strong demand are the real reasons behind this investor interest, and the market is functioning properly to limit demand and increase supply. CFTC has previously said that it has not found any evidence that speculators were artificially inflating prices.
"Data used by Commission staff show that price changes are largely unrelated to fund trading," according to written testimony before a Senate hearing earlier this month by CFTC Chief Economist Jeffrey Harris. "Broad-based manipulative forces are not driving the recent higher futures prices in commodities across-the-board."
Neither Harris nor any other economist at the CFTC could not be reached for comment. According to a chart presented in its congressional testimony it appears the CFTC used data from 2007 to reach its conclusion. But he said oil traders see this request for additional information as perhaps a precursor to broader regulation, like increasing the amount of contracts speculators are allowed to hold or raising the amount of money investors have to put down to buy those contracts. "The fear that this might happen may drive people out of the market," he said. "There could be a run for the gates."
Oil prices fell Thursday by over $4, one of the biggest declines in recent weeks. One expert attributed the slide to the investigation. "The traders now know that someone is looking over their shoulder," said Michael Greenberger, a professor at the University of Maryland and a former CFTC official. "Their phony sales are being watched, and in one day there was the biggest drop in 2 1/2 months." [If their trading is all legit and not manipulating the price, then why would they run for the hills at the first mention of "regulation"?]
If there is a run for the gates, he said prices may or may not fall, but liquidity would be reduced, leaving the market more vulnerable to manipulation by a single participant. And that's the second thing the CFTC is looking into - "practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts," the agency said in a statement.
This most likely means manipulation of the physical oil market, not typically done by speculators but rather by commercial players who might literally withhold oil from the market in an attempt to drive prices higher. The CFTC has found evidence of this in the past. BP recently settled a suit that alleged the company tried to corner the propane market to inflate prices in 2003 and 2004. BP agreed to pay a $303 million settlement. Haigh thinks it's likely CFTC will find evidence of this again given that the agency has been investigating for six months and has now chosen to make it public. But he stressed that a single player acting alone would in all likelihood not have a huge influence on prices. [Well, even if one or a few greedy bastards won't seriously impact prices, an example has to be made that such conduct is unacceptable]
"This investigation is just a way for the government to divert attention away from the fact that it hasn't created a viable energy policy," said Mike Fitzpatrick, an analyst at the brokerage MF Global in New York. "Ultimately, fundamentals rule the markets...this investigation is going to wind up producing nothing."
Not everyone agrees fundamentals rule the market. "There is a theory that the price of crude oil is being driven up not by supply and demand principles, but by speculators using what are called dark markets, markets that can't be watched by the public or regulators, to manipulate the price of crude," said Greenberger.
First Published: May 30, 2008: 2:57 PM EDT
Oil prices: Wall Street's gameIs $130 oil a bubble?
Oil prices: Wall Street's game
Big fund money is flowing into oil markets sending prices to levels never seen before. Is it profiteering or an essential way to ensure supply?
NEW YORK (CNNMoney.com) -- There's no question about it: A new breed of speculator is pouring money into the oil market. What's less certain is whether this new money is responsible for driving up prices or essential to a healthy market. Many blame record prices on Wall Street investors new to the oil market, saying they're bidding up gas prices to artificially high levels - and soaking drivers. As oil nears $130 a barrel, some say $10 to $70 of that price is due to Wall Street speculation.
But that's not the whole story. Nearly everyone agrees that speculators have always been essential to a functioning market and that oil prices could be much higher without them. What's harder to understand is the effect of new speculators flowing into commodities from big-money funds like university endowments, pensions and indexes. Some say they're a good influence. In addition to limiting demand, they make it easier to sell oil contracts and create a larger market where prices are less susceptible to big swings following individual trades - known as liquidity in financial speak. This camp says $130 oil is justified since demand is rising faster than supply.
Others say big-fund money is making it harder for traditional oil speculators to do their job. This camp says big funds distort traditional models used to predict prices and think $130 oil is a bubble ready to pop.
Traditionally, a futures speculator bets on the direction of commodity prices and then guarantees that commodity at that price to a client. This removes some of the risk - and greases the wheels of commerce. Speculators originated in the food market, and were intended to give farmers a set price in the spring to buy seed, according to Peter Beutel, an oil analyst at Cameron Hanover. For example, a speculator would offer a farmer $3.50 in April for a bushel of corn to be delivered and paid for in October - these are called futures contracts. The speculator hopes that by October corn will sell for $4, and he'll make money. The farmer can plant his fields certain that he's making $3.50 a bushel.
Conversely, a speculator might bet the price of corn will fall. He might offer to sell a bushel to a corn bread maker at $3.50 in April for corn to be delivered in October. If corn falls to $3 by October, the speculator comes out on top. The deal allows the bread maker to make long term business decisions, like how many employees to hire. Without this transparent marketplace, uncertainty would be priced into the product, resulting in higher costs for everyone. Although the lines between producer, consumer and speculator have been blurred in recent years, this same dynamic is at work in today's oil and gas markets.
"We're trying to get some type of cost certainty," said Brad Samples, a commodities analyst at Summit Energy in Louisville, Ky. Summit buys energy for clients who use lots of it. One client, Samples says, goes through about $15 million a year in diesel fuel, and it's Samples' job to make sure it gets a good deal at a consistent price.
When Samples buys a contract, he needs someone to sell it to him, usually a bank. To manage the financial risk, the bank will go out and sell that contract to someone else - in other words, a speculator. Sometimes that person might be someone like George Zivic, managing partner at Almanac Capital, a commodity investment firm. For him, the influx of big-fund money betting oil prices will move in one direction - in this case up - into the commodities market is a challenge. Before the new money, price movements were more predictable. For example, in the spring gasoline usually rises in tandem with crude, and Almanac and other related firms would look to make their money by betting on the difference between the two.
This year that hasn't happened - oil prices have greatly outpaced gasoline - and that's made making money in this market more difficult. He blames some of the schism on big-fund money betting oil prices will only go up. "When you have directional money, it makes the historical relationships distorted," he said. "There's no short term shortage of oil. $127 a barrel doesn't make sense."
Beutel, from the consultancy Cameron Hanover and a former NYMEX floor trader, goes even further in blaming big-fund money. "We want to see them out, they have no respect for our markets at all," he said.
But Beutel doesn't blame these funds for wanting to diversify their portfolio by investing in oil. If anyone is to blame, he says, it's the Federal Reserve, which has been predictably cutting interest rates since September to shore up credit markets. When interest rates fall, investors flock to commodities as an inflation hedge. "The Fed tipped their hand," he said. "[The big funds] were basically told by [Fed Chairman Ben] Bernanke that this is where the money is."
And if the money is there, why wouldn't the big funds take advantage of it? "We are following for us what is a prudent strategy to maximize investment returns, said Clark McKinley, a spokesman for CalPERS, California's pension fund for workers in the public sector. "Obviously, there's some unintended consequences."
Not everyone agrees big-fund money is playing a role in driving up prices, starting with the Commodity Futures Trading Commission, the government's own regulatory agency. Economists at the CFTC have testified that after studying all the numbers on who is trading what, there is no evidence speculators of any kind are significantly driving up the price of crude. 'You can't just point the finger at speculators," said Michael Haigh, head of U.S. commodities research at the investment bank Société Générale and a former economist at the CFTC. "Fundamentally, the markets are where they are supposed to be."
Haigh said that big-money funds are not just dumping their money onto the market - only betting prices will go up. He and others say these funds are sophisticated investors and take a variety of positions in the market. Deutsche Bank took a somewhat novel approach in investigating the role of speculative money. Analysts there looked at the price of commodities that do not trade in a futures market and came to basically the same conclusion. "The rally in non-exchange traded commodity prices since the end of 2002 has been similar if not greater in magnitude," the bank's analysts wrote in a research note. "We believe this refutes the claim that speculators have been the primary drivers of rising commodity prices during this cycle."
Members of Congress, their ears bent by angry motorists paying nearly $4 a gallon for gas, are considering increasing the amount of money investors have to put up front in order to buy oil futures. Some say this may work, as a lot of the investor interest in commodities is due to the fact that they can essentially gamble with a million dollars worth of oil by putting up $100,000 or less of their own money. In the stock market, they'd need to put up $500,000. But others say increasing these requirements - known as margin requirements - would merely drive oil trading into less regulated markets where information would be even harder to track.
The motorist organization AAA doesn't have an opinion on what Congress should do. But like many American drivers, they've certainly noticed that oil prices have shot up $50 a barrel since August at the same time that the stock market tanked, while the supply and demand picture for oil remained little changed. "After Israel invaded Lebanon, Hurricane Katrina, 9/11, all of these situations, we haven't seen prices rise to these levels," said AAA spokesman Geoff Sundstrom. "We have to wonder if the foundation behind these very high prices is nothing more than speculation."
First Published: May 16, 2008: 3:58 AM EDT
Why $120 oil is goodDrilling for oil in the Arctic
Monday, May 26, 2008
Obama and Iraq
But Obama took the turkey that night with a barely-noticed side comment that gave me pause. The Dems were asked to explain their lack of support for Bush's surge proposal earlier in the year, when the effort appears to be producing results now. All 3 rehashed the same talking point that the surge was intended to give Iraqi politicians some calm in the streets, as breathing room to push through overdue legislation and reconciliation. But of course the latter has not really happened, so the Dems declared the surge a failure as a result. They admitted that there was a significant reduction in violence, but what is the point if the leaders are still stalling? Spoken like true politicians – they downplay the positive news that fewer Iraqis are suffering each day, but the fact that the Iraqi government is still dysfunctional partially validates their opposition to the surge. Let's be honest, America can't make the Iraqi government any better. Most poor nations have terrible, corrupt governments, especially ones emerging from war and dictatorship. We even deposed the previous ineffective PM Al-Jafari to get Maliki in power, and now we're stuck with him and the political disaster we've moderated since 2003.
Obama: Although I would point out that much of that violence has been reduced because there was an agreement with tribes in Anbar province -- Sunni tribes -- who started to see, after the Democrats were elected in 2006, you know what, the Americans may be leaving soon, and we are going to be left very vulnerable to the Shi'as. We should start negotiating now. That's how you change behavior.
Obama went a step further than his rivals, and then fell off the cliff. He claimed (with no evidence of course) that the Anbar Sunnis took notice that the Dems regained Congress in 2006, and felt that change was in the air. Maybe the Americans would be leaving soon, so to avoid total Shia domination in the wake of the US withdrawal, they better shun Al Qaeda and play ball now. This was his explanation for the reduction of violence! One or two stupid comments may be forgiven as slips of the tongue (boycotting all Chinese-manufactured toys, attacking targets in Pakistan unilaterally – he has since rescinded this proposal), but any more and it becomes a pattern of poor judgment/self-control.
Maybe he really is that naïve about foreign affairs. Most world polls showed that no one really cared about the midterm election, and Congress has very little non-fiscal war authority. Maybe foreigners already know that the Iraq War is very unpopular and declared a lost cause among Americans, but it matters not if the president wants to continue the fight. What troubles me even more is the fact that none of the Dems could effectively answer the surge question, yet it seems rather obvious to me. It's not a short answer, but nothing in the Middle East ever is. Of course more US troops on the ground engaged in more offensive operations should improve security. Our military should have shown more interest in taking to the streets and vigorously protecting the Iraqi population years ago, instead of just hunkering down in fortified rear bases and only protecting "economic targets". Morally it's the right thing to do and politically it builds trust. Because an insurgent war boils down to which side wins the support of the people, and our side is handicapped because of our nationality and our past performance. The surge had an effect, but 2007 was the deadliest year for US troops post-invasion, and cost us hundreds of billions of dollars. Was the sacrifice worth it, when violence was probably going to somewhat decline on its own? It's not like Iraq is a peaceful paradise after the surge. Since our invasion, Iraqi sects have engaged in ethnic cleansing (not necessarily genocide, but definitely population transfer). Neighborhoods have become much more homogenized, and over 2M Iraqis have become internal or foreign refugees. Separated, impoverished peoples are less likely to engage in organized murder. Yes it may be helpful that US forces erected barricades, checkpoints, or other dividers to separate the hostile parties, but the Iraqis were doing it to themselves anyway.
Bush often cites his "doomsday scenario" for why we have to remain in Iraq: if we leave the violence will spill out of control, extremists will take power, and terrorism will spread elsewhere or follow us home. But this is uncertain, and experts contest it. Maybe the bloodletting of 2006 hit its peak, and now the nation is settling towards equilibrium as analysts predict. In any power vacuum, there will be struggle for dominance, and it may get ugly. But eventually a new order will take root and hopefully all parties will see that they have a better chance to achieve their goals via political channels than in battle, where they could lose everything. Instead of patrolling the streets and bombing suspected militant hideouts, America should be encouraging rival groups to the bargaining table. I know a "wait and see" attitude is risky, but 800 US soldiers might still be alive if we acted differently ( http://www.inteldaily.com/?c=173&a=4145).
I know it's hard to deliver a compelling point during a thirty-second debate window, but real issues often can't be nicely packaged for mass consumption. At least say something meaningful and accurate. You can claim that improvements in Iraq were actually independent of the Bush surge, and that military escalation will never be able to fix the greater problems in the Maliki government, as the Dems already noted. As I said, popular support is the true decider of an insurgency/civil war. If the choice is between extremist militias/Al Qaeda and America, then we should be ashamed if we are losing ground. But the militants and Al Qaeda have behaved so terribly in Iraq (especially in the last two years) that the public has turned against them, and they didn't need us to convince them. The militants' strength is their ability to infiltrate, strike fast, and disappear into the populace before we can respond. Yes it is helpful if our forces "clear, retain, and hold" contested neighborhoods, but it's pointless if the fighters just relocate and make trouble elsewhere.
Sunnis used to harbor and rely on insurgents/Al Qaeda for protection against the Americans and Shia who were marginalizing (or in some cases butchering) them. But Qaeda's brutal tactics and twisted form of Islam eventually turned them off. They saw through Osama's BS that the terrorists were not fighting for the liberation of Iraqis, but actually coldly sacrificing them in a Sunni-Shia civil war (sparked by their alleged bombing of the Golden Mosque) and their battle against America. Iraqis don't want to be Qaeda's pawn any more than they want to be ours, and they are tired of the sectarian bloodshed and cruel targeting of innocents in public places. Some Sunni leaders, mostly in Anbar Province, sided with US forces to drive them out (often after accepting large bribes from us, and we even armed their militias for better or worse). Of course there is the danger that they will switch allegiances again, but their change of heart was not due to the surge – it was due to Qaeda's cruelty and our opportune (albeit risky) carrot diplomacy. There is nothing wrong with bribery if it accomplishes what fighting can't!
That is what we need more of in Iraq, shrewd diplomacy instead of more fighting. Let's be honest; we can't force the Maliki government to do anything, and they can stall forever because they know America needs Iraq as a strategic base and oil supplier. Contrary to Obama's assertion, I think the Iraqis in power realize that we're not leaving anytime soon, not after making such a massive investment there. The Shia and Kurds know that it's mostly their country now (Iraq is only the second Shia-led nation in history, and the other is a major enemy of the US), and considering their ugly history of oppression by Sunnis, Turks, and others, why should they make any concessions to their rivals? The last two times Congress has changed hands, did the dominant side make an effort to include and placate the minority side? In fact, their first order of business was consolidating power and pushing through their narrow agendas. So we shouldn't expect any better of the Iraqis, not without motivation at least.
If we want to "win" in Iraq, we may have to incentivize the Shia to play ball. Yes they do enjoy the privileged position now, but it may not last without US backing. If we really mean to threaten them into action, then cut the double-talk and toothless reprimands. Blindly loyal Bush is a lost cause, and the Dems have started down this path but they have to clarify how far they are willing to go. Because as sad as it sounds, the Maliki government is now a larger problem in Iraq than Al Qaeda (according to current and former generals like Colin Powell). There were pseudo-legit elections and a multi-ethnic representative government was formed, but as we've recently seen in Kenya, the availability of democratic mechanisms/elections doesn't ensure justice, cooperation, and the rule of law. Iraq resembles the "Five Families of New York" more than a Western democracy. We could tell Maliki that if he fails to cooperate and we leave (no more money, no more US air strikes and offensives whenever they ring us), the well-armed Saudis have already proposed to support Sunni groups in our wake. His country might become a Saudi-Iran battleground with a new sectarian war even bloodier than 2006, and there's no glory in presiding over a pile of rubble. How would they like that? On the positive side, if we give them guarantees then maybe we can convince them that reconciling with the Sunnis and militants will give them even more goodies down the road. And it's not like Iraq doesn't need help (terrible inflation and unemployment, social services mostly absent, shoddy infrastructure, meddling neighboring nations). The Iraqis have to see us as a long-term strategic and business partner, not just a policeman or a crutch. I don't think it's such a stretch for our next president to realize and advocate this.
Kenya:
http://www.npr.org/templates/story/story.php?storyId=17774507&ft=1&f=1001
Iraq surge:
http://www.truthout.org/docs_2006/082407C.shtml
http://www.nytimes.com/2007/06/11/world/middleeast/11iraq.html?_r=1&hp=&oref=slogin&pagewanted=print
http://www.salon.com/opinion/feature/2007/08/07/surge/
http://www.npr.org/templates/story/story.php?storyId =17857251
http://www.nsnetwork.org/node/176
----------
As to the gaffe, I don't know - a lot of Republicans have been calling
it that, but I don't really see a serious problem with what Obama is
saying (and I know I'm kind of an Obama fanboi, but I'd believe this
no matter who was saying it).
From what I remember, the justification for the surge is that a burst
of troops will fix things well enough that when we inevitably have to
withdraw down to pre-surge levels, the surge will have made things
better than they were before. This is basically what Bush and Petraeus
said when the proposal was presented last year. Otherwise, all the
surge will have accomplished is a temporary lull in the fighting while
people wait for us to be over-extended again. So I don't think calling
Gibson out when he said the surge was working was a bad idea by the
dems. Don't get me wrong - improving the lives of Iraqis is a good in
itself, but if all we are doing is delaying things for 9-15 months
when we have to start withdrawing troops again, can we really say the
surge "worked"?
And the reason the violence has receded during the surge is partly
because we've pacified Baghdad, but also partly because of the "Anbar
Awakening", as you noted. And the Anbar Awakening was partly a result
of local tribes tiring of Al-Qaeda, but much more so because the
Sunnis realized that a united Shi'a government and militia forces are
a much bigger threat to them than the Americans were. They're
basically scared shitless that if we withdraw, they're toast, so
they're getting all the guns/training they can in the meantime. Would
they feel this pressure to make nice if they felt we were never going
to leave? I'm pretty sure not, and there have been a lot of Sunnis who
have said that basically fear of America leaving was a motivation. How
much this is influenced by domestic politics is hard to say, but given
how much the rest of the world pays attention to what goes on in the
US, I doubt it would fail to escape their attention that a potential
major policy shift might be underway in the US.
As (yet another) a side note, it's interesting being the UK how much
the rest of the world pays attention to what's going on here. I've had
people asking me detailed questions about the procedures of the Iowa
caucus that I'm sure most Americans wouldn't even know how to ask - I
guess because we figure most people in the US don't give a shit about
the rest of the world (or even our own country for that matter), the
rest of the world doesn't give a shit about what's going on in our
country, but that's really not true - the foreign press in the UK
probably covers US domestic politics better than most US sources; even
Al-Jazeera has pretty decent coverage of US politics.
So I agree that it's probably an overly-boastful statement and the
answer is a lot more complicated, so minus points for him on that
answer. However, I don't think that you can deny that insurgents in
Sunni areas changed their behavior in part because they sensed a
possible shift in US policy, which came about in part because the
American public is obviously tiring with the war, which was clearly
expressed in the 2006 elections. I also agree with you in that I don't
think there are any easy solutions to Iraq, but if you look what
happened when the Brits withdrew from Basra, I think that's pretty
suggestive of the dynamics going on right now in Iraq - there is no
pressure to solve any problems now because they know the Americans
will always be around to provide security. Once they sense that we're
on our way out, then you might start to see them making real progress,
because then they have to.
If you're interested, I think his plan shows that he's not that naieve
about Iraq: http://www.barackobama.com/issues/pdf/IraqFactSheet.pdf -
I'm not sure his plan is better than any other candidate, because Iraq
is such a clusterfuck, but on the stump and in his issue papers he
shows he's aware of the complexities at least.
----------
If people really want to support a candidate, they shouldn't just sing his or her praises all day and excuse their mistakes. The world has enough cheerleaders and salesmen out there; feedback and oversight are critical duties of the citizenry and free press. We are here to keep them honest, double-check their work, and suggest improvements. We shouldn't just leave it in the hands of paid campaign strategists or media blowhards with their own agendas. We are the Donald! Why were our parents harder on us than all the other kids? Because they love us the most and they want (and expect) us to do our best. They refuse to accept "good enough" and push us to do better. Bad parents are apathetic and just spoil their kids with undeserving affection/compliments. I think it's more helpful to support a candidate by criticizing them every step of the way and demanding better. Maybe then our leaders wouldn't take us for granted after Election Day passes.
Remember that Bush plunged the US, Afghanistan, and Iraq into a lot of problems partly because he surrounded himself with apologists and yes-men who didn't challenge his assumptions/opinions. I think true patriots and supporters would hold candidates (especially favored/popular candidates) accountable for what they said and did. We still want to vote for them and persuade others to do the same, but we have to acknowledge faults and call a spade a spade. Otherwise there is no incentive to improve if our leaders dismiss the sheepish masses as infatuated and blindly loyal. Preoccupied with idol worship, we might forget to keep the best interests of the country in mind. They are not infallible deities, and should have their feet over the coals at all times. When appropriate we have the right to criticize them (after all, they are working for us), not just accept everything they have to offer as the best of all worlds. Obama might well become one of our greatest presidents, but a lot of his support comes from his rock star celebrity, not necessarily his merits as a prospective leader. Let's be honest; many voters (and candidates!) have no idea what it takes to be a president, myself included. I am just trying to barely educate myself on some issues and make the best guess I can. But ultimately as JFK said, one ignorant voter can compromise democracy for all of us (no accusations intended, and I'll be the first to admit my ignorant voter status). Americans have the right and duty to scrutinize the hell out of our future leaders. Better do it now before it's too late, or we'll have to clean up another Katrina/Iraq.
----------
I'll stick to the Iraq issue for the rest of this email (because it interests me more) and touch on campaigning later if I have time. I know you and several others on this email list are strong Obama supporters, and in the end I might vote for him too. Especially if the choice is him against Romney (I have come to hate him for all reasons except his Mormon faith!). But stupid is still stupid. You know I like to diss the pack leader and root for the underdog, so take it with a grain of salt. Though I think you will be hard pressed to defend his argument that Iraqis even paid attention to the midterm election, and it had something to do with the positive changes of 2007. Actually many in the Middle East media hailed Rumsfeld's departure as the real turning point for US involvement in Iraq, not the midterm election. Not sure if everyday Iraqis paid attention though.
http://news.bbc.co.uk/2/hi/middle_east/6138966.stm
I couldn't find the link, but I remember in the wake of the Dems regaining Congress last winter, NPR interviewed Iraqis on the streets and they basically didn't care or think it would change anything for their country. Of course the world cares about who will become the next president (especially the UK as our closest ally), but a few shifting chairs in Congress is not big news. Americans barely care about Pakistani parliamentary elections in February, and that result might actually affect us! Do you think Iraqis, who have their own convoluted domestic politics, and face the daily challenges of finding work/acquiring scarce goods/avoiding death, care that Jim Webb won Virginia and now the Dems have a narrow majority in the Senate? There was no "major policy shift" underway just because Reid and Pelosi said so. They might have duped gullible and exasperated American voters, but skeptical Iraqis know better than to trust more blowhard American politicians (who never saw a minute of war, and might not know the difference between Sunni and Shia) with big promises of changing things.
Good timing for this Obama/surge discussion though, since Morning Edition is running a series on the effects of the surge this week: http://www.npr.org/templates/story/story.php?storyId=17899543
If you don't believe me, listen to them. Their main factors that contributed to the reduction in violence:
(1) The Mahdi Army (largest Shia militia) was given a ceasefire order by its leader al-Sadr to stop targeting Americans and Sunnis (not sure what led to this decision), and now he is busy studying to become an Ayatollah.
(2) The factions were weary of civil war and supporting Al Qaeda, plus they are more segregated now so it's harder for them to murder each other daily.
(3) General Petraeus was under strong pressure to reduce US casualties, so he and others embraced a plan to cut deals with the Sunni insurgents. Instead of fighting with them daily, we would bribe them to work for us.
The strongest reason they cite is number 3. Nowhere in their article did they mention Sunnis reacting to the Congressional election (sorry Obama). And surging 30,000 troops into greater Baghdad and the Sunni triangle (a region of over 10 million Iraqis) probably couldn't account for the widespread, night-and-day reduction of violence (sorry Bush). So from the evidence at hand, it appears that the Bush surge and 2006 elections are not the chief causes. Violence was inevitably on the decline due to demographic factors in Iraq (as L and I said, the nation is a lot more segregated/displaced/ethnically cleansed now) and Petraeus' clever but risky strategy of bribing Sunni militants into cooperation. Since the majority of anti-American insurgents are Sunni, this seems to make sense. And with the Mahdi Army on vacation, the few Sunnis still living in mixed neighborhoods might feel less threatened, less dependent on insurgents, and more willing to work with Americans. Actually it's the Shia Maliki government that has been vehemently protesting this initiative. Of course they don't want Americans cutting deals and arming their rivals.
I guess that is how you change behaviors during a traumatic war in the Middle East. Paying Sunni militants $10/day in the CLC program ("Concerned Local Citizens") to patrol their own neighborhoods seems affordable and practical. It takes the crosshairs and pressure off exhausted US forces, and gives Iraqis a sense of solidarity, purpose, and gainful employment (so the desperate ones aren't lured and bribed by Al Qaeda instead). If Sunnis feel that the National Police are just a corrupt Shia militia in uniform (they would be correct), then this is a better way for them to fight for their people, stand up to rivals, and try to make their homeland better. Stepping up reconstruction efforts doesn't hurt either (schools, utilities, jobs). The people need immediate, tangible compensation, which is something that the Dems in Congress didn't and can't provide. This strategy is not without concern or criticism though. In some cases, we are creating mercenaries out of fighters who were shooting at Americans a month ago. We are trusting them to do the job of US soldiers. And history tells us that empires in trouble, like Rome, are the only ones desperate enough to rely on mercenaries. Also what's stopping these Sunni CLCs from using their new found cash and arms to take revenge on Shias (as Maliki fears) or even their American employers? Analysts are worried that Petraeus' move might buy us some temporary calm in Iraq, but long-term it's a recipe for an even bloodier future civil war. Time will tell.
Ignorance also produces false assumptions and fears. Your assertion that an American withdrawal is undesirable among Sunnis is also dubious. It was their country before we deposed Saddam, and the anti-American insurgency is mostly Sunni. Contrary to some allegations, most attacks on American soldiers came from Sunni Iraqis, not foreigners or Iranian-backed Shias. The Al Qaeda sympathizers who remain are also Sunni (though Qaeda has tried to kill Sunni leaders that cooperate with the US). They are also probably quite upset at us for losing power through de-Ba'athification, as well as the corrupt political processes that brought unfit leaders like Chalibi and Maliki into positions of influence. This 2006 poll suggests that Sunnis are the most eager ethnic group to see the Yanks gone ASAP, while the semi-autonomous Kurds are the least, especially now with the Turkey-PKK problem ( http://thinkprogress.org/2006/09/27/iraqis-poll/ ).
Yes I think some Sunnis are concerned with Shia domination without the US to keep a lid on things, but it's almost moot since the country is already Shia-dominated. Don't forget that Shia Muslims are a tiny minority in worldwide Islam, so there are plenty of sources of support for Iraq's Sunnis if we vacate (especially Saudi Arabia and Egypt). Sunni nations are scared shitless of a "Shia Revival" in Mesopotamia, and will strongly oppose any Iran-Iraq-Hizbullah axis from developing. As bizarre as it seems, Sunnis are more hostile to Iran than we are, so they'll be damned to let Iran enjoy the spoils if America leaves. Let us also not forget that some Sunnis (including former Al Qaeda in Iraq leader Zarqawi) really view Shias as vile heretics, and may want to kill them more than Americans or Jews. No matter what, president 44 has to do a better job reading up on Islam and Middle East history (or at least appoint the right advisors).
http://www.cfr.org/publication/11179/shia_revival.html
http://www.npr.org/templates/story/story.php?storyId=7309835 (I already blogged about this piece)
Obama's pdf that you forwarded doesn't say anything new or insightful on Iraq (though his humanitarian agenda is very commendable), and a total withdrawal by 2009 is not as easy as some Dems make it sound. How much would we leave behind? The training and equipping of Iraqi security forces is incomplete. Just the process of cleaning (desert dust is murder on machinery) and packing up all our stuff would take over a year. It would also be very expensive (not as expensive as continuing the war for years, of course), and we are just talking about withdrawing to neighboring Kuwait, not Camp Pendleton. And our forces en route to Kuwait probably won't be able to stop along the way on their 350 mile journey through scorching desert, due to security concerns (unless we erect a series of huge fortified "rest stops" for them). Have Obama or others given this much thought? I am tired of incomplete planning and empty promises, but I better get used to it since this is campaign season after all.
http://www.npr.org/templates/story/story.php?storyId=12360390 (Iraq withdrawal logistics)
------
From NPR on the surge and causes of reduced violence:
"The real debate, in my mind ... (is) not whether things are better in Iraq — they are unquestionably like night and day, (the) change in the level of violence. The real question is what caused it," McCaffrey said.
What caused it is open to debate. "Improvements in security are a result of the greater number of coalition and Iraqi security forces and the strategy that guides the operations we conduct," Petraeus says.
But some current and former military officers with whom NPR spoke disagree. McCaffrey and other former officers say that a surge of 30,000 additional troops into a country of 30 million could never have enough of an impact alone to turn things around. "The least important aspect of the so-called change in strategy was the surge," McCaffrey says.
Once Insurgents, Now Allies
If it wasn't just the surge, how did it happen? It could be, in part, exhaustion among Sunnis, tired of fighting and dying. Or also, in part, a cease-fire declared by the largest Shiite militia, others say. But another part, and possibly the most significant, can be traced to the end of last May. That month, 126 U.S. troops died; it was the second deadliest month for U.S. forces during the war. Petraeus was under pressure to reduce those casualties.
"Petraeus seems to have concluded that it was essential to cut deals with the Sunni insurgents if he was going to succeed in reducing U.S. casualties," Macgregor says.
The military now calls those "deals" the Concerned Local Citizens program or simply, CLCs. It's a somewhat abstract euphemism. The CLC program turns groups of former insurgents, including fighters for al-Qaida in Iraq, into paid, temporary allies of the U.S. military.
Creating a New Force
Some 70,000 former insurgents are now being paid $10 a day by the U.S. military. It costs about a quarter billion dollars a year. It's a controversial strategy, and Macgregor warns that it's creating a parallel military force in Iraq that is made up almost entirely of Sunni Muslims. "We need to understand that buying off your enemy is a good short-term solution to gain a respite from violence," he says, "but it's not a long-term solution to creating a legitimate political order inside a country that, quite frankly, is recovering from the worst sort of civil war."
That civil war has subsided, for now. It's diminished because of massive, internal migration, a movement of populations that has created de-facto ethnic cantons. "Segregation works is effectively what the U.S. military is telling you," Macgregor says. "We have facilitated, whether on purpose or inadvertently, the division of the country. We are capitalizing on that now, and we are creating new militias out of Sunni insurgents. We're calling them concerned citizens and guardians. These people are not our friends, they do not like us, they do not want us in the country. Their goal is unchanged."
Macgregor, a decorated combat veteran and a former administration adviser, articulates a view that is privately shared by several former and current officers. It's not that they believe the plan isn't working. It's that they see it as a dangerous one with potentially destructive consequences. But McCaffrey argues that at $10 a day, the gamble is worth taking. "We can pay them that for 10 years if we had to," he says. "Better we provide an infusion of cash where we're keeping a local night watchman for us on duty than we conduct combat operation. Money isn't even a factor we ought to take into account."
A Temporary Freeze
Macgregor says that people are desperate for success. "They want to believe that we have done something positive for the population of Iraq. That we are helping them to become something positive," he says. "The thing that worries me most of all is what happens over the next 12 to 24 months in Iraq. Could we not have made matters worse in the long term? Are we not actually setting Iraq up for a worse civil war than the one we have already seen?"
Iraq can be seen as a conflict temporarily frozen. The largest Shiite militia group has temporarily sworn-off attacking both the U.S. military and Sunni Muslims. Sunni groups are, for the time being, allying themselves with the United States for a fee. And in the north, Kurdish militants are focused on Turkey rather than Iraq. It is a waiting game. And still, quietly, each group builds its own armory, preparing for the inevitability of fighting another day.
Was Ahmadinejad misquoted about Israel?
http://greatreporter.com/mambo/content/view/1531/1/
24/. Media Misquotes Threat From Iran's President
A mistranslated quotation attributed to Iran's President Ahmadinejad, which threatened that, "Israel must be wiped off the map," has been spread around the world. Ahmadinejad's actual statements, however, were significantly less threatening.
So what did Ahmadinejad actually say? To quote his exact words in farsi:
"Imam ghoft een rezhim-e ishghalgar-e qods bayad az safheh-ye ruzgar mahv shavad."
That passage will mean nothing to most people, but one word might ring a bell: rezhim-e. It is the word " Regime", pronounced just like the English word with an extra "eh" sound at the end. Ahmadinejad did not refer to Israel the country or Israel the land mass, but the Israeli regime . This is a vastly significant distinction, as one cannot wipe a regime off the map. Ahmadinejad does not even refer to Israel by name, he instead uses the specific phrase "rezhim-e ishghalgar-e qods" (regime occupying Jerusalem).
So this raises the question.. what exactly did he want "wiped from the map"? The answer is: nothing. That's because the word "map" was never used. The Persian word for map, "nagsheh", is not contained anywhere in his original farsi quote, or, for that matter, anywhere in his entire speech. Nor was the western phrase "wipe out" ever said. Yet we are led to believe that Iran's President threatened to "wipe Israel off the map", despite never having uttered the words "map", "wipe out" or even "Israel".
THE PROOF:
The full quote translated directly to English:
"The Imam said this regime occupying Jerusalem must vanish from the page of time".
Word by word translation:
Imam (Khomeini) ghoft (said) een (this) rezhim-e (regime) ishghalgar-e (occupying) qods (Jerusalem) bayad (must) az safheh-ye ruzgar (from page of time) mahv shavad (vanish from).
Here is the full transcript of the speech in farsi, archived on Ahmadinejad's web site
www.president.ir/farsi/ahmadinejad/speeches/1384/aban-84/840804sahyonizm.htm
This is the passage that has been isolated, twisted and distorted so famously. By measure of comparison, Ahmadinejad would seem to be calling for regime change, not war.
----------
24/. Media Misquotes Threat From Iran's President
A mistranslated quotation attributed to Iran's President Ahmadinejad, which threatened that, "Israel must be wiped off the map," has been spread around the world. Ahmadinejad's actual statements, however, were significantly less threatening.
So what did Ahmadinejad actually say? To quote his exact words in farsi:
"Imam ghoft een rezhim-e ishghalgar-e qods bayad az safheh-ye ruzgar mahv shavad."
That passage will mean nothing to most people, but one word might ring a bell: rezhim-e. It is the word " Regime", pronounced just like the English word with an extra "eh" sound at the end. Ahmadinejad did not refer to Israel the country or Israel the land mass, but the Israeli regime . This is a vastly significant distinction, as one cannot wipe a regime off the map. Ahmadinejad does not even refer to Israel by name, he instead uses the specific phrase "rezhim-e ishghalgar-e qods" (regime occupying Jerusalem).
"Regime occupying Jerusalem" is just a circumlocution which still identifies Israel. That he refuses to dignify the nation by calling it by name seems more, rather than less, ominous. When you raise a farm animal they always recommend not giving it a name, because it makes the process of slaughtering it more emotionally charged (except Andrew and his cow "Hamburger"!). Referring to it as a regime rather than a nation/country allows him to dehumanize the state in the same way Americans do with nations we don't like: Castro's regime, Saddam's regime, the North Korean regime ... "regime" is a word you use to describe an evil government of bad people.
So this raises the question.. what exactly did he want "wiped from the map"? The answer is: nothing. That's because the word "map" was never used. The Persian word for map, "nagsheh", is not contained anywhere in his original farsi quote, or, for that matter, anywhere in his entire speech. Nor was the western phrase "wipe out" ever said. Yet we are led to believe that Iran's President threatened to "wipe Israel off the map", despite never having uttered the words "map", "wipe out" or even "Israel".
This seems kind of asinine to me. "Wipe off the map" is a colloquialism, and I'd be surprised if it directly translated into Arabic. There's always a challenge in translating about how you convey connotations - doing a literal, word-for-word translation often omits much of the meaning of the original statement. But making a big deal about how the word "map" was NEVER USED seems juvenile, at best.
For example, think about the Greek phrase "come home with your shield, or on it". It's understandable with a simple word-for-word translation, but there's additional contextual information you have to know about the culture in order to understand not just what the speaker said, but what the speaker meant. Translating those sorts of phrases is non-trivial.
THE PROOF:
The full quote translated directly to English:
"The Imam said this regime occupying Jerusalem must vanish from the page of time".
Word by word translation:
Imam (Khomeini) ghoft (said) een (this) rezhim-e (regime) ishghalgar-e (occupying) qods (Jerusalem) bayad (must) az safheh-ye ruzgar (from page of time) mahv shavad (vanish from).
"Must vanish from the page of time" ... it doesn't seem like too much of a stretch to imagine this phrase is a similar colloquialism to "wipe off the map". Vanishing from the page of time doesn't seem like a nice thing to have happen to you. It's a slightly different verb construction which may give it a different connotation: "must be wiped from the map" is in the passive voice, and implies an actor who performs the wiping. This sort of passive voice in most official documents tends to imply that the speaker identifies with that unnamed actor, though without directly taking responsibility for the statement (seeing the passive voice in any corporate/political communication should set off a red flag). "Must vanish from the page of time" doesn't have the same implication of an actor who would make the regime vanish, so it's a bit less threatening.
But that sort of analysis is pretty deeply rooted in English. It's not obvious what the connotation of the phrase would be to a native Iranian. The translation of that phrase into the colloquialism "wiped off the map" depends on a lot of contextual knowledge on the part of the translator. It may be the proper way of translating the meaning, and it may be an overstatement. But it's certainly not the sort of thing you can prove or disprove as simply as getting out your Arabic-English dictionary and doing some simplistic word-for-word translation.
Here is the full transcript of the speech in farsi, archived on Ahmadinejad's web site
www.president.ir/farsi/ahmadinejad/speeches/1384/aban-84/840804sahyonizm.htmThis is the passage that has been isolated, twisted and distorted so famously. By measure of comparison, Ahmadinejad would seem to be calling for regime change, not war.
Perhaps the author should distinguish between regime change and war. I've only seen a couple instances of "regime change" in my lifetime, but they weren't happy, frolicking sorts of affairs. Sounds like the speaker is using the same set of linguistic tricks our own dear president did in justifying the regime change which happened to Iran's neighbor. It's somewhat mysterious to me why the author believes Iran's proposed regime change for Israel would be any less bloody.
------------
While I don’t personally believe that an Iran driven Israeli regime change would be peaceful, it is not hard to imagine someone wanting a regime change WITHOUT destroying the country. For instance, I imagine a great many Americans want a regime change in…America! The GOP and religious right and so on could I think easily be considered a new regime in America. So with Israel, there are particular policies that one may adhere to that would be extremely distasteful to Iran (expanding borders for example). The unfortunate thing is that Iran is still a theocracy and so it is basically a given that they hate Jews, as well as any other religion that is not their own. So when they say regime change that is probably a p.c. way of saying die infidel die. But the fact of the matter is that the American media didn’t offer the real words and then explain to you why they mean what they mean, they skipped step B through Y and went to Z, Iran wants to destroy Israel. So it seems to me the American media definitely got away with telling a half truth, sometimes more damaging than a full lie. I’ll throw this sentence to my Iranian buddy at work and see what he things it means. Not word for word, but a description of the meaning that it is meant to convey. I’ll see what he comes up with.
---------
This was a link from M's site so I have no familiarity with the source, nor do I speak Farsi (btw the predominant language in Iran is Farsi, not Arabic, because Persians are not of Arab descent). Maybe we shouldn't read into things so much or bother with semantics/interpretations. I think the more interesting question is, did someone deliberately embellish the translation of the quote so as to make Ahmadinejad appear more anti-Semitic, more crazy, and more repugnant to Western sensibilities? If so, then someone has an agenda to demonize Iran and its leader, presumably to increase popular support for anti-regime activities. And contrary to your assertions, "regime" does not imply evil government, and regime change does not have to be violent (more to come on this below). If not, then the author is a propagandist (to the other extreme) to try to mask Ahmadinejad's liabilities. So Iran's leader is a vocal anti-Semite who threatens his enemies. That makes him no worse than our allies Mahmoud Abbas or some Saudi leaders (who still haven't officially recognized Israel). Premier Khruschev threatened to "bury" America (and unlike Iran, the Soviets actually had the ability to do so), but did he? Nixon probably said nastier things about the Jews on his White House tapes, yet his administration gave Israel plenty of economic and military aid. Words are not actions.
I don't think it is useful to "psychologize" Ahmadinejad, armed with more assumption than evidence, to decipher the hidden connotations of him not calling Israel by name. It could have just been a slip of the tongue or a euphemism (like in America we call Israel "The Jewish State" but we are not trying to dehumanize them by doing so).
Regime change can be bloody but doesn't have to be. The Soviet Union was supposed to be the godless, belligerent "Evil Empire" bent on world domination and such. They had a bloodless regime change. East Germany called it quits nonviolently. There were also bloodless regime changes and movements towards greater democracy and less military rule in South Africa, South Korea, and Indonesia. The British and French granted several of their Caribbean and African colonies independence without any fighting. Do I think the fairly right-wing government in Israel will go down without a fight? Definitely not, but regime change does not equal war. Under Clinton, the official State Department policy towards the 3 Axis of Evil nations was "regime change". Did we fire a single shot? There are peaceful diplomatic and economic ways to encourage regime change. Do I think Iran would favor those choices over military aggression if they had the chance? Who knows and it's just speculation anyway. Bottom line, calling for regime change in another nation is not a declaration of war. Sometimes regimes are toppled violently, but often from the inside and not due to a foreign invasion.
"Regime" is just a word for a ruling body. In the Western mass media it has come to have a negative connotation, but really we can't assume that in all cases. There's nothing in that word that suggests "evil", whether Iran refers to the regime in Jerusalem or when Bush refers to the regime in Tehran. But it does seem that our press and politicians use "regime" to characterize unfriendly governments more often than allies. Though to me it's silly to blanket-label governments as good or evil. All governments do some good and some bad at various times. How do we draw the line when a regime is good or evil? Is it all in the eye of the beholder? Maybe in that case, we should keep "regime" as a neutral word as it was originally intended.
Webster:
re·gime 
1. a mode or system of rule or government .
2. a ruling or prevailing system.
3. a government in power.
4. the period during which a particular government or ruling system is in power.
5. Medicine/Medical. regimen (def. 1).
This year, 60 Minutes had a lengthy interview with Ahmadinejad that some members of the Jewish American community were very upset at ABC for airing. The host prodded Ahmadinejad several times to qualify what he meant in his previous speech when he supposedly said "wipe Israel off the map". But he didn't respond. If he and the rest of Iran are such anti-Semites, then why didn't he say anything derogatory on American mass media when he would reach the greatest audience to disseminate his "hate"? When he was invited to Columbia to speak (and NYC is home to more Jewish people than Tel Aviv), he again refrained from any anti-Israeli conversation. If he was such a racist and extremist, why would he back down from two of the biggest speaking forums in his life? Instead he discussed other socio-political issues.
Look, I make no apologies for Ahmadinejad. I think he's a poor leader and an ineffective politician, but he has a brain. He may say ridiculous things like, "There are no gays in Iran", but he is not a wacko. It takes some guile and skill for an engineering professor to become mayor of Tehran, climb the political ladder, tame the Ayatollahs, and eventually become president, even though his popularity numbers are poor and on the decline, and he may not win re-election unless he delivers on his promise to improve their economy. He got slammed in the recent Iranian election, where candidates loyal to Ahmadinejad were summarily voted down. To his peril probably, Ahmadinejad has focused his administration on standing up to Israel and America, mostly in the form of nuclear research as a matter of national prestige. The more we tell them "no", the more they want to continue. The more we criticize and try to isolate them, the harder it is for moderate, reformist voices to be heard.
We haven't approached diplomacy seriously or maturely, and that move has been counter-productive to our "regime change" agenda. Even Reagan invited Gorby to Santa Barbara against the wishes of the hawks in his party, but history validated his decision. And we won't even have a meet-and-greet among Iranian and US ambassadors? Ahmadinejad has invited Bush to discuss and debate on multiple occasions, but to no avail. Unlike North Korea and Saddam's Iraq, Iran under Ahmadinejad has also engaged in a lot of clever and productive diplomacy to improve ties with Russia, China, and Europe, as well as reach out to Sunni Muslim nations. His government has also bolstered Syria and Shia groups in Iraq and Lebanon, in constructive or damaging ways depending on whom you ask. Even Iraqi PM Maliki said that Iran was a positive influence on his country. Iran has millions of dollars worth of contracts with the Iraqi government, such as setting up a telecom network, and thousands of Iranians make pilgrimages to holy Shia sites within Iraq, contributing to the tourism economy. But when a reporter asked Bush about Maliki's statement, he replied, "If he truly believes that, then the PM and I need to have a heart-to-heart discussion."
----------
And it's not just "biased" Muslims who are protesting the alleged Ahmadinejad misquoting. The Guardian is one of the best investigative reporting sources in the world.
If Iran is ready to talk, the US must do so unconditionally
It is absurd to demand that Tehran should have made concessions before sitting down with the Americans
Jonathan Steele
Friday June 2, 2006
The Guardian
----------
Well, after having our profs incessantly make fun of the G. I wouldnt exactly
call the paper one of the best. Its better than most here in the UK, but thats
like saying CNN is better than Fox; true but still reveals just how crappy the
state of journalism in the UK is. The only paper here Id marginally trust to tie
their own shoes is the FT...
I agree our Iran position is basically retarded. I
think I saw an analysis that made a lot of sense to me; basically that Iran is
maybe Israel's largest security concern at the moment (which isn't to say that
it is unmanageable - the Israelis are worried but don't have the same hard-on
for war that the admin does right now, probably because they have to live with
the consequences). However, it is not our largest security concern (Iraq,
Afghanistan rank much higher obviously), and that the admin is basically
conflating the two problems.
Iran is a somewhat problematic player in the regional arena that concerns the US
a lot, but, played right, could work towards our ends (they aren't interested in
letting a bunch of crazies run Iraq either, because then they'd have no
influence), with the proper carrot and stick. However, treating Iran as our
greatest exisential threat more or less precludes this kind of nuance. So we're
shit up a creek in Iraq without their help and have no leverage on them except
war. Great. Obama's thoughts in this regard I thought were actually quite
interesting (I think he's best in class of the major three democrats wrt foreign
policy actually).
Q. The Bush administration has little influence on Iranian behavior in Iraq. How
would you elicit cooperation from Iran and Syria that the Bush administration
has failed to obtain? Would we offer assurances that we would not be engaged in
a policy of regime change. What would you do?
A. I think you foreshadowed my answer. You’ve got the Bush administration
expecting Crocker to make progress on the very narrow issue of helping Shia
militias at the same time as you’ve got Dick Cheney giving a speech saying it is
very likely that we may engage in military action in Iran and the United States
Senate passing a resolution, suggesting that our force structure inside Iraq is
dependent in someway on blunting Iranian influence. You can’t engage in
diplomacy in isolation. There’s got to be a broader strategic context to it.
The Iranians and the Syrians are acting irresponsibly inside Iraq. They perceive
that it is a way to leverage or impact or weaken us at a time when they’re
worried about United States action in a broader context. I’ve already said, I
would meet directly with Iranian leaders. I would meet directly with Syrian
leaders. We would engage in a level of aggressive personal diplomacy in which a
whole host of issues are on the table. We’re not looking at Iraq, just in
isolation. Iran and Syria would start changing their behavior if they started
seeing that they had some incentives to do so, but right now the only incentive
that exists is our president suggesting that if you do what we tell you, we may
not blow you up.
My belief about the regional powers in the Middle East is that they don’t
respond well to that kind of bluster. They haven’t in the past, there’s no
reason to think they will in the future. On the other hand, what we know, is
that, for example, in the early days of our Afghanistan offensive, the Iranians
we’re willing to cooperate when we had more open lines of dialogue and we were
able to identify interests that were compatible with theirs.”
Q. So what assurances would you offer them to get them to be more cooperative –
try to convince them that the U.S. would not pursue regime change?
A. There are a series of serious problems that we have. Iraq is one. Their
development of nuclear weapons is another. Their support of terrorist activities
– Hezbollah and Hamas are a third. On all these fronts, we’ve got severe issues
with their actions. We expect them to desist from those actions, but what we are
also willing to say is as a consequence of their changes in behavior, we are
willing to examine their membership in the W.T.O., we are willing to look at how
can we assure that they’ve got the kinds of economic relationships that can help
grow their economy.
We are willing to talk about certain assurances in the context of them showing
some good faith. I think it is important for us to send a signal that we are not
hell bent on regime change, just for the sake of regime change, but expect
changes in behavior and there are both carrots and there are sticks available to
them for those changes in behavior. Where those conversations go is not yet
clear, but what is absolutely clear is that the path that we are on now is not
going to make our troops in Iraq safer. Iran has shown no inclination to back
off of their support of Shia militias as a consequence of the threats that
they’ve been receiving from the Bush and Cheney administration. If anything, it
probably accelerates their interest in trying to make a situation in Iraq as
uncomfortable as possible for us.”
Q. Would you be seeking a comprehensive rapprochement or if Iran insisted on
pursuing their weapons programs, which is entirely possible, would you still try
to carve out some sort of side arrangement that would pertain to stability? And
what would you be prepared to offer?
A. I can’t anticipate what their response would be. What I can anticipate is
that the act of us reaching out to them in a series [sic] way, empowered by the
Oval Office, not that we’ll have Crocker over here doing something, while we do
something else, but a serious, coordinated diplomatic effort will, if nothing
else, change world opinion about our approach to Iran and will strengthen our
ability should they choose not to stand down on the nuclear issue, for example,
or to continue to engage in hostile activity even if directly inside Iraq, that
it greatly strengthens our position with our allies – both in the region and
around the world and strengthens our capacity to impose tougher economic
sanctions and take other steps, not in isolation, but as part of a broader
international effort.
---------
Well let's distinguish between populist media and professional publications, and probably your profs prefer the latter. Clearly the latter is superior in quality of research, writing, academic expertise, etc. The Guardian may not be a great paper, but it is a good source of investigative journalism, something sadly lacking from most mainstream US news sources apart from maybe the Post or the NYT. TV news is BS as you said. But the Guardian will actually report on controversial, under-reported stories, and they don't pull punches. Maybe they sensationalize, exaggerate, and muckrake at times, but at least they cover more interesting stories than "What did Britney do today?"
Another difference worth noticing is between public and for-profit media. NPR/PBS will actually send underpaid correspondents and film crews to distant shitholes in Zimbabwe, Myanmar, or Chiapas to cover a story if the editors deem it newsworthy. CNN wants to manage costs so they may prefer to send their reporters 10 miles to the White House press room to get "official statements" from some government hack, instead of pursuing the story at its source. Buzzworthy stories like Iraq or Darfur might warrant an actual business trip here and there. But sorry for going off on a tangent.
Yeah totally, and we've pulled the same crap with Hamas, Castro, and other undesirables. What kind of BS infantile Condi Rice diplomacy is this? "If Iran stops its nuclear research and support of terror groups, then we will talk. We refuse to even meet with you until you make all the concessions that we asked for." Then there would be nothing more to negotiate! It's like expecting a commitment of marriage before you go on a first date. Even I know that is not how diplomacy works. It's like if the Iranians demanded that we pull out of Iraq, cut off aid to Israel, and dismantle our Mideast/Central Asian bases before they agree to sit down for talks with us. But maybe the Bushies don't want to negotiate at all, and just conjured up this "excuse" to blame the lack of communication on the "uncooperative, stubborn Iranians bent on nuclear ambitions".
Cheney, Giuliani, and others have not minced their words and basically declared that war is the best option, although it's hard to separate election-year grandstanding with actual foreign policy proposals. Iran-hating has become ever hotter for the GOP candidates (and the Dems to some extent) than illegals-bashing. That quack Tom Tancredo even went so far as to pronounce that he might threaten the destruction of Mecca and Medina to deter Iranian nuclear research and terrorism from "Islamofascists" (here's an interesting op-ed about that moronic term: http://www.iht.com/articles/2007/11/06/opinion/edislam.php). As you said, Obama sounds promising because he actually isn't scared to admit that he'd want to TALK with Iran, offer quid-pro-quo concessions, and work out our differences peacefully. Though his stance on Pakistan in the war on terror leaves much to be desired (see below).
The Iranians are definitely not saints, but we mustn't underestimate their clever diplomacy. They have played the stalling, PR, and misdirection games well with the UN and IAEA, buying them time to continue research, delay meaningful sanctions/punishments, and throw the dogs off the scent. They also have China and Russia in their corner (plus Japan and other powerful nations are major importers of Iranian hydrocarbons). They may not sing Iran's praises, but they are definitely not so enthusiastic about stricter sanctions (as is the case with Sudan too). And unlike Iraq, we can't go it alone to halt Iran's nuclear progress. How do we attack nuclear knowledge anyway? We can try to bomb a facility, but we can't bomb it out of their memory. All the data is backed up and they can just rebuild and continue somewhere more fortified deeper in the mountains. Except now we've started a war, they've sent agents on reprisal attacks against us and our allies, and all the diplomatic options are off the table. At best our bombing will delay their nukes, and may even accelerate research (even moderate Iranians will see that the American threat is real, nationalism will dominate, and they'll push forward with even greater haste and motivation).
But if any of you have seen the movie "Michael Clayton", you'd appreciate this reference. Clooney is a "problem fixer" for a high-powered NYC law firm, and his life was threatened because he uncovered a secret about a company's big lawsuit. He tells them, "I am not the guy you kill; I am the guy you buy. Are you so stupid that you can't see that?" Iran is not a nation we attack; it's a nation we bribe. I know that sounds "un-American", but it may be the best option. As you said, the stick won't work with Iran because of their influence in Iraq, geographic/strategic advantages, and oil wealth. The carrot will work because they are clearly in need of economic assistance, enhanced trade, security assurances, and such. They are scared of outside attack and more scared of their own people revolting (hence the state-sponsored repression). Like East Germany or North Korea, no regime can survive if it spends the bulk of its energy policing and deceiving its own people. The theocracy can't last in its current form, and we can help the people without propping up the government. We can facilitate reforms and a peaceful transition for Iran to become a constructive, responsible, non-nuclear member of the international community. But our policy of isolation and name calling accomplishes just the opposite.
If political forces in Washington and Tel Aviv merge our two distinct national security priorities into one, we do so at both our perils. As you said, Israel's Mideast security priorities are: prevent Iranian influence and armaments from growing to dangerous levels, keep Hamas/Hizbullah down and out of the political process (and by extension, keep the Palestinians impoverished/fragmented), and then relative stability/coexistence with Saudi Arabia/Syria/Iraq. Our priorities are: counter Islamic extremism/Al Qaeda, fix Iraq, fix Afghanistan, two-state solution in Palestine, and then regime change in Iran. We are still bosom buddies despite our conflicting interests. Olmert and Israel fumbled in their invasion of Lebanon, and much of the Muslim world saw that war as a struggle between Iranian and American proxies for regional dominance. America's diplomatic shielding of Israel from UN censure makes us appear partisan and hypocritical to the Muslims we are trying to persuade to renounce violence and embrace reforms. During the first year of our occupation, Iraqis would often refer to US forces as "Jews". I am not saying the mess we've made in the Middle East since WWII is all Israel's fault, but I think we all realize that US foreign policy in the region would be vastly different (and probably better) if we totally divorced ourselves from Israel's national priorities (as the EU has).
In closing, I do like Obama and he has always opposed the Iraq War. But I worry about his ability to withstand the GOP and Hillary's attacks yet still appear electable (since image is more important than substance to the typical American voter). He was so desperate to counter the critics and demonstrate that he can be "tough minded" on foreign policy, that he uttered such an idiotic, ridiculous thing: he wouldn't seek the Pakistani government's approval to launch military operations within that nation in pursuit of terrorists. I still don't think he has recovered politically from this gaffe (maybe his "flip flopper" moment?). In Karachi they burned American flags in response.
He should know better to watch his tongue when discussing Mideast issues. His Dem rivals are eager to pounce on any misstep from "Mr. Clean", and even casual statements can inflame temperamental Muslim sensibilities, as was the case with the Mohamed cartoons. It was a stupid idea to begin with that wasn't even worth mentioning. As I said before, an uninvited US attack within Pakistan may accomplish short-term strategic goals, but will ultimately serve to increase anti-American extremism and violent blowback.
http://www.cnn.com/2007/POLITICS/08/03/obama.pakistan.ap/index.html
Obama terror vow angers Pakistan
ISLAMABAD , Pakistan (AP) -- Pakistan has criticized U.S. presidential candidate Barack Obama for saying that, if elected, he might order unilateral military strikes against terrorists hiding in this Islamic country.
Top Pakistan officials said Obama's comment was irresponsible and likely made for political gain in the race for the Democratic nomination.
"It's a very irresponsible statement, that's all I can say," Pakistan's Foreign Minister Khusheed Kasuri told AP Television News on Friday. "As the election campaign in America is heating up we would not like American candidates to fight their elections and contest elections at our expense."
Also Friday, a senior Pakistani official condemned another presidential hopeful, Colorado Republican Tom Tancredo, for saying the best way he could think of to deter a nuclear terrorist attack on the U.S. would be to threaten to retaliate by bombing the holiest Islamic sites of Mecca and Medina.
Obama said in a speech Wednesday that as president he would order military action against terrorists in Pakistan's tribal region bordering Afghanistan if intelligence warranted it. The comment provoked anger in Pakistan, a key ally of the United States in its war on terror. Watch Obama's speech on fighting terrorism »
Many analysts believe that top Taliban and al Qaeda leaders, including Osama bin Laden, are hiding in the region after escaping the U.S.-led invasion of Afghanistan in 2001.
President Gen. Pervez Musharraf has come under growing pressure from Washington to do more to tackle the alleged al Qaeda havens in Pakistan. The Bush administration has not ruled out military strikes, but still stresses the importance of cooperating with Pakistan.
"There are terrorists holed up in those mountains who murdered 3,000 Americans. They are plotting to strike again," Obama said. "If we have actionable intelligence about high-value terrorist targets and President Musharraf will not act, we will."
The Associated Press of Pakistan reported Friday that Musharraf was asked at a dinner at Prime Minister Shaukat Aziz's house on Thursday about the potential of U.S. military operations in Pakistan. Musharraf told guests that Pakistan was "fully capable" of tackling terrorists in the country and did not need foreign assistance.
Deputy Information Minister Tariq Azim said no foreign forces would be allowed to enter Pakistan, and called Obama irresponsible.
"I think those who make such statements are not aware of our contribution" in the fight on terrorism, he said.
Pakistan used to be a main backer of the Taliban, but it threw its support behind Washington following the September 11, 2001 attacks.
Since then, Pakistan has deployed about 90,000 troops in its tribal regions, mostly in lawless North and South Waziristan, and has lost hundreds of troops in fighting with militants there.
But a controversial strategy to make peace with militants and use tribesmen to police Waziristan has fueled U.S. fears that al Qaeda has been given space to regroup.
In Pakistan's national assembly on Friday, Minister for Parliamentary Affairs Sher Afgan said he would bring on a debate next week on recent criticism of Pakistan from several quarters in the U.S., including Tancredo's remarks.
It was a matter of "grave concern that U.S. presidential candidates are using unethical and immoral tactics against Islam and Pakistan to win their election," Afghan said.
Tancredo told about 30 people at a town hall meeting in Osceola, Iowa, on Tuesday that he believes that a nuclear terrorist attack on the U.S. could be imminent and that the U.S. needs to hurry up and think of a way to stop it.
"If it is up to me, we are going to explain that an attack on this homeland of that nature would be followed by an attack on the holy sites in Mecca and Medina. Because that's the only thing I can think of that might deter somebody from doing what they otherwise might do," he said.
http://www.guardian.co.uk/pakistan/Story/0,,2141482,00.html?gusrc=rss&feed=12
Pakistan criticises Obama after warning on military strikes
Ewen MacAskill in Washington
Saturday August 4, 2007
The Guardian
The response from Pakistan was mirrored in criticism from Hillary Clinton and other Democratic rivals.
Mr Obama, in a speech on Wednesday, said President George Bush had chosen the wrong battlefield in Iraq and should have concentrated on Afghanistan and Pakistan.
He said he would not hesitate to use force to destroy those who posed a threat to the United States, and if the Pakistani president, Pervez Musharraf, would not act, he would.
That speech may have played well with Democratic activists and the public at large. But before any poll could be held to test reaction, Mr Obama showed uncertainty on Thursday in an interview with the Associated Press.
He appeared to be caught off guard when he was asked if he would use nuclear weapons against al-Qaida in Pakistan.
Mr Obama replied: "I think it would be a profound mistake for us to use nuclear weapons in any circumstance." He added: "... involving civilians".
Demonstrating a degree of unpreparedness, he went on to say: "Let me scratch that. There's been no discussion of nuclear weapons. That's not on the table."
Ms Clinton pounced, portraying herself as more savvy and dependable on foreign affairs.
"Presidents should be very careful at all times in discussing the use or non-use of nuclear weapons," she said.
"Presidents, since the cold war, have used nuclear deterrence to keep the peace. And I don't believe that any president should make any blanket statements with respect to the use or non-use of nuclear weapons."
Joe Biden, another Democratic rival, described Mr Obama as naive, while Chris Dodd, who has only an outside chance of securing the nomination, said he was inconsistent.
Ms Clinton and John Edwards are almost neck and neck with Mr Obama in Iowa, where a caucus in January will provide the first election test.
Success in Iowa could be crucial, providing the impetus for the primaries in New Hampshire, Nevada and South Carolina. A poll in the Washington Post yesterday of voters likely to attend the caucus put Mr Obama at 27%, Ms Clinton at 26% and Mr Edwards at 26%.
Mr Obama and Ms Clinton, after largely avoiding criticising one another in campaigning over the last six months, have been exchanging personal jibes almost daily for the last two weeks over foreign policy.
Both will be attending a debate in Chicago today at a convention that brings together bloggers mainly from the left. Mr Obama will almost certainly receive a warmer welcome than Ms Clinton because of her 2002 vote for the Iraq war and their foreign policy positions.
Subscribe to:
Posts (Atom)