Nineteen banks taking taxpayer money from the Treasury Department have spent $32.4 million lobbying the federal government during the first nine months of this year, their lobbying disclosure reports show.
Combined, the Treasury is investing in the banks $159 billion from the $700 billion financial rescue package approved by Congress last month. None of the banks has indicated it plans to stop lobbying.
Lobbying by the financial industry before and during the financial crisis has come under criticism from consumer groups, members of Congress and President-elect Barack Obama.
“It’s ridiculous that the perpetrators of this mess should be the people dictating to Congress how to get out of it,” says Kathleen Day of the non-profit Center for Responsible Lending.
Sen. Dianne Feinstein, D-Calif., began drafting a bill to ban recipients of government help from lobbying with taxpayer funds after learning that insurance giant American International Group continued to lobby after it received $123 billion in government-backed loans. AIG suspended its lobbying Oct. 20, company spokesman Joe Norton says.
In a statement, Feinstein said “it would be unconscionable for these companies to misuse taxpayer dollars” on lobbying. Although federal law prohibits federal loan, grant or contract money from being used for lobbying, Feinstein wants to ensure that ban also applies to the investments, loan guarantees and other emergency help offered to financial firms, Feinstein spokesman Gil Duran said.
Financial industry lobbyist Scott Talbott says such restrictions are unnecessary.
“Washington is watching. The world is watching. Companies will be able to show how they’re using the money,” said Talbott, a senior vice president of the Financial Services Roundtable, a trade group that represents 21 large banks getting government investments. “Lobbyist money will come out of other income.”
Feinstein and others criticized AIG last month for sending executives on a $440,000 retreat after getting government help. AIG so far has spent $9.5 million on lobbying this year, records show.
Norton said AIG stopped working to influence legislation and regulations, but its lobbyists “continue to monitor policy and have general discussions” with lawmakers and regulators. He said AIG has no plans to fire its lobbyists or lobbying firms.
THE BALANCE OF INFLUENCE
Lobbying expenses for first 9 months of 2008
By banks receiving government help:
Company
Lobbying amount
Government investment
Merrill Lynch{*}
$4.6 million
$25 billion
Bank of America{*}
$4.7 million
$25 billion
Citigroup
$5.6 million
$25 billion
JPMorgan Chase
$5 million
$25 billion
Wells Fargo
$2 million
$25 billion
Goldman Sachs
$4.2 million
$10 billion
Morgan Stanley
$2.4 million
$10 billion
PNC Bank
$320,000
$7.7 billion
U.S. Bancorp
$290,000
$6.6 billion
Capital One
$920,000
$3.6 billion
* — Merrill Lynch is being taken over by Bank of America, and the merged bank will receive $25 billion
Sources: Lobbying disclosure reports, U.S. Senate Office of Public Records, Financial Services Roundtable
Brokerage giant Merrill Lynch, a victim of the financial crisis, is merging with Bank of America and expects to share in the $25 billion the Treasury Department is spending to help the merged bank.
Despite its crumbling financial foundation and organizational upheaval, one thing at Merrill hasn’t changing: It has continued to lobby the federal government, including on the $700 billion financial rescue package that provided the money for the government investments in Merrill and other major banks.
President-elect Barack Obama and members of Congress have blamed lobbying by the financial industry in part for the current financial crisis. Last month, Obama said the crisis developed “when speculators gamed the system, regulators looked the other way, and lobbyists bought their way into our government.”
Jeff Peck, a lobbyist whose clients include Merrill Lynch, says financial companies will “take their lumps” before a skeptical Congress but have a right to lobby Washington policymakers.
Merrill Lynch hired the firm April 1 and paid it $160,000 through September to lobby Congress on a “blueprint for regulatory and mortgage reform,” the firm’s disclosure reports say. Merrill Lynch has spent $4.6 million in lobbying in the first nine months of the year, records show.
“When you have this kind of scrutiny and this kind of seismic change happening … everyone wants to make sure they’re part of the process that affects their business,” Peck said.
Bank of America also has no plans to quit lobbying, spokesman Scott Silvestri said.
“We continue to talk to Congress and regulators about issues of interest and concern to our company,” Silvestri said.
Lobbyists play a key role in keeping lawmakers and government decision-makers informed about how their decisions affect the lobbyists’ clients, says Scott Talbott of the Financial Services Roundtable, a group representing large banks, insurance companies and other financial institutions.
“Lobbyists provide information, and that role is more important than ever right now,” Talbott says. “You have a very complicated industry, and we’re trying to find the best solutions. … Now is not the time to be cutting back on information flow.”
Banks and other financial firms lobbied Congress for the financial rescue package, but the idea for direct government investment in financial institutions came from the Treasury Department. The American Bankers Association wrote to Treasury Secretary Henry Paulson last week to complain that healthy banks without toxic debt on their books were being pressured to take part.
“This is not a program the banking industry sought,” wrote Ed Yingling, CEO of the bankers’ group. He said some banks are worried that being coerced into taking government money will make them appear to be financially weak and that the government may decide to restrict dividend payments to shareholders.
Unlike the banks, in which the government is buying minority stakes, the feds completely took over Fannie Mae and Freddie Mac, the giant home mortgage financing companies brought down by the foreclosure crisis.
Fannie Mae and Freddie Mac spent $14.3 million on lobbying before the government halted it in September after taking over the companies at a cost of as much as $200 billion.
Lobbying by Fannie and Freddie has been bipartisan. Freddie Mac’s internal lobbyists included Kirsten Johnson-Obey, the daughter-in-law of House Appropriations Committee Chairman Dave Obey, D-Wis. Fannie Mae paid $115,000 in lobbying fees this year to a lobbying firm headed by Steve Farber, the co-chairman of the host committee for Democratic Party convention held in August in Denver.
On the Republican side, Freddie Mac paid $260,000 this year to Timmons & Co. — a lobbying firm founded by Bill Timmons, who worked in the Nixon and Ford administrations and was a top campaign aide or adviser to every presidential candidate since Richard Nixon.
Kathleen Day of the Center for Responsible Lending says financial companies’ clout should be on the decline because their mistakes led to the current crisis.
“It shouldn’t be the industry getting its way all the time,” Day said. “Look where that got us.”
To understand the meaning of the U.S. election results, it is worth looking back to the moment when everything changed for the Obama campaign. It was, without question, the moment when the economic crisis hit Wall Street.
Up to that point, things weren’t looking all that good for Barack Obama. The Democratic National Convention barely delivered a bump, while the appointment of Sarah Palin seemed to have shifted the momentum decisively over to John McCain.
Then, Fannie Mae and Freddie Mac failed, followed by insurance giant AIG, then Lehman Brothers. It was in this moment of economic vertigo that Obama found a new language. With tremendous clarity, he turned his campaign into a referendum into the deregulation and trickle down policies that have dominated mainstream economic discourse since Ronald Reagan. He said his opponent represented more of the same while he stood for a new direction, one that would rebuild the economy from the ground up, rather than the top down. Obama stayed on this message for the rest of the campaign and, as we just saw, it worked.
The question now is whether Obama will have the courage to take the ideas that won him this election and turn them into policy. Or, alternately, whether he will use the financial crisis to rationalize a move to what pundits call “the middle” (if there is one thing this election has proved, it is that the real middle is far to the left of its previously advertised address). Predictably, Obama is already coming under enormous pressure to break his election promises, particularly those relating to raising taxes on the wealthy and imposing real environmental regulations on polluters. All day on the business networks, we hear that, in light of the economic crisis, corporations need lower taxes, and fewer regulations — in other words, more of the same.
The new president’s only hope of resisting this campaign being waged by the elites is if the remarkable grassroots movement that carried him to victory can somehow stay energized, networked, mobilized — and most of all, critical. Now that the election has been won, this movement’s new missions should be clear: loudly holding Obama to his campaign promises, and letting the Democrats know that there will be consequences for betrayal.
The first order of business — and one that cannot wait until inauguration — must be halting the robbery-in-progress known as the “economic bailout.” I have spent the past month examining the loopholes and conflicts of interest embedded in the U.S. Treasury Department’s plans. The results of that research can be found in a just published feature article in Rolling Stone, The Bailout Profiteers, as well as my most recent Nation column, Bush’s Final Pillage.
Both these pieces argue that the $700-billion “rescue plan” should be regarded as the Bush Administration’s final heist. Not only does it transfer billions of dollars of public wealth into the hands of politically connected corporations (a Bush specialty), but it passes on such an enormous debt burden to the next administration that it will make real investments in green infrastructure and universal health care close to impossible. If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal.
Readers of The Shock Doctrine know that terrible thefts have a habit of taking place during periods of dramatic political transition. When societies are changing quickly, the media and the people are naturally focused on big “P” politics — who gets the top appointments, what was said in the most recent speech. Meanwhile, safe from public scrutiny, far reaching pro-corporate policies are locked into place, dramatically restricting future possibilities for real change.
It’s not too late to halt the robbery in progress, but it cannot wait until inauguration. Several great initiatives to shift the nature of the bailout are already underway, including http://bailoutmainstreet.com. I added my name to the “Call to Action: Time for a 21st Century Green America” and invite you to do the same.
Stopping the bailout profiteers is about more than money. It is about democracy. Specifically, it is about whether Americans will be able to afford the change they have just voted for so conclusively.
A decision on whether or not Iceland will receive its requested loan from the IMF has been delayed again for two days. The decision is now expected on Monday.
The Icelandic PM says he is entirely confident that the USD 2.1 billion loan will be granted, and that a wider 6 billion dollar rescue package will be agreed upon as a result.
The delay is blamed on IMF coordination with the Nordic countries. Some sources claim the IMF is waiting for the Nordic countries to commit money beforehand; while others claim the Nordic countries are waiting for the IMF’s confirmation before they pledge support.
PM Geir H. Haarde believes the weekend’s hurdles will be easy to conquer – although, if true, it could potentially become a frustrating situation.
Norway and the Faroe Islands have already pledged to lend Iceland money. The final rescue deal is expected to include cash from the IMF, the Nordic bloc, the UK, Netherlands and Poland. The participation of the USA, Russia and the European Central Bank has not yet been confirmed or denied.
The Prime Minister denies credible rumours that the delay is caused by IMF unease over Iceland’s ongoing negotiations with the Netherlands and the UK over frozen savings accounts.
Polish authorities will participate in the International Monetary Fund (IMF) economic stabilization program for Iceland, which has yet to be accepted by the IMF board, by granting Iceland a USD 200 million (EUR 155 million) loan.
This was confirmed by Magdalena Kobos, a spokesperson from the Polish Ministry of Finance, to Bloomberg news agency.
According to Bloomberg, Iceland is likely to receive an IMF-led emergency loan of around USD 6 billion (EUR 4.7 billion). In addition to Poland, the Scandinavian countries, Britain and the Netherlands will participate in granting the loan to Iceland.
According to late-breaking news fromvisir.is, Icelandic Prime Minister Geir H. Haarde announced at a governmental meeting this morning that he had not been made aware of Poland’s intentions to offer Iceland a USD 200 million loan.
Barack Obama has run perhaps the best organized and most inspiring of presidential campaigns in US political history. He has risen above sleazy political tactics, challenged stereotypes, eschewed divisiveness, focused on issues that are important to Americans, and maintained his poise and principles in the face of tremendous pressure from his opponents. It has been truly awe-inspiring and admirable.
There is little wonder that almost 53% of American voters and perhaps a larger percentage of the world population have found themselves strongly attracted to Barack Obama. He has become a shining beacon of “hope” and “change” for a country in a crisis of self-confidence, and a world participating vicariously through the blown up “reality-TV” of American presidential elections.
Without taking anything away from the greatness of Obama’s achievement, and the historical importance of this event for American culture and identity, I feel constrained to point out that those who think an Obama presidency will improve the way that the United States has been engaging with the world may need to take a reality-check.
I say this as one who instinctively likes Barack Obama, has tremendous respect and admiration for him, shares with him the same alma mater, has close friends and relatives all across the United States, and has followed the campaign speeches, events and reporting on the US election with pathological interest.
I am addressing this article only to those who are already aware of the many ways in which the United States has been uniquely responsible for undermining international law, stability, peace and prosperity in the World. Those who are offended that I could even make such a suggestion should investigate elsewhere, and read no further.
The insight I share is a simple one: nothing that Barack Obama has done or promised gives rise to the “hope” that an Obama presidency will usher in the “change we need” in the world. The gloomy conclusion comes from asking a series of questions, and for each one recognizing the answer to be “no he won’t”:
Will president Obama allow the United States to recognise the jurisdiction of the International Criminal Court (ICC)? The ICC is the preeminent global mechanism for holding egregious human rights violators to account, when they are able to escape being held to account by national jurisdictions. It is a mechanism championed by Europe and enthusiastically adopted by much of the world, but almost fatally undermined by the United States formal renouncing in 2002, and keeping a clutch of countries that depend on US support away from it – Sri Lanka being amongst that number.
Will president Obama bring the United States into the Kyoto protocol or at least an equivalent and sufficient compact on responding to Global Warming? The United States with less than four percent of the global population is responsible for more a quarter of the annual emissions that cause global warming – by far the highest per-capita pollution rate. The negative consequences of Global warming will be borne disproportionately by the poor of the world who have benefited the least from the industrial activities over the last hundred years that have brought about the problem.
Will president Obama bring the United States back in to the 1972 Anti-Ballistic Missile (ABM) Treaty with Russia, or an acceptable equivalent? President George Bush in 2002 withdrew the US from the 1972 ABM treaty, because Russia could no longer compete in the arms race. This withdrawal from the treaty and subsequent plans for missile deployments in countries close to Russia has been the principal reason for souring relations with Moscow. It has begun a new version of the cold war, with attendant threats to the security of the world. (Georgia being the first bit of grass to get trampled as the Elephants position them-selves in the fight).
Will president Obama reverse the longstanding US policy of blindly supporting Israel as it continues to deny the people of Palestine a just return of their lands and the right to a dignified existence in their own territory? Israel routinely receives upwards of 2 billion dollars in military aid alone from the US each year (together with about another one billion in non-military aid, Israel receives one sixth of the US foreign aid budget each year), and at the U.N. Security Council the US routinely exercises its veto power in favour of Israel anytime the rest of the world tries to even voice their concern about the injustice. This unprincipled support has been the chief recruiting sergeant in the Middle East for Al Qaida-style organizations, which are undermining stability and peace in the world.
Will president Obama choke off the still strong political and military support by the US for the utterly corrupt, repressive, authoritarian Saudi Arabian regime? The Saudi regime is amongst the most corrupt and repressive in the world. That regime and US support for it remains the second most important driver of Al Qaida recruitment. It monopolises the massive wealth from oil revenues for the aggrandizement of a small circle of family, friends, and multinational oil companies, denying much of the local population even a semblance of fair share and perpetuates that injustice by repressive laws, restricted freedoms and denial of democracy.
Will president Obama after closing down the Guantanamo Bay prison camp (even McCain would) apologise and pay compensation to those who can’t be charged — the large number of innocent people yanked in there by mercenary schemes, tortured, and denied any semblance of justice for now almost 7 years? Guantanamo Bay prison has — in large screen technicolour, brazenly and shamelessly — flouted numerous international covenants on civil, political and human rights. Since it’s inception in January 2002, Guantanamo Bay prison has shown the middle finger to the universal values of civilised cultures and made these values seem cheap, subservient, and disposable when inconvenient. Such an iconic prison camp that ends with unrepentant impunity will have terribly undermined the power of these values to shape the world.
Will president Obama change the US position in 2001, when it became the only country to oppose the international UN treaty on curbing the flow of small arms? This treaty – spearheaded by Sri Lankan Jayantha Dhanapala, then under-secretary-general to Kofi Anan – aimed to provide some simple global standards and tracing methods to curtail the illicit flow of small arms in the world (much of them manufactured and sold by the US). These weapons expand the power of organized crime, fuel militia gangs, arm child soldiers (including those of the LTTE in Sri Lanka), and are estimated by the UN to kill at least half a million people each year.
Will president Obama withdraw US intransigence at World Trade talks (which have been failing to reach consensus since the Doha round in 2001)? The US (which together with the EU spends more than 100 billion dollars per year on farm subsidies) wants to continue denying farmers from poor countries the same access to the markets of very rich nations, as has been secured for multinationals from those countries into the markets of the poor? Even the global western institutions such as the IMF and World Bank admit openly that this lack of symmetry in trade access is one of the principle causes of poverty in the African continent, the poorest region of the world.
I have considered here only a few of the burning questions of the world. I think they highlight the bleakness of this grand “change” in America, in terms of having a positive effect on the way that American power is wielded in the world. With a George Bush presidency, there was at least no illusion about the selfish abuse of military and institutional power by the United States. An Obama presidency that continues these wolfish tendencies in sheep’s clothing will not make the world a better place.
The election of Barack Obama is shrouded in the illusion that US engagement in the world will now be moral and benevolent. But the time for that has not yet arrived, and is not likely to arrive until US economic and military power diminishes more significantly. For those who were listening, Barack Obama has in fact been threatening the world, by the trade, military and foreign policy positions that he has articulated consistently throughout his campaign – and there is no reason to think he didn’t mean what he said.
Has Barack Obama offered “hope” for Americans? Resoundingly “Yes!” But the hope that President Obama offers Americans is not hope for the world.
Can he stop the war mongering that has become embedded in America?
Can he eliminate the corruption in the American political system?
The American self serving agenda has seeped into every corner of the world. Whether is be Free Trade or the Financial Crisis. It has seeped into the IMF and World Bank. It has slithered into every aspect of the planet. Corporations are as corrupt as the MOB. They hold too much power over Governments and people.
Free Trade agreements, the IMF and World Bank help promote their agenda of cheap slave labour, massive profits and the ability to pollute world wide. They promote privatization of services such as water, education and health care. This all for profit and to the demise of the people. Oddly enough the because of the Financial Crisis many countries have had to borrow money from the IMF and World Bank and are now at the mercy of their dictatorial agenda.
They of course are apparently seen as the good guys helping out those poor countries in need, when in fact they are just as usual, promoting more privatization of their resources. How sweet it is to be in their grasp. Well for the corporations that is, not for the people of the country that had to borrow money. I bet their Cooperate mouths are just watering at the prospect of more profits, at the expense of the countries who were forced to turn to the IMF and World Banks.
Farmers in India who have committed suicide or lost their farms may have something to say about the IMF loan given to India. They sure helped them now didn’t they? The International Monetary Fund was promoting an agenda all right. A corporate agenda, not that of “actually helping the country or it’s people”.
Iceland had to raise their Interest rates to a whopping 18 percent, while the rest of the institutions are lowering them. That was one of the stipulations in the IMF loan, they will receive from the IMF. There is something fishy in that, isn’t there? Gorden Brown treating them as a terrorist is just way out there. There certainly is something rather strange about it all. One has to wonder what the true agenda is?
A few years back it was well known what was going on. Africa is one of the victims. A classic example of IMF and World Bank pretending to be nice.
The 612 billion war budget is not necessary either.
Instead they have working toward World Domination via Military Dominance, Free Trade agreements, IMF and the World Bank. They have pandered to Corperate Greed and Profiteering. Which in the end causes more poverty, more pollution, more war, more corruption, more death, more cheap slave labour, more profiteering for the greedy and more hatred towards the United States of America.
NATO and the United Nations have done little to stop the Fascist Agenda. If anything they have enabled the US.
Should they end the Aid to Israel ? Well much of the aid is earmarked for weapons for one and it destabilizes the Middle East.
Can Obama sort through all of this and find ways to improve the life of US Citizens and the rest of the World?
Sure he could. It will take time and political will.
Will he and the Government of the US do anything is another story.
The rest of the world also needs to work with Obama to end the War Machine and Cooperate Corruption however.
The Enablers around the world, must also make it clear their agenda of World Domination must end.
Enough is Enough.
If the leaders in the World are to promote anything is should be to improve the lives of it’s citizens, not the profiteers and war mongers.
Cleaning up the media that sifts out “propaganda” to the American public would also go a long way to helping as well. The American people have the right to know the truth. So does the rest of the world.
The propaganda machine has worked it’s way into much of the media around the world as well.
People want the “truth” not “propaganda” and “lies”.
The World Bank and International Monetary Fund (IMF) are two of the most powerful international financial institutions in the world. They are the major sources of lending to African countries, and use the loans they provide as leverage to prescribe policies and dictate major changes in the economies of these countries. The World Bank is the largest public development institution in the world, lending over $24 billion in 2007 – of which over $5 billion (or 22 percent) went to Africa.
The World Bank and IMF are controlled by the world’s richest countries, particularly the U.S., which is the main shareholder in both institutions. The World Bank, headquartered in Washington, DC, follows a “one dollar, one vote” system whereby members with the greatest financial contributions have the greatest say in decision making. The U.S. holds roughly 17% of the vote in the World Bank and the 48 sub-Saharan African countries together have less than 9% of the votes. The Group of 7 rich countries (G-7) control 45% of World Bank votes. This system ensures that the World Bank and IMF act in the interest of the rich countries, promoting a model of economic growth (called neo-liberal) that benefits the richest countries and the international private sector.
Over the past two decades, the poorest countries in the world have had to turn increasingly to the World Bank and IMF for financial assistance, because their impoverishment has made it impossible for them to borrow elsewhere. The World Bank and IMF attach strict conditions to their loans, which give them great control over borrower governments. On average, low-income countries are subject to as many as 67 conditions per World Bank loan. African countries, in need of new loans, have had no choice but to accept these conditions.
The World Bank and IMF have forced African countries to adopt “structural adjustment programs” (SAP) and other measures which cut back government spending on basic services. They have required African governments to reduce trade barriers and open their markets, maintaining their economies as sources of cheap raw materials and cheap labor for multinational corporations.
As a result of World Bank and IMF policies, average incomes in Africa have declined, and the continent’s poverty has increased. Africa’s debt crisis has worsened over the past two decades, as the failure of World Bank and IMF intervention has left African countries more dependent than ever on new loans. These institutions have also undermined Africa’s health through the policies they have imposed. Forced cutbacks in spending on health care, and the privatization of basic services, have left Africa’s people more vulnerable to HIV/AIDS and other poverty-related diseases.
The policies of the World Bank and IMF have come increasingly under fire, for the negative impact they have had on African countries. But these institutions, and the U.S. and other wealthy countries that control them, refuse to address these concerns. Instead, they continue to use Africa’s debt as leverage to maintain control over the economic policies of African countries. Even as Africa faces the worst health crisis in human history, these institutions insist that debt repayments take priority over spending on the fight against poverty and HIV/AIDS. African countries continue to spend up to five times more on debt servicing than on health care for their populations.
In response to growing criticism of their policies, the IMF and World Bank have continuously repackaged their structural adjustment programs over the last two decades. In 1999, the institutions began a funding system that requires a country to create a Poverty Reduction Strategy Paper (PRSP), which purports to outline programs that will promote growth and reduce poverty over the next several years. Through the Poverty Reduction Growth Facility (PRGF), which disburses funds, the World Bank and IMF approve and then finance these poverty reduction programs. While the World Bank and IMF claim that this allows greater flexibility for countries receiving assistance, the degree of ownership that countries have in PRSPs is exaggerated. Parliaments and civil society are often excluded from developing and adopting PRSPs.
In 2005, the IMF created the Policy Support Instrument (PSI). PSIs do not provide financial assistance to the countries that choose to participate. Rather, the IMF provides economic policy advice to a country, and then monitors it to determine whether or not the country has earned the IMF’s endorsement. Creditors and donors can then base their decision to offer loans or grants to a country on the IMF’s PSI assessment. In practice, this program continues to enforce IMF economic reforms and compromise the ability of African governments to decide on their development path.
To address the external debt crisis of poor countries, the IMF and World Bank introduced the Heavily Indebted Poor Countries (HIPC) initiative in September 1996. Designed by creditors, this initiative was intended to extract the maximum in debt repayments from poor countries. It has failed even to meet its stated objective of reducing Africa’s debt burden to a “sustainable” level, and the strict HIPC eligibility requirements prevent many countries from receiving much-needed assistance.
In July 2005, the Group of 8 (G-8) proposed a debt cancellation deal for 18 countries, 14 of which are in Africa. That September, the World Bank and IMF approved this deal through the Multilateral Debt Relief Initiative (MDRI). The MDRI grants debt cancellation to countries that meet certain eligibility requirements, including adherence to economic policies and programs that the World Bank and IMF deem satisfactory. As of December 2007, the World Bank and IMF have approved MDRI debt relief for 25 countries, 19 of which are in Africa. Although the MDRI provides some progress on the issue of debt, it still leaves many African countries trapped under the burden of illegitimate debt. Furthermore, it establishes the precedent that future debt cancellation will only be offered to countries that have submitted their economies to the draconian dictates of the World Bank and IMF’s structural adjustment policies.
The benefits of debt cancellation have been proven repeatedly. While in 2003, Zambia was forced to spend twice as much on debt payments as on health care, partial debt cancellation allowed the government to grant free basic healthcare to its population in 2006. In Benin, more than half of the money saved through debt cancellation has been spent on health. In Tanzania, the newly available funds were used to eliminate primary school fees, increasing attendance by two-thirds. Uganda is currently using the $57.9 million of savings it gained from debt relief in 2006 to improve primary education, energy and water infrastructure, malaria control, and healthcare. Cameroon is using its $29.8 million in savings for poverty reduction, infrastructure improvement, and governance reforms.
Since 2007, there has been talk of the IMF selling its gold reserves to offset its growing administrative budget deficits. In order for the IMF to sell any part of its gold reserves, the sale must be approved by an 85% majority of its members. The United States controls about 17% of this vote, giving it an effective veto over this action. In February 2008, the U.S. Treasury announced that it would support the sale if the IMF takes part in a package of reforms that would put more emphasis on surveillance and financial stability and less on lending.
By law, however, the U.S. Congress must authorize the sale of IMF gold before the U.S. Executive Director may support such a decision. This puts Congress in a unique position to greatly influence the future actions and operations of the IMF. In contrast with Treasury’s modest reform proposal, Congress could seize this opportunity and condition its approval of the IMF’s gold sales on a bold reform agenda that eliminates IMF policies that have restricted investments in health, education and HIV/AIDS spending. Specifically, gold sales should be approved only if the IMF ceases use of overly restrictive deficit-reduction and inflation-reduction targets, eliminates budget ceilings for the health and education sectors and de-links debt cancellation from such harmful macroeconomic conditions. Gold sales could also be used to finance expanded debt cancellation.
African countries must have the power to shape their own economic policies and to determine their own development priorities. This requires the cancellation of all of Africa’s illegitimate external debts, and an immediate end to the harmful policies the World Bank and IMF have imposed in Africa.
by Trevor Ngwane and George Dor, The Sowetan July 12 2000
Last Friday, Horst Koehler, newly-appointed head of the International Monetary Fund, received a hostile response from the anti-privatisation forum, Jubilee 2000, the campaign against neoliberalism and the South African Communist Party. We are trained to be hospitable in the African tradition, but this was a fair exception.
The Anti-Privatisation Forum includes two campaigns. The first is the anti-Igoli Forum which opposes Johannesburg’s “iGoli 2002” plan to privatise our city. The second is the Wits University Crisis Committee, which opposes a similar strategy, “Wits 2001,” which has led to massive job losses and the decline of arts education at South Africa’s main university.
The campaigns oppose the privatisation of social goods, like water and education, that in a just society should be under the control of communities, workers and students. The unity of our struggles is all the more urgent in view of this week’s Urban Futures Conference, at which the powers behind iGoli 2002 and Wits 2001 are hoping to showcase the sale of our city and our university.
If Horst Koehler thought his visit to South Africa would be widely applauded, he should know that workers, community activists and students in Johannesburg have been protesting his institution for many years.
The last such visit by an IMF leader was in October 1996, when Michel Camdessus came to meet workers, community activists and students, as requested by finance minister Trevor Manuel. But our leadership in Cosatu, Sanco and Sasco boycotted the meeting on grounds that the IMF would do harm to South Africa.
The subsequent events in East Asia, which shamed Camdessus, proved that a firm stand against the IMF was correct. We know that firsthand in our country and our continent, where for more than two decades people have suffered immensely, due to IMF interference.
The IMF made billions of dollars of loans to apartheid South Africa during the late 1970s and early 1980s. Our allies in the Jubilee 2000 South Africa movement have demanded that these loans, which were repaid by South African society during one of the most repressive, bloody periods in our history, now in turn be the basis for reparations by the IMF to a democratic South Africa.
During the late 1980s, when the apartheid regime began to sell state assets to white-owned conglomerates and raised interest rates to the highest levels in our history, the IMF was prodding it to do so. The IMF consistently argued that South African workers were overpaid, and that South Africa should implement a Value Added Tax to shift the burden of tax payment further to lower-income people. The apartheid regime generally followed this advice and was applauded by the IMF for doing so.
In December 1993, the IMF granted a US $750 million loan (about R5,1 billion) which was purportedly for drought relief. Actually, the drought had ended eighteen months earlier. The loan carried conditions such as a lowered budget deficit to prevent a new government spending more on social programmes, and lower wages for civil servants. These conditions have subsequently become government policy in the form of Gear. The loan was a secret agreement, only leaked to the business press in March 1994.
Again and again in Southern Africa and across the Third World the IMF’s free-market economic advice and conditions on loans have been disastrous. These disasters have led to a profound crisis of legitimacy for the Washington institution. Former World Bank chief economist Joseph Stiglitz wrote in the April 2000 New Republic magazine that the IMF is populated by “third-rate economists.”
One reason for the IMF’s crisis of legitimacy is the control exercised by the US government. This power is based on ownership of 18% of the IMF’s shares, enough to veto anything the US disagrees with.
The IMF remains a profoundly undemocratic institution, whose economic policies have been roundly condemned for the misery caused throughout the Third World and especially in East Asia, Russia and Latin America when “emerging market crises” occurred during 1997-99.
The IMF’s fraternal institution, the World Bank, has had an especially obnoxious role in Johannesburg. Bank staff were responsible for a 1995 infrastructure policy which recommended low standards and high prices for household water and electricity, even though the Reconstruction and Development Programme mandated the opposite. Bank staff recommended that low-income households be not given flush toilets but instead use pit-latrines, without considering the public health risks of excrement leaking into Johannesburg’s water table through its dolomitic rock.
When a similar scheme was established in Winterveld in 1991, hundreds of people got cholera as a result.
The Bank also promoted privatisation of municipal services across the country. In Johannesburg, it took the lead on research to promote a one-sided, pro-corporate perspective on iGoli 2002. It is no wonder that the Johannesburg privatisation plan has been renamed “E.Coli 2002”.
For all these reasons, the visit of Horst Koehler and the ongoing role played by the World Bank in Johannesburg represent very serious dangers to poor and working-class people and the environment.
When 30,000 people joined in protest against these institutions, in their hometown Washington DC in April, it was clear they were not listening to us but we all are surprised by how quickly they have followed us back to Johannesburg to do their damage. They must not be allowed to arrange the junk-sale of our university, our city, our country and our continent.
Trevor Ngwane is a Johannesburg councillor and Wits master’s degree student, while George Dor is chairman of the campaign against neoliberalism in South Afric. Both are affiliated to the Alternative Information and Development Centre in Johannesburg.
Africa must not let multinational corporations and international donors dictate its biotechnology agenda, says David Fig.
Africa is rapidly becoming a focal point for multinational crop and chemical corporations clearing the way for the extended uptake of their products and technologies. In particular, African governments are facing enormous pressure to endorse and adopt genetically modified (GM) crops.
Organisations like the Alliance for the Green Revolution in Africa — bankrolled by the Gates and Rockefeller Foundations — are partly to blame through their heavy investment in infrastructure aimed at supporting the development and distribution of GM crops and seeds.
But the African Union (AU) itselfis now also encouraging the adoption of GM technology. Working in tandem with its development wing, the New Partnership for African Development (NEPAD), the AU’s High Level Panel on Modern Biotechnology is soon to release a Freedom to Innovate plan — the clearest expression yetof the trend to back this controversial and risky technology. And it does so uncritically, rather than taking a more rational precautionary position that would safeguard Africa’s rich biodiversity and agriculture.
The AU is also engaged in efforts to revise the carefully crafted African Model Law on Biosafety, which outlines the biosafety provisions necessary for African environmentalconditions.
The revisions emanate from those seeking to make the biosafety content less stringent, placing Africa under even more pressure to conform to the needs of the gene corporations.
Saying no to the GM bandwagon
Support for GM technology, though, is by no means universal across the continent. The AU’s efforts in shaping the Freedom to Innovate plan and model law contrast with the leadership role that the Africa Group took in developing the Cartagena Protocol to ensure more stringent biosafety precautions.
Indeed, a number of African governments and civil society organisations are increasingly speaking out against the pressures from gene companies — and the foundations that back them — to adopt their technologies.
For example Angola, Sudan and Zambia have resisted pressure to accept GM food aid, while nongovernmental groups such as the African Biodiversity Network, based in Addis Ababa, Ethiopia, defend community and farmers’ rights to reject GM seed. At one stage Burkina Faso implemented a moratorium on the planting of GM crops.
The Freedom to Innovate document does little justice to the debate raging around Africa. Instead it seeks to institutionalise the pro-GM position of larger countries like Nigeria and South Africa for the entire continent.
Offering unbiased advice
There is no question that Africa needs technology to develop. But it must be appropriate to a country’s chosen path of development.
New technologies aimed at development must be evaluated in depth by, among others, scientists with no vested interests.
Natural scientists must assess GM technology’s likely impacts on both the environment and human and animal health. Social scientists must also examine the potential socio-economic consequences of such innovation — such as impacts on local food security, trade or indebtedness. Stakeholders, including those who safeguard traditional knowledge, could further enrich such assessment by indicating proven alternatives.
This model of technological assessment could serve Africa very well. It could enable governments to formulate appropriate policies and development priorities.
Most importantly, if a technology is found to be questionable or negative in terms of its impacts — or if there are no clear development benefits to be derived from its adoption — a precautionary mechanism must exist that can delay and carefully regulate its introduction.
The freedom to choose
The Freedom to Innovate plan tries to advocate the idea that all biotechnology benefits Africa and fails to analyse the risks attached to their adoption. While some aspects of modern biotechnology might prove useful in African agriculture, this does not mean that one aspect of this — GM crops — can increase continental food security and farmer prosperity.
GM technology forces Africa into high-input, chemical-dependent agriculture which impacts on biodiversity and creates debt burdens for small farmers.
In addition, the regulatory steps required for control of GM crops are so demanding of resources that, even when other budgetary areas relating to food security may need more pressing attention, Africa is forced to prioritise their set up.
Gene corporations, together with the scientists that work for them, have invested a lot of time, effort and money in developing GM crops. Not surprisingly,they are the ones who propound the idea that transgenic crops can rescue Africa from poverty and underdevelopment.
But Africa must not let itself be bullied into accepting a technology that has yet to prove itself as appropriate for solving the continent’s hunger problems. The AU’s role should be one of providing governments with well-reasoned technological evaluation, rather than acting as a proxy for promoting a specific industry’s commercial needs.
David Fig is an independent environmental policy analyst based in Johannesburg, and a trustee of Biowatch South Africa.
Africa and the IMF: In Defense of Economic Correction
August 6 1993
Regarding “To the World Bank and IMF: Africa Has Its Own Agenda” (Letters, July 1) from Hassan Sunmonu:
The writer, secretary-general of the Organization of African Trade Union Unity, suggests that World Bank and IMF-supported economic adjustment programs in Africa have increased African indebtedness and poverty. This assertion flies in the face of the evidence wherever these programs have been carried out in a sustained manner.
It also ignores the fact that the pace of progress achieved has varied across countries, depending on the nature and the severity of the pre-existing economic conditions, the effects at times of unfavorable external developments (such as worsening terms of trade and drought), and domestic political realities.
Mr. Sunmonu calls on the IMF and the World Bank to abandon their “anti-people and anti-development programs,” accept the rights of all countries to formulate their own development plans, give to African governments sovereign authority over their economic policies, withdraw all experts from African central banks and finance ministries, and compensate African countries for the harm done them and write off their debts.
Such extreme views ought not to go unanswered.
IMF-supported macroeconomic and structural adjustment programs aim at helping countries attain higher growth, lower inflation and improved balance of payments and external debt positions. In most cases, the IMF is called upon for assistance when economic imbalances become very severe and growth has slackened, or even turned negative.
In assisting member countries to develop policies to restore economic health, the IMF is, together with the World Bank, helping them direct public spending away from nonessential or unproductive uses, including excessive military spending, to social, infrastructural and other priority needs. It is only through successful stabilization of their economies and determined structural adjustment – to expand supply capacities – that countries will eventually generate resources to promote development and reduce poverty, strengthen debt-servicing capacities and withstand external shocks.
Because the IMF is fully aware that adjustment policies may have temporary adverse effects on some of the poor, it is helping countries design social safety nets and otherwise formulate targeted social programs to assist the poor during periods of adjustment. It takes great care to tailor its macroeconomic policy advice to the individual needs and circumstances of each member country. At the request of several African member countries, the IMF has assigned a small number of resident representatives and technical experts in specific areas.
The IMF currently has committed more than $4 billion under its concessional loan facilities to 30 African countries. Writing off IMF loans to African countries would be counterproductive. IMF loans are drawn from a limited revolving pool of funds, and are made available temporarily to countries in balance of payments needs. If loans were written off, the pool would contract, with the risk of depriving other countries in need – many in Africa – of IMF financing.
I certainly share Mr. Sunmonu’s disappointment at the slow and uneven pace of economic progress in Africa. While those countries with records of determined implementation of strong reform policies have shown progress on growth and inflation, there is still indeed a long way to go. Far too many of the countries that have embarked on programs of economic correction have let them slip at the first hurdle.
World Bank pushes Malawi agriculture privatisation
April 5 2004
The World Bank is demanding the privatisation of the Malawian agricultural marketing board as a condition of its latest structural adjustment loan. The way the Bank has manoeuvred to persuade Malawi’s parliament to accept this shows the limits of ‘country ownership’. It also demonstrates key weaknesses in one of the World Bank and IMF’s new tools, Poverty and Social Impact Analysis (PSIA) studies which are supposed to outline likely consequences of key reforms so as to enable a better debate on policy design. A Malawian civil society campaign coalition which has mobilised against these planned reforms expressed its concern with how the World Bank and other donors have pushed their agenda on this issue “at the expense of the food security of the poor”.
The privatisation of the state marketing board in Malawi (ADMARC) has been an objective of the World Bank for 10 years. It represents a central element in an approach to agriculture that holds that full liberalisation of the sector will be best for poor women and men. This approach has been increasingly questioned in Malawi and other countries in the region, particularly in the context of the recent food crisis. Many commentators believe the full liberalisation of other elements of the agriculture sector under Bank and Fund advice was a major cause of the food crisis and the subsequent deaths in 2002.
Because of the controversy over the proposed reforms, including studies by civil society groups, the Bank agreed to commission a Poverty and Social Impact Analysis. This research showed that ADMARC’s important role in supporting the lives of poor women and men would be destroyed by privatisation. But, presumably embarrassed by the results, the Bank delayed publication of the study for two years, withholding it until just after the Malawian parliament had agreed to the reforms.
In late December 2003 legislation was rushed through a special parliamentary session turning ADMARC into a limited company, the first stage in the privatisation process. This session was boycotted by many MPs, partly because they had already expressed opposition to the privatisation of ADMARC in two previous hearings. Civil society campaigners expressed concern that ADMARC privatisation was being “used as a carrot for grants and loans”. This was borne out by the Bank’s response to the parliamentary vote, a February announcement of a new $50 million structural adjustment credit with the privatisation of ADMARC as one of its conditions.
The civil society and official impact analysis studies agreed that ADMARC is clearly in need of reform, but demonstrate that it plays a vital social role in ensuring market access for the rural poor by running subsidised markets country-wide. These markets would close under privatisation and the small and weak private sector would be unlikely to fill this gap, leaving a dangerous vacuum in service provision that directly threatens people’s livelihoods.
Civil society groups have mobilised to publicise these issues, with a major campaign during 2002 against the privatisation of ADMARC. An active media campaign resulted in a series of high-profile national debates. Parliament was closely involved, and in particular the Agriculture committee which carried out its own analysis showing the harm that privatisation would cause to the poorest.
The decision-making process and its outcome are being declared unacceptable by Malawian civil society groups. They are “demanding that any conditionality regarding ADMARC is immediately removed from the new loan” and encouraging civil society groups in other countries to take action in their support. Groups pushing the Bank to conduct Poverty and Social Impact Analyses will also need to ensure far greater control over the process of commissioning, reviewing and disseminating such studies, to ensure that they enrich debate rather than sit on shelves until the World Bank or IMF browbeat parliamentarians to accept their agendas.
Had a Call to Action for Mobilization
in Washington, DC
Reasons being:
For six decades, the World Bank and IMF have imposed policies, programs, and projects that:
Decimate women’s rights and devastate their lives, their families, and their communities;
Subjugate democratic governance and accountability to corporate profits and investment portfolios;
Trap countries in a cycle of indebtedness and economic domination;
Force governments to privatize essential services;
Put profits before peoples’ rights and needs;
Abet the devastation of the environment in the name of development and profit;
Institutionalize the domination of the wealthy over the impoverished – the new form of colonialism; and
Facilitate corporate agendas through the economic re-structuring of countries enduring conflict and occupation, such as East Timor, Afghanistan, and Iraq.
In the 60th anniversary year of the IMF and World Bank, we demand the following measures from the institutions and the governments which control them. Add your voice, endorse the demands:
Open all World Bank and IMF meetings to the media and the public;
Cancel all impoverished country debt to the World Bank and IMF, using the institutions’ own resources;
End all World Bank and IMF policies that hinder people’s access to food, clean water, shelter, health care, education, and right to organize. (Such “structural adjustment” policies include user fees, privatization, and economic austerity programs.);
Stop all World Bank support for socially and environmentally destructive projects such as oil, gas, and mining activities, and all support for projects such as dams that include forced relocation of people.
We furthermore recognize the urgency of the world’s most catastrophic health crisis, the HIV/AIDS pandemic. We assert the culpability of the international financial institutions in decimating health care systems of Global South countries, and reject the approach of fighting the pandemic with more loans and conditions from these institutions. We call on the world’s governments to best deploy their resources by fully funding the Global Fund to Fight AIDS, Tuberculosis, and Malaria. We demand the elimination of trade rules that undermine access to affordable life-saving medications.
Help end global economic injustice driven by the policies and programs of the international financial institutions!
The Project aims to reduce occupational health and environmental hazards of artisanal (small-scale) gold mining communities in northern Guinea. The total population of the area covered by the project is estimated at 150,000 of which over 40,000 people are involved every year in gold mining activities. The unregulated burning of mercury amalgam is the primary method for gold extraction. It is widely reported that this method yields 1 kg of gold for every 1.3 kg of mercury employed.
Guinea, on the Atlantic coast of Africa, is one of the poorest countries in the world. Conakry, the capital, is a bustling, colorful and vibrant city of about 2 million struggling with the side effect of urbanization—pollution.
The lack of sewage and water treatment directly impacts human health in the city. Only a fraction of households, primarily in the wealthiest neighborhoods, have reliable access to running water at all, while well water is contaminated by bacteria and parasites. The city has no wastewater treatment facilities, and only 8% of households are connected to a piped municipal sewage system. The overwhelming majority of households have only basic latrines; in better homes, the floor is tiled and the hole is deep. As a result, diseases such as diarrhea, hepatitis A, poliomyelitis, typhoid, cholera, and meningitis run rampant.
Major Environmental Concerns
Air Pollution – From leaded gasoline, automobile exhaust, traffic jams and old cars. Also from fuel sources: charcoal, plastic bags and tires used to cook, and the burning of garbage. Leads to elevated cases of respiratory and cardiovascular disease.
Water pollution – Lack of sanitation services pollutes coastal marine ecosystem, contaminates food supply , increases instance of waterborne diseases (malaria, diarrhea, hepatitis A, poliomyelitis, typhoid, skin diseases, cholera, meningitis), and renders water undrinkable.
Lack of Infrastructure and Public Services – Residential and commercial garbage collection is just beginning to be put into place. No waste water treatment plant exists, although plans are afoot to install a sewage treatment facility in the western part of town. Human waste, when collected, is disposed of directly into the ocean or local dump.
Abandoned PCB capacitors from France, England, Germany and the US have contaminated approximately 3 acres in the center of Conakry. There have been significant observed impacts on human health and the environment because the water is entirely saturated with PCB waste. The black PCB oil runs directly through the site into a shallow channel that empties into the ocean. The site is within 100 yards of a village that relies on the water for drinking, cooking and bathing.
The capital of Mozambique, Maputo, lies on Maputo Bay. City residents rely on considerable amounts of fishery resources, both for consumption and economic reasons. Maputo Bay beaches also serve many residents and tourists as a leisure spot throughout the year. Yet despite its beauty, there is growing evidence that the waters inside the bay are polluted by untreated sewage coming from new developments in the city that are not connected to the existing sewage and drainage facility and water treatment plant.Groundwater contamination from pit latrines and storm water effluent is polluting the bay to the extent that swimming is inadvisable in all but the most distant areas of the bay. The Ministry of Health tests fecal coliform levels regularly, and there is a general ban on the consumption of shellfish from the bay.
Although pollution from industry, automobiles and domestic waste continue to adversely affect the quality of life in Maputo and in Mozambique in general, the majority of the population lacks education and awareness of pollution issues and their relation to human health. A lack of public debate on the subject means a general lack of pressure on relevant institutions to act where human health is threatened by pollution contamination. The media, and especially the radio, is an important source of environmental information and education due to national coverage and transmission in local languages.
This project seeks to contribute to the reduction of occupational health hazards of small-scale gold miners in the Manica District of Mozambique by promoting the use of mercury retorts, while at the same time leading to overall reduction of environmental degradation in the region. Manica is a district of Mozambique in the Manica Province with a population of 155,731 people. Manica District borders with the Republic of Zimbabwe in the west, the District of Gondola in the east, the District of Barué to the north through the Pungué River, and the District of Sussundenga in the south, which is bounded by the Revué and Zonué Rivers. In the Manica District of Mozambique, more than 10,000 people are directly and indirectly involved in artisanal (small-scale) gold mining activities (garimpagem) as their main source of income.
Mozambique, like many other developing countries, uses leaded gasoline. While the adverse health effects of lead have been well-documented and many of the world’s countries have either completely phased out use of leaded gasoline or lowered lead concentrations, Africa remains as a bastion of leaded gasoline use. The primary lead exposure pathway is via airborne lead and lead in dust and soil. In congested urban areas vehicle exhaust from leaded gasoline accounts for some 90 percent of airborne lead pollution.
Air pollution in Dakar, the capital, is a source of concern for local authorities. Large quantities of atmospheric pollutants emitted by vehicles are starting to pose serious environmental and public health problems, especially for the most vulnerable population (children, pregnant women, people suffering from diseases and respiratory complications such as: tuberculosis, pneumonia, cancers, bronchitis, asthmas, and allergies). Common pollutants emitted are: carbon dioxide, carbon monoxide, nitrogen oxides, and suspended particles.
This project takes the first steps to initiate the clean up of the most polluted region of Senegal – Hann Bay. The bay wraps around the industrial zone of the city of Dakar, Senegal. It is highly populated area, with local residents bathing in the water, and numerous fishing boats along the crowded shore. Industrial pollution along the banks from 1968 – 1997 has rendered the bay exceedingly toxic. This work will fund and support a group both within the Ministry of Industry and Ministry of Environment to create a credible implementation plan that will install an industrial waste treatment plan for the factories of the Hann region. Once the effluent treatment plant is in operation, work can begin to remediate legacy contamination from historical toxins.
Havelock is a town on the northwest border of Swaziland and is home to one of the world’s largest asbestos mines, which is now closed. The town and mine are dominated by Bulembu, Swaziland’s highest peak. The asbestos mine in Bulembu operated from 1939 to 2001 and was closed without rehabilitation of the environment. The mine dumpsite has contaminated the Nkomazi River and poses a grave contamination risk to the multi-million dollar Maguga dam, which is about ten kilometers away. Huge fiber-rich dumps dwarf the school, which is less than 200 meters from the old mill.
EnviPro is an environmental engineering NGO working on a project in the neighborhood of Vingunguti, in Dar es Salaam, to manage waste effluent from Vingunguti Abattoir, a local slaughterhouse. The slaughterhouse is dumping waste directly into the Msimbazi River, posing a significant health risk to residents of Dar es Salaam and surrounding areas, and EnviPro has designed a plan to install a wastewater treatment program for the plant.
Mikocheni, a neighborhood in Dar es Salaam, is home to four heavily polluted streams that run directly into the Indian Ocean. Untreated industrial and domestic waste is dumped into the waterways upstream, or into storm drains. Environmental Management Trust (EMT) is undertaking a project to monitor and stop this pollution of marine habitats and breaches. The project goals are to make wastewater treatment mandatory for all polluting industries, to stop residential houses from releasing waste from septic tanks into streams, and to ensure that sewers, storm drains and pumping stations are properly maintained to prevent leaks into the stream.
The government of Tanzania has developed a leaded gas phase-out action plan and it was discussed at a national stakeholders’ meeting in Dar es Salaam in September, 2003. The country’s planned phase-out of leaded gasoline is part of a larger initiative to ban the use of leaded gasoline in Sub Saharan Africa, as stated in the Dakar Declaration of 2001.
The Msimbazi River flows across a third of Dar es Salaam City and eventually discharges into the Indian Ocean. The river is an important water resource for residents of some of Dar es Salaam’s poorest neighborhoods. Residents use the water in various ways – for drinking, bathing, support for agriculture and industry, and as an environmental buffer. Nevertheless, many industries continue to pour unwanted end products from human and industrial activity into the river, threatening most of its functional benefits, and even its usefulness as an irrigation source.
The Msimbazi River Action Network (MRAN) brings together current Blacksmith partners (EMT, Envipro and LEAT) in an effort to organize clean-up and oversight activities focused on the Msimbazi River in Dar es Salaam. This network connects community and government representatives with the aim of minimizing industrial and domestic pollution sources on the river, and to protect the over 100,000 people living on the river from heavy metal contamination as well as deadly diseases such as cholera.
The Lawyers Environmental Action Team (LEAT) works in Mwanza and surrounding regions with community-based organizations, non-governmental organizations, and the Mwanza City Council to identify problems and educate both polluters and victims of pollution about environmental laws. LEAT also conducts public interest litigation to force the cessation of polluting activities by both local factories and Mwanza City authorities. And LEAT works with surrounding towns and villages affected by polluting industries. Village and municipal leaders and residents have been educated about existing environmental laws used to combat environmental pollution, and they have been briefed on the Village Land Act of 1999 which stipulates rights of villagers regarding their land and other natural resource laws.
Zambia is a land-locked country in Central/Southern Africa with a population of about 10 million people. About 1.25 million people inhabit the capital, Lusaka, with another 2 million in the northern Copperbelt region. Major pollution-related problems are due to mining and industrial waste. In 2001, Blacksmith Institute helped to found ARE, an NGO focusing on a heavily polluted industrial area on the Kafue River. The Kafue River, part of the Zambezi basin, is a source of potable water for over forty percent of Zambia’s population. It is also host to wildlife and birds. For decades, industries such as copper mines, metallurgical plants, textile plants, fertilizer factories, sugar processing plants, cement factories, various agricultural activities, and the Kafue Sewage Treatment Plant (KSTP) have polluted the river. Mineral deposits, chemicals, and suspended solids have led to overgrowth of aquatic weeds, choking river life. The continuous discharge of raw sewage into the Kafue River from the KSTP has contributed to the steady supply of nutrients (ortho-phosphates, nitrates, ammonia, etc.) ensuring the proliferation of various types of weeds, like the Salvina molesta, thereby causing eutrophication. Both aquatic life and human health are in danger. High incidences of environmentally mediated disease, such as gastro-enteritis, intestinal worms, and diarrhea diseases mostly in children have been reported from communities around the river and have been linked to drinking water from certain parts of the river. The raw sewer pollution of Kafue River could inadvertently lead to outbreaks of epidemics like cholera.
Bata Tannery uses various chemicals in tanning animal skins. Amongst these chemicals is chromium sulfate, which can easily be converted to either hexavalent or trivalent chromium. The effect of these chemicals on human and aquatic life is potentially lethal. Equally, the yeast production from Lee Yeast results in high concentrations of both chemical oxygen demand (COD) and biochemical oxygen demand (BOD) in the wastewater. The net effect is the reduction in the river system’s oxygen concentration, leading to toxic anaerobic conditions.
For almost a century, Kabwe, a city of 300,000 in Zambia, has been highly contaminated with lead from a government-owned lead mine and smelter, Zambia Consolidated Copper Mines (ZCCM). Although the mine has been closed since 1994, residents continue to get sick and die from the contamination due to a lack of cleanup efforts on the part of the company and the government.
Lead is one of the most potent neurotoxins known to humans. When breathed in, lead directly attacks the central nervous system. It is particularly damaging to infants and children, and can cross the mother’s placenta, putting unborn and nursing infants at risk. Yet, remarkably, the citizens of Kabwe have until recently been completely unaware that they are living in one of the most poisoned cities on earth. Blacksmith founded a local NGO, Kabwe Environmental and Rehabilitation Foundation (KERF), that has been bringing educational services to the community on how to limit exposure to lead, and nursing support for those who are ill.
Kabwe, the second largest city in Zambia with a population of 300,000, is located about 130km north of the nation’s capital, Lusaka. It is one of six towns situated around the Copperbelt, once Zambia’s thriving industrial base. In 1902, rich deposits of potentially dangerous lead were discovered in the mine and smelter located in the center of the town. Ore veins with lead concentrations as high as 20 percent have been mined deep into the earth and a smelting operation was set up to process the ore. Mining and smelting operations were running almost continuously up until 1994 without the government addressing the potential danger of lead. The mine and smelter, owned by the now privatized Zambia Consolidated Copper Mines, is no longer operating but has left a city with poison and toxicity from deadly concentrations of lead in the soil and water.
During the operation there were no pollution laws regulating emissions from the mine and smelter plant. In turn, air, soil, and vegetation were all subjected to contamination, and ultimately, over some decades, millions of human lives were also affected. Some recent findings reveal the extent to which one of the most potent neurotoxins to man, lead, has affected the health of Kabwe citizens. In the U.S., normal blood levels of lead are less than10 mcg/dl (micrograms per deciliter). Symptoms of acute poisoning occur at blood levels of 20 and above, resulting in vomiting, diarrhea, and leading to muscle spasms and kidney damage. Levels of over ten are considered unhealthy and levels in excess of 120 can often lead to death. In Kabwe, blood concentrations of 300 micrograms/deciliter have been recorded in children and records show average blood levels of children range between 60 and 120 mcg/dl.
Children that play in the soil and young men that scavenge the mines for scraps of metal are most susceptible to lead produced by the mine and smelter. A small waterway runs from the mine to the center of town and had been used to carry waste from the once active smelter. There is no restriction to the waterway, and in some instances local children use it for bathing. In addition to water, dry and dusty backyards of workers’ houses are a significant source of contamination for the locals. One of the most common ways that workers and residents become exposed to toxic levels of lead is through inhalation of contaminated soil ingested through the lungs.
The only coal mine in Zambia is located in Maamba where coal is extracted by open-pit quarrying. Since 1967 coal has been continuously produced by the Maamba Collieries in Southern Zambia near Lake Kariba. Although it has a production capacity of one million tons of coal per year, actual production is less than half this capacity.
(Jamaica) IMF decimating one country after another
Once in debt you are their slaves. They go in destroy the agriculture and make your country depend on their subsidised food imports. What happens if they decide not to provide the food? Mass famine or should I say mass depopulation.
Added November 3 2009
Life and Debt is a feature-length documentary which addresses the impact of the International Monetary Fund, the World Bank, the Inter-American Development Bank and current globalization policies on a developing country such as Jamaica.
Life & Debt is a woven tapestry of sequences focusing on the stories of individual Jamaicans whose strategies for survival and parameters of day-to-day existence are determined by the U.S. and other foreign economic agendas. By combining traditional documentary telling with a stylized narrative framework, the complexity of international lending, structural adjustment policies and free trade will be understood in the context of the day-to-day realities of the people whose lives they impact.
Bulgaria To Withdraw Soldiers From Iraq At Year-end
SOFIA,
November 6 2008
Bulgaria plans to withdraw its 155-strong military contingent in Iraq when its mandate expires at the end of this year, government officials said in newspaper interviews Thursday.
“We are evaluating our presence there (in Iraq), but we estimate that we have to a great extent fulfilled our mission,” Foreign Affairs Minister Ivaylo Kalfin told the daily 24 Hours.
The announcement came after U.S. Democratic party candidate Barack Obama won the presidential elections Tuesday. Obama has vowed to withdraw the majority of U.S. troops from Iraq by mid-2010.
Bulgaria’s Defense Minister Nikolay Tsonev told Trud newspaper that the Bulgarian contingent stationed near the capital Baghdad “will be withdrawn before Dec. 31,” when the parliamentary mandate expires.
Parliament has the final say over whether to extend the troops’ mandate or bring them home.
But Kalfin said Thursday that Bulgaria would continue contributing to peace and stability in Iraq by sending instructors to train the Iraqi security forces.
After joining the U.S.-led coalition in the country in 2003, Bulgaria lost 13 soldiers and six civilians.
The country’s center-left government withdrew its 360-strong military contingent from Iraq in 2005 in a move to meet its pre-election pledges.
But three months later it dispatched a 155-strong contingent on a ” peacekeeping and humanitarian mission” to guard the Ashraf refugee camp at the border with Iran.
When Prince Charles claimed thousands of Indian farmers were killing themselves after using GM crops, he was branded a scaremonger. In fact, as this chilling dispatch reveals, it’s even WORSE than he feared.
The children were inconsolable. Mute with shock and fighting back tears, they huddled beside their mother as friends and neighbours prepared their father’s body for cremation on a blazing bonfire built on the cracked, barren fields near their home.
As flames consumed the corpse, Ganjanan, 12, and Kalpana, 14, faced a grim future. While Shankara Mandaukar had hoped his son and daughter would have a better life under India’s economic boom, they now face working as slave labour for a few pence a day. Landless and homeless, they will be the lowest of the low.
Human tragedy: A farmer and child in India’s ‘suicide belt’
Shankara, respected farmer, loving husband and father, had taken his own life. Less than 24 hours earlier, facing the loss of his land due to debt, he drank a cupful of chemical insecticide.
Unable to pay back the equivalent of two years’ earnings, he was in despair. He could see no way out.
There were still marks in the dust where he had writhed in agony. Other villagers looked on – they knew from experience that any intervention was pointless – as he lay doubled up on the ground, crying out in pain and vomiting.
Moaning, he crawled on to a bench outside his simple home 100 miles from Nagpur in central India. An hour later, he stopped making any noise. Then he stopped breathing. At 5pm on Sunday, the life of Shankara Mandaukar came to an end.
As neighbours gathered to pray outside the family home, Nirmala Mandaukar, 50, told how she rushed back from the fields to find her husband dead. ‘He was a loving and caring man,’ she said, weeping quietly.
‘But he couldn’t take any more. The mental anguish was too much. We have lost everything.’
Shankara’s crop had failed – twice. Of course, famine and pestilence are part of India’s ancient story.
But the death of this respected farmer has been blamed on something far more modern and sinister: genetically modified crops.
Shankara, like millions of other Indian farmers, had been promised previously unheard of harvests and income if he switched from farming with traditional seeds to planting GM seeds instead.
Distressed: Prince Charles has set up charity Bhumi Vardaan Foundation to address the plight of suicide farmers
Beguiled by the promise of future riches, he borrowed money in order to buy the GM seeds. But when the harvests failed, he was left with spiralling debts – and no income.
So Shankara became one of an estimated 125,000 farmers to take their own life as a result of the ruthless drive to use India as a testing ground for genetically modified crops.
The crisis, branded the ‘GM Genocide’ by campaigners, was highlighted recently when Prince Charles claimed that the issue of GM had become a ‘global moral question’ – and the time had come to end its unstoppable march.
Speaking by video link to a conference in the Indian capital, Delhi, he infuriated bio-tech leaders and some politicians by condemning ‘the truly appalling and tragic rate of small farmer suicides in India, stemming… from the failure of many GM crop varieties’.
Ranged against the Prince are powerful GM lobbyists and prominent politicians, who claim that genetically modified crops have transformed Indian agriculture, providing greater yields than ever before.
The rest of the world, they insist, should embrace ‘the future’ and follow suit.
So who is telling the truth? To find out, I travelled to the ‘suicide belt’ in Maharashtra state.
What I found was deeply disturbing – and has profound implications for countries, including Britain, debating whether to allow the planting of seeds manipulated by scientists to circumvent the laws of nature.
For official figures from the Indian Ministry of Agriculture do indeed confirm that in a huge humanitarian crisis, more than 1,000 farmers kill themselves here each month.
Simple, rural people, they are dying slow, agonising deaths. Most swallow insecticide – a pricey substance they were promised they would not need when they were coerced into growing expensive GM crops.
It seems that many are massively in debt to local money-lenders, having over-borrowed to purchase GM seed.
Pro-GM experts claim that it is rural poverty, alcoholism, drought and ‘agrarian distress’ that is the real reason for the horrific toll.
But, as I discovered during a four-day journey through the epicentre of the disaster, that is not the full story.
Death seeds: A Greenpeace protester sprays milk-based paint on a Monsanto research soybean field near Atlantic, Iowa
In one small village I visited, 18 farmers had committed suicide after being sucked into GM debts. In some cases, women have taken over farms from their dead husbands – only to kill themselves as well.
Latta Ramesh, 38, drank insecticide after her crops failed – two years after her husband disappeared when the GM debts became too much.
She left her ten-year-old son, Rashan, in the care of relatives. ‘He cries when he thinks of his mother,’ said the dead woman’s aunt, sitting listlessly in shade near the fields.
Village after village, families told how they had fallen into debt after being persuaded to buy GM seeds instead of traditional cotton seeds.
The price difference is staggering: £10 for 100 grams of GM seed, compared with less than £10 for 1,000 times more traditional seeds.
But GM salesmen and government officials had promised farmers that these were ‘magic seeds’ – with better crops that would be free from parasites and insects.
Indeed, in a bid to promote the uptake of GM seeds, traditional varieties were banned from many government seed banks.
The authorities had a vested interest in promoting this new biotechnology. Desperate to escape the grinding poverty of the post-independence years, the Indian government had agreed to allow new bio-tech giants, such as the U.S. market-leader Monsanto, to sell their new seed creations.
In return for allowing western companies access to the second most populated country in the world, with more than one billion people, India was granted International Monetary Fund loans in the Eighties and Nineties, helping to launch an economic revolution.
But while cities such as Mumbai and Delhi have boomed, the farmers’ lives have slid back into the dark ages.
Though areas of India planted with GM seeds have doubled in two years – up to 17 million acres – many famers have found there is a terrible price to be paid.
Far from being ‘magic seeds’, GM pest-proof ‘breeds’ of cotton have been devastated by bollworms, a voracious parasite.
Nor were the farmers told that these seeds require double the amount of water. This has proved a matter of life and death.
With rains failing for the past two years, many GM crops have simply withered and died, leaving the farmers with crippling debts and no means of paying them off.
Having taken loans from traditional money lenders at extortionate rates, hundreds of thousands of small farmers have faced losing their land as the expensive seeds fail, while those who could struggle on faced a fresh crisis.
When crops failed in the past, farmers could still save seeds and replant them the following year.
But with GM seeds they cannot do this. That’s because GM seeds contain so- called ‘terminator technology’, meaning that they have been genetically modified so that the resulting crops do not produce viable seeds of their own.
As a result, farmers have to buy new seeds each year at the same punitive prices. For some, that means the difference between life and death.
Take the case of Suresh Bhalasa, another farmer who was cremated this week, leaving a wife and two children.
As night fell after the ceremony, and neighbours squatted outside while sacred cows were brought in from the fields, his family had no doubt that their troubles stemmed from the moment they were encouraged to buy BT Cotton, a genetically modified plant created by Monsanto.
‘We are ruined now,’ said the dead man’s 38-year-old wife. ‘We bought 100 grams of BT Cotton. Our crop failed twice. My husband had become depressed. He went out to his field, lay down in the cotton and swallowed insecticide.’
Villagers bundled him into a rickshaw and headed to hospital along rutted farm roads. ‘He cried out that he had taken the insecticide and he was sorry,’ she said, as her family and neighbours crowded into her home to pay their respects. ‘He was dead by the time they got to hospital.’
Asked if the dead man was a ‘drunkard’ or suffered from other ‘social problems’, as alleged by pro-GM officials, the quiet, dignified gathering erupted in anger. ‘No! No!’ one of the dead man’s brothers exclaimed. ‘Suresh was a good man. He sent his children to school and paid his taxes.
‘He was strangled by these magic seeds. They sell us the seeds, saying they will not need expensive pesticides but they do. We have to buy the same seeds from the same company every year. It is killing us. Please tell the world what is happening here.’
Monsanto has admitted that soaring debt was a ‘factor in this tragedy’. But pointing out that cotton production had doubled in the past seven years, a spokesman added that there are other reasons for the recent crisis, such as ‘untimely rain’ or drought, and pointed out that suicides have always been part of rural Indian life.
Officials also point to surveys saying the majority of Indian farmers want GM seeds – no doubt encouraged to do so by aggressive marketing tactics.
During the course of my inquiries in Maharastra, I encountered three ‘independent’ surveyors scouring villages for information about suicides. They insisted that GM seeds were only 50 per cent more expensive – and then later admitted the difference was 1,000 per cent.
(A Monsanto spokesman later insisted their seed is ‘only double’ the price of ‘official’ non-GM seed – but admitted that the difference can be vast if cheaper traditional seeds are sold by ‘unscrupulous’ merchants, who often also sell ‘fake’ GM seeds which are prone to disease.)
With rumours of imminent government compensation to stem the wave of deaths, many farmers said they were desperate for any form of assistance. ‘We just want to escape from our problems,’ one said. ‘We just want help to stop any more of us dying.’
Prince Charles is so distressed by the plight of the suicide farmers that he is setting up a charity, the Bhumi Vardaan Foundation, to help those affected and promote organic Indian crops instead of GM.
India’s farmers are also starting to fight back. As well as taking GM seed distributors hostage and staging mass protests, one state government is taking legal action against Monsanto for the exorbitant costs of GM seeds.
This came too late for Shankara Mandauker, who was 80,000 rupees (about £1,000) in debt when he took his own life. ‘I told him that we can survive,’ his widow said, her children still by her side as darkness fell. ‘I told him we could find a way out. He just said it was better to die.’
But the debt does not die with her husband: unless she can find a way of paying it off, she will not be able to afford the children’s schooling. They will lose their land, joining the hordes seen begging in their thousands by the roadside throughout this vast, chaotic country.
Cruelly, it’s the young who are suffering most from the ‘GM Genocide’ – the very generation supposed to be lifted out of a life of hardship and misery by these ‘magic seeds’.
Here in the suicide belt of India, the cost of the genetically modified future is murderously high.
Vidarbha remains a grim statistic. One suicide in every eight hours. More than half of those who committed suicide were between 20 and 45, their most productive years. The Maharashtra government says as many as 1920 farmers committed suicide between January 1, 2001 and August 19, 2006. Nearly 2.8 million of the 3.2 million cotton farmers are defaulters, reports Jaideep Hardikar
Suicide count
There are no authentic figures on the exact number of farm suicides in Vidarbha, but the Maharashtra government accepts a figure of 1920 from January 1, 2001 to August 19, 2006. The Vidarbha Jan Andolan Samiti (VJAS), a farmers’ movement, puts the toll at 782 from June 1, 2005 to August 26, 2006. And, in the last three months, there has been a suicide every eight hours.
Cost of cultivation
Across the country, the average cost of cultivation in cotton is a little more than Rs 16,000 per ha. With an average productivity of 460 kg per ha, it costs between Rs 35 to Rs 48 per kg to grow cotton. In Vidarbha, the cost of cultivation could go well beyond Rs 20,000 perha and if marketing cost is added, it crosses Rs 22,000. But the productivity is only 146 kg per ha. In other words, the cost per kg is almost double — well over Rs 70 per kg. In Maharashtra, the cost of growing cotton increased from Rs 17,234/ha in 2001-02 to Rs 20,859 in 2002-03.
Right age, wrong step
Among the farmers who committed suicide in the past year, more than 50% were between 20 and 45 years of age (their most productive years), according to a study by the Sakal Newspapers Limited of the two districts, Amravati and Yavatmal.
Cotton area
The hybrid cotton covers about 73% of the cotton area in Vidarbha, whereas desi varieties cover about 27%. Most of these produce medium to medium-long fibre.
Area under Bt cotton has risen from a mere 0.4% in 2002-03 to 15% in 2005-06 in Vidarbha, according to the agriculture department statistics. Only 3% cotton land falls under assured irrigation. Cotton area has declined from 16.12 lakh ha in 2001 to 12.18 lakh ha in 2005-6. Only 3% of it is under irrigation. The shift is towards soybean.
Defaulters
The Planning Commission’s fact-finding mission members found out that nearly 2.8 million of the 3.2 million cotton farmers in Vidarbha are defaulters. Of every Rs 100 borrowed, approximately Rs 80 goes back in to servicing of old loans.
PM’s promise
The Prime Minister in his Rs 3750-crore package jacked up an additional credit flow of Rs 1200 crore taking it to Rs 2000 crore for 2006-07. But the ground situation shows a credit disbursal of less than a thousand crore.
Is there light at the end of the tunnel?
Revive traditional crops. Pump money back into the rural economy, say experts
“In Vidharbha, it is too risky to adopt expensive technologies. Small farmers who take loans for cultivation have no capacity to meet the calamity of crop failure. Traditional crops like jowar should again be revived. The funds allotted under the Prime Minister’s package for seed replacement should be used to promote jowar, pulses and legumes. Also, organic farming and crop-livestock integration should be promoted on both ecological and economic grounds. Vidharbha can be declared as the Organic Farming Zone of Maharashtra, so that its oranges, jowar, cotton and other crops become known as organic products and thereby gain in market value.” — MS Swaminathan Chairman, National Commission on Farmers
“It’s not true that suicides are taking place only in Vidarbha. They began in Andhra and spread to other parts of the country. But why did farmer suicides begin after 1994? The answer is we liberalised the economy and devalued our rupee. As a result, the cost of energy went up, the cost of agriculture rose and living costs soared. The 5th Pay Commission was a vindication of this. But the farmers remained in a low-cost economy. The promise that exports in a free market would bring profits to farmers was never kept. We imported 110 lakh bales from 1998 to 2004.” — Vijay Jawandhia Wardha farmers’ leader, social commentator
“The point is we need to understand that green revolution has collapsed. Continuing suicides by farmers is a reflection of that. Suicides are more alarming in those areas where green revolution was pushed with force. But that doesn’t mean there is no agrarian crisis in other areas; it’s all over the country now. A few areas like Vidarbha are peculiar with socio-economic, agro-climatic and other factors. We borrowed a technology that did not fit into our socio-economic milieu. Tractor is today a symbol of suicides. Fertilizers and pesticides have destroyed our natural base. Farmers in Vidarbha and elsewhere are the victims of policies that have siphoned money from the rural economy.” — Devinder Sharma Former journalist, agriculture expert
They have created many problems for farmers.They bully, sue and torment them.
They are one of the worst Companies imaginable.
Monsanto Hid PCB Pollution for Decades
Monsanto’s Agent Orange: The Corporation Continues to Refuse Compensation to Veterans and Families for Exposure to the Toxic Chemical
Taxpayers Forced to Fund Monsanto’s Poisoning of Third World
Monsanto’s GE Seeds are Pushing US Agriculture into Bankruptcy
Cotton Farmers Going Bankrupt from Monsanto’s GE Cotton
In order for the FDA to determine if Monsanto’s growth hormones were safe or not, Monsanto was required to submit a scientific report on that topic. Margaret Miller, one of Monsanto’s researchers put the report together.
Shortly before the report submission, Miller left Monsanto and was hired by the FDA. Her first job for the FDA was to determine whether or not to approve the report she wrote for Monsanto. In short, Monsanto approved its own report. Assisting Miller was another former Monsanto researcher, Susan Sechen. Deciding whether or not rBGH-derived milk should be labeled fell under the jurisdiction of another FDA official, Michael Taylor, who previously worked as a lawyer for Monsanto.
There is more Much more.
This just the tip of the Iceburg. It is a very large Iceburg.
The Orissa government has sought Rs 1,250 crore ($250 million) loan from the World Bank under the third tranche of the Orissa Socio Economic Development Programme (OSEP).
It has already sent the proposal for loan assistance to the Government of India (GoI) to be forwarded to the World Bank for approval.
This was communicated to the visiting four member World Bank team by the state government today. During the discussion with the World bank team, the state government apprised them of various steps taken by it relating to anti-corruption measures, introduction of e-procurement system and financial management.
Talking to the media after discussion with the senior state government officials at the secretariat, VJ Ravishankar, lead economist, South Asia Poverty Reduction and Economics Management of World Bank said, the state government has sought a loan of $250 million from the World Bank under the third tranche OSEP.
The Bank will consider the request for loan after the GoI sends a letter in this matter, he added. The Orissa government availed $125 million in the first tranche and $225 million in the second tranche of OSEP.
Ernesto May, sector director, poverty reduction, economic management, finance and private sector development of the World Bank, South Asia region, said, the overall performance of the state government has been very satisfactory. The World Bank team will work together with the Orissa government to assess the overall situation, he added.
The team members later had a look at the Orissa Treasury Management System and computerisation of accounting system in the Controller of Accounts office.
The World Bank has approved two loans to Bulgaria worth 142 million euros, aimed at raising employment, productivity and living standards in the European Union newcomer, the lender said on Wednesday.
The Balkan country, which joined the EU in 2007, is the bloc’s poorest member with the lowest incomes per capita and has one of the lowest productivity rates.
The global financial crisis is expected to hit Bulgaria’s so far booming economy and possibly raise jobless rates as foreign investments and a domestic credit expansion, which supported growth in the past few years, are slowing.
The World Bank said in a statement that one of the loans worth 102 million euros will support Bulgaria’s reform agenda in the areas of health, education, and social protection.
‘Maintaining the momentum of reforms has become more urgent at this time of turbulence in the global financial markets, and the support of the Bank to the reform agenda … has gained additional significance,’ the statement said.
The bank’s project will support policies to increase employment, lay the foundations for long-term productivity growth by providing incentives for job creation and improving quality of education and promote fiscal sustainability, it said.
The second loan of 40 million euros is designed to stimulate social inclusion by helping low-income and marginalised families educate their children and reduce early drop-outs.
Economists and ratings agencies have warned that Bulgaria’s dependence on foreign cash to fund its huge current account deficit and foreign debt make the country vulnerable in times of tight global liquidity and credit conditions.
Sofia’s debts to the World Bank stood at 573.3 million euros at the end of September and account for 17.7 percent of the state public foreign debt, finance ministry data showed.
(Reporting by Irina Ivanova; Editing by Toby Chopra)
Ukraine could receive a $2 billion loan from the World Bank, the speaker of the country’s parliament said on Thursday.
The International Monetary Fund earlier agreed to lend Ukraine $16.5 billion.
“The ball is in Ukraine’s court now. It is up to us to decide what amount of money we should receive,” Arseniy Yatsenyuk said following meetings in Washington with the heads of both organizations.
The speaker said the funds would be used to reform Ukraine’s financial and banking sectors.
The financial crisis has seen Ukrainians rush to withdraw their savings, fearing banking collapses. More than $3 billion were pulled out of banks in October.
Ukraine’s economy has been hard hit by the global credit crunch, along with the falling price of steel, a key national export.
Last Friday, Ukraine’s parliament approved a set of measures needed to receive the IMF loan. President Viktor Yushchenko signed the bills into law on Monday.
Bank of America(NYSE: BAC) and JPMorgan Chase(NYSE: JPM).
They’re both huge. They’ll both be survivors. Both received a $25 billion investment from the Treasury. One picked up Countrywide when it looked ready to fail, the other picked up WaMu when it did fail. One bought Merrill Lynch(NYSE: MER) before a pending disaster, the other bought Bear Stearns after a historic disaster.
I smell a fight brewin’. Let’s watch these two go head-to-head and crown the king of the megabanks.
A year to forget
JPMorgan has certainly fared better than B of A in the past year: Shares are down 13% and 56%, respectively. Even so, if you compare the two on a variety of different metrics, you’ll be hard-pressed to find a clear front-runner. Both companies are well capitalized — especially after Hank Paulson’s early Christmas gift — and have ample reserves to cover future losses, and both have kept nonperforming loans and net charge-offs at levels that shouldn’t keep you from losing too much sleep, which is about all you can ask for these days.
While the similarities abound, shareholders have to grapple with a huge wild card to assess the quality of these two: the impact of mammoth acquisitions made in the past year. Comparing past results seems irrelevant, since the B of A and JPMorgan of next year will be completely different beasts than the B of A and JPMorgan of this year.
Everything must go!
Both banks shocked the financial world with four monster deals this year: Countrywide, Bear Stearns, WaMu, and Merrill Lynch (pending). The deals are serious game-changers, since they give B of A and JPMorgan the chance to close the investment-banking gap with Goldman Sachs(NYSE: GS) and Morgan Stanley(NYSE: MS), and the real-estate gap with Wells Fargo(NYSE: WFC) — especially in light of its pending Wachovia(NYSE: WB) acquisition.
Better yet, all of these deals were made with companies that either had, or likely would have, failed. It only makes sense, then, that they were struck at fire-sale prices … which most were. Countrywide was bought for about $4 billion — one-third of its tangible book value at the time. JPMorgan paid no more than what Bear Stearns’ New York office building was valued at, and has the government backing some of Bear’s riskiest assets. WaMu was acquired from the FDIC for a token amount just five months after JPMorgan originally offered $8 per share.
The one exception to this bargain-bin rampage? Bank of America’s pending $50 billion acquisition of Merrill Lynch.
Whereas JPMorgan was practically handed Bear Stearns, B of A actually paid a premium to Merrill’s book value — and did it without any government help. Why’d it pay up? Your guess is as good as mine. You’d think a deal struck at a time when Merrill likely would have failed without a partner would have been done at terms B of A would be salivating over, yet Merrill Lynch appeared to come out with the bargaining power on this one.
Now — without comparing the differences between Bear Stearns and Merrill Lynch — we have something material to distinguish B of A from JPMorgan: Merrill Lynch could easily end up being a $50-billion blunder for B of A, especially if the economy continues to upend the finance world as we know it. JPMorgan’s deal with Bear Stearns, on the other hand, will likely go down as “the deal of the century” even if Wall Street continues to flounder, simply because it paid so little for it. That fact alone shifts the probability of success in the coming years comfortably into JPMorgan’s corner.
The verdict
Two great banks. Two survivors in a hollowed-out industry. Two stocks that will likely look like bargains five or 10 years down the road when — dare I say it — the credit crunch could be long gone.
But since so much of B of A’s future is now hinged on the moot assumption that the $50 billion offered for Merrill will eventually bear fruit, I’d put the odds of big returns in the coming years leaning more toward JPMorgan Chase.
Allied Irish Banks left analysts in little doubt yesterday that its 24pc stake in US lender M&T will be put on the block as the group seeks to build up its capital reserves in the face of soaring bad loan losses.
The group slashed its full year earnings guidance by more than a third to €1.20 a share before the stock market opened, after more than doubling its forecast for bad loan loss provisions to €950m — or 0.75pc of average loans.
An increasing number of souring loans to property developers has forced AIB to also hike its loan loss forecast for 2009 from 0.6pc-0.8pc loans to 0.9pc-1.10pc. This points to a combined charge of over €2.35bn for the two years, assuming the overall loan book remains stable.
However, the country’s largest lender said it had an “action plan” that would save it from going to shareholders to raise fresh equity.
“It’s no surprise that AIB’s credit quality has deteriorated, given the challenging economic environment,” said Sebastian Orsi, an analyst with Merrion Capital. “The bad debt figures are beginning to get up there towards what the market is expecting.”
Analysts estimated the group would save €500m by a decision not to pay a final cash dividend this year. A scrip issue has not been ruled out and a question mark hangs over whether AIB will make a 2009 payout.
AIB also highlighted that asset disposals are on the cards as it seeks to increase its core tier one capital ratio — a key measure of a lender’s balance sheet strength — from 6pc at the end of this year to “at least 7pc over time”. Irish banks will come under pressure to sufficiently address their capital bases before the Government guarantee scheme runs out in two years’ time.
“We cannot announce specific actions in advance. Suffice to say, we have assets and the disposal of assets can bring us up [to a 7pc core ratio],” said John O’Donnell, group finance director. He indicated, on questioning in an analysts’ conference call, that a sale of its M&T stake could release €1.2bn of additional capital.
“The new target of 7pc is obviously low relative to where [UK and European] peers are headed and will disappoint the market. One presumes a disposal of M&T is imminent in order to help AIB to get there,” said Davy analysts.
Chief executive Eugene Sheehy appeared to pour cold water on suggestions the group’s 70pc stake in fast-growing Polish lender Bank Zachodni WBK could be sold.
“In our model, as you’re aware, we’ve four divisions,” he said, referring to the Republic of Ireland, UK, Capital Markets and Poland units, “and we believe the strategy we have in each division is robust. We spent a long time building up our positions in these markets. We’ve invested a lot of money and a lot of time building up these franchises and we don’t see the merit in running them down.”
When asked how a theoretical sale of Bank Zachodni could boost capital, Mr Sheehy told an analyst: “You’re stretching theory a bit too far.”
AIB sees its dependency on wholesale funding dipping this year as deposits grow by a “low teens percentage” — driven by the UK, Capital Markets and Poland — while loans increase about 9pc.
The loan-to-deposit ratio should fall from 157pc last year to 150pc at the end of 2008, and further gain in the medium term.
While AIB’s net interest margin has been squeezed in recent years as loan growth outpaced that of deposits, the group sees the trend is now being reversed.
Eastern European markets are feeling the pinch as investors pull money out of the region and local currencies plunge. Plunging domestic currencies mean higher monthly payments for businesses and households repaying foreign-denominated loans, forcing them to scale back spending.
In Budapest, project manager Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer can’t get a foreign-currency loan.
The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, the euro and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe‘s developing markets and local currencies plunge.
“There’s no money out there,” said Mr Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers.
“We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”
Loans
Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism.
The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.
“What has been a factor of strength in recent years has now become a social weakness,” said Tom Fallon, head of emerging markets in Paris at La Francaise des Placements, which manages $11bn.
Since the end of August, the Hungarian forint has fallen 16pc against the Swiss franc, the currency of choice for Hungarian homebuyers, and more than 8pc against the euro.
Foreign currency loans make up 62pc of all household debt in the country, up from 33pc three years ago.
Romania’s leu dropped more than 14pc against the dollar and 3.2pc against the euro.
Poland’s zloty declined more than 17pc against the dollar and 6.8pc against the euro, and Ukraine’s hryvnia plunged 22pc to the dollar and 11.5pc to the euro.
That’s even after a boost this week from an International Monetary Fund (IMF) emergency loan programme for emerging markets and the US Federal Reserve‘s decision to pump as much as $120bn into other developing countries.
The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining US dollar funding”.
In Kiev, Ukraine, Yuriy Voloshyn, who works at a real-estate company, says he’s decided to abandon plans to buy a new television because of his dollar-based mortgage. His monthly payments have risen by 18pc, or 1,000 hryvnias (€130), since he took out the loan seven months ago.
“I only have money to pay for food and my monthly fee to the bank,” Mr Voloshyn(25) said. “I can’t even dream about anything else.”
Rafal Mrowka, a driver from Ostrow Wielkopolski in western Poland, says he became addicted to checking foreign currency rates as monthly installments on his Swiss-franc mortgage jumped 25pc.
Nervous
“I’ve even stopped getting nervous, now I can only laugh,” the 32-year-old, first-time property owner said.
The bulk of eastern Europe’s credit boom was denominated in foreign currencies because they provided for cheaper financing. For example, Hungarian consumers borrowed five times as much in foreign currencies as in forint in the three months to June.
The extra burden on borrowers is making a bad economic outlook worse, said Matthias Siller, who focuses on emerging markets at Baring Asset Management in London, where he manages about $4bn.
If borrowers believe local interest rates are prohibitive and foreign currency lending dries up, it means “a sharp deceleration in consumer spending,” Mr Siller said. “That will bring serious problems for the economy.”
The east has been the fastest-growing part of Europe, with Romania’s economy expanding 9.3pc in the year through June, Ukraine 6.5pc and Poland 5.8pc. The combined economy of the countries sharing the euro grew 1.4pc in the period.
Ukraine, facing financial meltdown as the hryvnia drops and prices for exports such as steel tumble, has agreed to a $16.5bn loan from the IMF while Hungary secured $26bn in loans from the IMF, the EU and the World Bank. The government forecast a 1pc economic contraction next year, the first since 1993.
The Hungarian central bank raised its benchmark interest rate by three percentage points to 11.5pc last month to defend the forint.
“Panicked customers are calling to say they’re afraid the interest on their mortgages will go up or that they won’t be able to secure mortgages,” said Nikolett Gurubi, director of lending at Otthon Centrum Belvaros, the downtown Budapest branch of a real estate agency.
“We’ve been observing a return to a good old banking rule, to lend in a currency in which people earn,” said Jan Krzysztof Bielecki, chief executive officer of Poland’s biggest lender, Bank Pekao SA.
It stopped non-zloty lending in 2003.
“Earlier, banks competed on the Swiss franc market watching only sales levels and not looking at keeping an acceptable risk level.”
The problem is a “good lesson to all of us”, Polish President Lech Kaczynski said last month at a press conference in Warsaw, where he urged Poles to stick to zloty lending.
Lithuania’s central bank said on Thursday it had decided to cut the obligatory reserve ratio for commercial banks to 4 percent from 6 percent to boost liquidity, the first reserve ratio cut for six years.
A spokesman for the central bank said the move would free up about 1 billion litas ($372.4 million) of funds for banks.
Like other financial markets, the small Lithuanian money market has also suffered a liquidity squeeze during the global financial crisis and banks had urged the central bank to cut reserve requirements to free up funds.
(Reporting by Nerijus Adomaitis, writing by Patrick Lannin, editing by Mike Peacock)
VILNIUS,
November 6 2008
Lithuania’s central bank on Thursday cut reserve requirements for banks as the global credit squeeze finally made itself felt in the Baltic states’ small financial sector.
Analysts say that Latvia, Estonia and Lithuania, with high current account deficits and consumer debts, could be vulnerable to the kind of crisis which has forced Hungary to turn to the IMF, though Baltic leaders have played down this probability.
None of the three former Soviet states has had to launch a bank bailout or feed liquidity to its institutions like bigger nations in western Europe, but local money market rates have steadily risen and liquidity has dried up.
Lithuania’s central bank responded to the problem by reducing its obligatory reserve ratio for commercial banks to 4 percent from 6 percent to boost liquidity, the first reserve ratio cut for six years.
A spokesman for the central bank said the move would free up about 1 billion litas ($372.4 million) of funds for banks. Latvia’s central bank has also said that it will continue to cut reserve requirements for banks.
The bank sectors in Lithuania, Estonia and Latvia are dominated by Nordic groups such as SEB, Swedbank , Nordea and DNB NOR as well as a sprinkling of local banks such as Parex in Latvia and Snoras and Sialiu in Lithuania.
‘The central bank decision shows there are liquidity problems in the banking system,’ said Stasys Jakeliunas, a Lithuanian independent financial analyst.
He said this was also reflected in the fact that local overnight rates had risen from 4.6 percent on October 22 to 8 percent on Thursday. The six-month rate had risen 70 basis points from Wednesday to 9.2 percent today.
‘That indicates a sort of pre-crisis situation…The central bank’s decision to unfreeze some assets could help fix liquidity in the short run, but may not be enough in the longer term,’ Jakeliunas said.
A similar money market trend has been seen in Latvia.
There, the overnight rate has eased to about 3 percent from the 8 percent seen in mid-October, but the 6-month rate has spiked to 12.5 percent from 8 percent at the start of October, meaning long-term local financing is hard to come by.
The Latvian government this week said it would make available state guarantees for loans taken out by local banks, saying this was similar to measures taken by other EU nations to support their financial sectors.
The Latvian central bank has also been selling euros and buying lats in recent weeks as the lat currency has been stuck at the weak end of its 1 percent band against the euro.
(Reporting by Nerijus Adomaitis, writing by Patrick Lannin, editing by Patrick Graham)
The leader of the main opposition party Fidesz last week slammed the government for turning to the IMF to bolster the shaky economy. Viktor Orban said the move compromises Hungary’s sovereignty and reduce its room for financial manoeuvre. “It is shameful and painful that Hungary has to give up a part of its sovereign decisions because it has plunged into a crisis,” he said.
Orbán was not the only dissenting voice. “May God save Hungary from drawing the EUR 20 billion loan that is to be jointly provided by the IMF, the EU and the World Bank,” said property tycoon Sándor Demján, one of Hungary’s richest citizens and head of a national employers and entrepreneurs lobby group. “What Hungary really needs is to start structural reforms of its bloated public administration, pension, education and taxation systems and put an end to overspending. We must start saving; we cannot build a welfare state on loans,” he told the left-wing daily Népszabadság last Wednesday. He added that, under the circumstances, the issue of tax cuts can be set aside for six months.
Also less than ecstatic about the IMF bailout proposal was István Éger, head of the Hungarian Chamber of Physicians.Fearing that underpaid public health workers will be at the sharp end of the cutbacks that the IMF is demanding as a condition for the loan, he turned to President László Sólyom and Hungarian Academy of Sciences chairman József Pálinkás, asking for an independent study into whether such drastic cutbacks are necessary.The planned cancellation of the “thirteenth-month” bonus salary payment and other compulsory honorariums would create labour shortages that endanger patient care, Éger said last Wednesday.
Only last September, Éger had called for the government to raise doctors’ salaries to at least 70% of the EU average by 2013. Doctors’ wages vary from hospital to hospital, for example at Budapest Szent János Hospital, the average basic gross wage was HUF 331,000 (EUR 1,284) a month in March this year, while at the Szent Imre Hospital it is a mere HUF 237,000 (EUR 919). “The liberal economics mindset that created this crisis has suffered a global defeat, while at the same time the leaders of this country are preparing to accept terms dictated by the same mindset,” Éger added.
Last Friday, Finance Minister János Veres said the government will put a bill before Parliament within two weeks which, if passed, would allow the authorities to draw down on the IMF loan and channel money into the banking sector if required.
Opposition needs to appear to be constructive rather than contrary as tough decisions loom
The most important issues in Hungarian politics at the moment are still management of the crisis, the HUF 375 billion (EUR 1.44 billion) spending cut announced by the government and the USD 25 billion (EUR 19.51 billion) loan granted by the International Monetary Fund, the World Bank and the European Union. The position of Prime Minister Ferenc Gyurcsány as “crisis manager” is likely to strengthen in the short-term. The opposition is still trying to find its feet in this new scenario.
MDF: stand on our own
At the national summit the Hungarian Democratic Forum (MDF) proposed a spending cut of approximately HUF 1 trillion (EUR 3.85 billion), considerably more than the government. The Forum’s criticism of the IMF agreement is related to this. According to its party leaders, the crisis should be managed from the state’s “own resources” through a spending cut, and the loan amount should on no account be spent on day-to-day matters . The latter is rational, but the government itself is not planning to spend the USD 25 billion, so the MDF’s tough approach does not really pose a challenge to the Hungarian Socialist Party (MSZP) minority government.
In reality it is a question of the considerably weakened MDF trying to become the favoured party among influential economic figures by taking a stance in favour of a larger spending cut. Despite its rhetorical attacks the Forum is in fact closer to the MSZP than the other parliamentary parties in terms of the budget.
SZDSZ: in line, & in the shadows
The Alliance of Free Democrats (SZDSZ) since leaving the coalition has not managed to adopt a new position as a decisive opposition party, nor as a political force capable of bringing down the prime minister and setting up a government of experts.
It has given in to pressure and is negotiating with the MSZP on significant policies, and has lost political weight. The “crisis-managing” prime minister has adopted the liberals’ proposal of a law putting a ceiling on spending and is reducing the deficit. The SZDSZ is incapable of triumphing in these questions, and has faded into the background beside Gyurcsány’s words and actions.
The liberals’ ultimate condition for rejoining the coalition is a tax-reform timetable, and that has not been fulfilled. The prime minister has made vague promises on this issue, but in the current situation his hands are tied.
The tax reform fund proposed by the SZDSZ is the guarantee for starting to reduce taxes, but not now: the money potentially saved in 2009 would be collected in this fund, which in the second half of 2009 at the earliest could be used as a basis for reducing taxes, and it is not yet known how much money can be collected. Overall we can say that the SZDSZ’s tough-sounding rhetoric is designed to obscure the fact that they have moved closer to the government.
Fidesz: Hungary shamed
Fidesz’s situation is also difficult: the consistency of the party’s communications has lessened, despite the fact that for a long time this has been one of its main strengths. Aside from the fundamental contradiction that Fidesz wishes to introduce immediate radical tax reductions without cutting spending, the party also took a unique stance in connection with the role of the IMF.
The party first stressed that negotiations should have been launched with the EU, and not the IMF. Next deputy chairman Mihály Varga expressed disappointment at the EU’s unresponsiveness: “It makes me question whether it’s worth being a member of the European Union.” With this statement he indirectly justified the government’s decision to turn to the IMF: if the EU is not willing to help, then the government has to look elsewhere. The government finally signed a joint loan guarantee agreement with the World Bank, the International Monetary Fund and the European Union.
Next Fidesz used its last remaining argument that Hungary has been shamed as the only EU country to have need to seek such assistance. Raising the question of responsibility is undoubtedly important. However at the time of crisis management, seeking a solution can compete with the issue of responsibility, and in the former respect the prime minister had the advantage.
A different game now
Just as swift crisis management has offered the prime minister a chance to strengthen his position, the prolonged real economy crisis could offer Fidesz a similar political opportunity. The next year of the Gyurcsány government could be spent in an ever-deepening crisis. That will make the MSZP’s already problematic situation extremely difficult. At this stage, however, we know little about whether the crisis will change voters’ expectations of political figures in the long-term, and whether, for example, Fidesz will be forced to adopt a less-confrontational style of politics. If that is the case then the outcome of the next elections will also depend on Fidesz’s ability to adapt.
Following are excerpts from the a Letter of Intent which Hungary’s central bank and government sent to the International Monetary Fund and published on the central bank’s website http://www.mnb.hu on Thursday.
‘Financial market stress in Hungary has intensified in past weeks as a result of events in global financial markets. In response, the government and the central bank of Hungary (Magyar Nemzeti Bank, MNB) have developed a comprehensive strategy to firmly anchor macroeconomic policies and reduce financial market stress. We request that the Fund support our program through a Stand-By Arrangement (SBA) for a period of 17 months in the amount of SDR10.5 billion (EUR 12.5 billion). This arrangement, in conjunction with support of EUR 6.5 billion under the EU’s balance of payment financing facility and other multilateral and bilateral commitments, will signal the international community’s support for our policies.
We have discussed with IMF staff our economic program, which is outlined below. Our main objectives are to (i) reduce the government’s financing needs and improve longterm fiscal sustainability, (ii) maintain adequate capitalization of the domestic banks and liquidity in domestic financial markets, and (iii) underpin confidence and secure adequate external financing. The government is in the process of considering additional steps to improve the competitive position of the economy, which are fully consistent with the program.
‘The first review of the program will take place by February 15, 2009 and the second review by May 15, 2009. We believe that the policies set forth in this letter are adequate to achieve the objectives of our economic program, but the Government stands ready to take additional measures as appropriate to ensure the achievement of its objectives.’
FINANCING NEED
‘Gross external financing needs will decline over the course of 2009, due to the smaller fiscal and current account deficits, and will be partly covered by EU structural funds (a stable source of inflows) and already committed foreign direct investment inflows. We cautiously assume net outflows from the non-financial private sector and a reduction in the government’s net issuance of external debt. Foreign banks, however, are expected to largely maintain their exposure in Hungary (see below). At the same time, we aim to gradually increase the MNB’s foreign reserves as a precaution against unexpected outflows. The resulting external financing need of some EUR 20 billion can be covered by drawing on resources from the IMF, support under the EU’s balance of payment facility and other official creditors. Any additional support from other international financial institutions will be used to further augment our foreign reserves.
FISCAL DISCIPLINE
‘The government is committed to maintaining fiscal discipline in the long-term, recognizing that this is a key element in retaining investor confidence. We therefore intend to continue budget consolidation in the 2010 budget – to be discussed with IMF staff as part of the program – and beyond; new medium-term fiscal targets will be contained in the forthcoming convergence program and our medium-term fiscal framework. To put fiscal sustainability on a permanent footing, we have already submitted to parliament a draft fiscal responsibility law, which establishes fiscal rules on public debt and primary deficit, strengthens the medium-term expenditure framework (rolling three-year expenditure ceilings) and creates a fiscal council to provide independent and expert scrutiny. We plan to enact this law by end-December 2008 (a structural benchmark).’
FINANCIAL SECTOR POLICIES
‘The Hungarian banking system complies with regulatory capital requirements and has been profitable. Liquidity risk has recently increased due to the drop in global risk appetite which has increased banks’ funding costs and shortened maturities. However, most of the external funding comes from parent banks in the euro area, which now have access to liquidity through ECB facilities and which have pledged their continuous support of their subsidiaries in Hungary, as reaffirmed in the joint statement of MNB and leading banks in Hungary of October 17, 2008. The MNB and the HFSA will monitor this commitment closely, and provide summary information on a daily basis to IMF staff. Domestic funding has not shown any signs of stress and any stress would be contained by the liquidity facilities mentioned below. In addition, the government has not only increased the level of deposit insurance coverage of retail deposits from HUF 6 million to HUF 13 million (in line with EU agreements) but also pledged to provide a blanket guarantee on all deposits. The government stands ready to take further measures to ensure the stability of bank funding, if needed.
We have developed, in consultation with IMF staff, a comprehensive package of support measures available to all qualified domestic banks, to buttress their credibility and confirm our commitment to preserving their key role in the Hungarian economy. The domestic banks have entered this period of market stress with strong solvency positions, which they have been able to preserve so far in spite of the severity of the turmoil. We are nevertheless in the process of providing a support package in line with best practices, ensuring a level playing field within the EU. The banking sector package contains provisions for added capital and funds a guarantee fund for interbank lending. Funding will be divided as follows: Total funding of HUF 600 billion will be divided evenly between the Capital Base Enhancement Fund and a and the Refinancing Guarantee Fund. The Package is available to private Hungarian banks of systemic importance. The Capital Base Enhancement Fund has been sized to bring the eligible banks’ capital adequacy ratio (CAR) up to 14 percent. The Guarantee Fund is meant to bring comfort to the providers of wholesale funding and secure the refinancing of the eligible banks. Its endowment of HUF 300 billion will be invested in euro denominated government bonds of Euro area countries and managed by the MNB. Open for new transactions until end-2009, it will guarantee the rollover of loans and wholesale debt securities with an initial maturity of more than 3 months and up to 5 years, against a fee and with appropriate safeguards. This package should also ensure that the domestic banks remain capable of playing a responsible role vis-à-vis their foreign subsidiaries. We will submit a bill to this effect to parliament by November 10 and request an extraordinary procedure to pass the bill as soon as possible (structural performance criterion). We will monitor carefully the impact of a possible deterioration of borrowers’ capacity to repay their loans as the economy slows. Recent pressures on banks’ funding are being addressed by their management in close coordination with the HFSA and MNB. We welcome the involvement of EBRD in further strengthening the Hungarian banking system.’
(Reporting by Krisztina Than; editing by David Stamp)
An IMF rescue deal steadied Hungary’s battered currency on Monday, but a downgrade in Romania’s debt rating to “junk” status showed the ripples of the global crisis were still spreading across emerging markets.
After reaching a $16.5 billion loan agreement with Kiev to shore up Ukraine’s teetering economy, the International Monetary Fund said on Sunday it would finalize a deal with Budapest in the next few days to bolster Hungary’s near-term stability.
Facing the worst global financial crisis since the 1930s, emerging Europe has watched foreign investors once bullish on the region’s prospects of strong economic growth and deeper integration into the European Union dump their assets.
In particular, there is concern that countries like Ukraine and EU members Hungary, Romania, Bulgaria and the Baltic states may not be able to handle their large foreign debt burdens, which could spark financial crises.
News of Hungary’s IMF deal sent the forint 2 percent higher. The currency’s almost 20 percent dive in the last month had spooked investors across the ex-communist bloc, previously seen as safer than most other emerging economies.
“The purpose … is to create a safety net for Hungary,” Prime Minister Ferenc Gyurcsany said.
Turkey’s central bank governor said he would welcome some form of arrangement with the IMF, adding to growing calls for the government to strike a deal.
Budapest turned to the IMF to shore up its markets after investors sold off Hungarian assets on worries over its banking system and the financing of its large external debt.
ROMANIAN CUT TO JUNK
Ratings agency Standard & Poor’s cited just such a reason when it cut Romania’s sovereign rating to junk status on Monday and said its outlook was negative, sending the leu currency 3 percent lower to a 10-day low against the euro.
It also cut to stable from positive its outlook for Poland — where a deputy finance minister warned of capital flight on Monday from Polish units to their euro zone-based owners — due to falling international markets and tightening credit.
S&P said it had cut Romania because of mounting risks to its real economy due to rising private sector debt and a dependency on its need to borrow on increasingly uncertain foreign markets.
It said policymakers had ignored warnings and were instead focused on general elections scheduled for November 30.
The IMF did not disclose the size of its package for Hungary, but analysts said it should be over $10 billion, based on the IMF’s agreement in principle with Ukraine to a $16.5 billion standby loan, also announced on Sunday.
“The policies Hungary envisages justify an exceptional level of access to Fund resources,” IMF Managing Director Dominique Strauss-Kahn said in a statement.
Analysts said the Hungarian package could give support to the forint in the short term and would likely set conditions for the government to tighten state spending further.
“The package will be fairly large, an amount exceeding $10 billion,” said Eszter Gargyan at Citigroup. “Hopefully it will have conditions which would require structural changes to ensure a sustainable fiscal position.”
DAIMLER BOOST
Providing a shot in the arm for Hungary’s ailing economy, Germany’s Daimler signed a deal with the government to invest 800 million euros ($995.4 million) in a new plant that will produce over 100,000 compact cars a year from 2012.
Despite improved sentiment, Hungary’s debt agency scrapped a two-month T-bill auction on Monday as demand has remained low, and the stock market was down 6.9 percent.
Hungary’s government and central bank have scrambled to reassure investors that the foreign-dominated banking system is stable and have tried to jump start the all-but-frozen markets for foreign currency swaps and government bonds.
The main problem is a strong demand for FX funding, particularly in euro and Swiss francs, in the banking sector after a boom in lending to households and companies.
(Additional reporting by Sandor Peto, Gergely Szakacs, Balasz Koranyi, and Michael Winfrey in Prague)
(Writing by Krisztina Than and Michael Winfrey; Editing by Jon Boyle)
BUDAPEST, Hungary (AP) — Hungarian financial authorities say they are ready to provide local banks up to 600 billion forints ($3 billion, 2.3 billion euros) to boost banks capital and help them refinance debts.
The government plans to present the package to parliament on Monday and ask for speedy approval. Half would be guarantees to help the banks refinance.
Hungary would get a stake in the banks participating in the state aid.
The aid package for banks comes as part of the $25.1 billion standby loan for Hungary announced last month by the International Monetary Fund, the European Union and the World Bank.
Serbia’s officials say they are negotiating a financial arrangement with the International Monetary Fund to help the Balkan state counter effects of the global financial crisis and bolster its credit rating.
Here are some key facts about Serbia’s arrangements with the IMF and about the country’s economy.
* The IMF mission arrived in Belgrade in late October to advise the government on its 2009 budget.
* Serbia says it will not need extra funding in the next 6-12 months, but could use an available $700 million of its IMF quota if there is a sudden halt in investment inflows.
* Worries focus on external financing for the country, which has a current account deficit of 18.5 percent of gross domestic product and saw almost 12 percent wiped off the value of its currency between the start of October and early November. A fall in the dinar’s value makes it more expensive for business and consumers to meet obligations in foreign currencies.
* Since 2000 when the West embraced Serbia after nearly a decade of isolation, the Balkan country has had two financial programmes with the IMF.
* In June 2001 the IMF approved a $249 million stand-by loan to Serbia and Montenegro, at the time the two remaining partners in their shrunken Yugoslav federation.
* In 2002 Serbia signed a three-year loan deal worth $962 million with the IMF and its completion was the main condition for the Balkan state to win an additional 15 percent debt write off — equivalent to $700 million — from the Paris Club of creditors.
* Serbia’s dinar currency, currently trades at two-year lows of 85.70-86.00 to the euro. The central bank spent 260 million euros of its more than 9.4 billion euros in hard currency reserves defending the dinar in October.
* Following reports on the financial sector crisis in the West, Serbs withdrew more than 500 million in savings deposits from banks. Serbians lost more than $4.0 billion in private savings in the early 1990s and the government is repaying the debt with a 14-year bond maturing in 2016.
* In 2007 Serbia’s economy grew by 7.5 percent. This year’s growth is seen at around 7 percent but the global credit crunch is expected to weigh on activity and the government has cut its 2009 growth forecast to four from six percent.
* Standard and Poor’s rates Serbia BB- with a negative outlook and had seen fiscal expansion as the main threat. Their representatives will visit Serbia later this week before deciding a change in credit rating or outlook. (Reporting by Ivana Sekularac, Editing by Gordana Filipovic and Patrick Graham)
The International Monetary Fund approved a $16.5 billion (10.4 billion pound) loan program for Ukraine that includes monetary and exchange rate policy shifts to ease strains from the global financial crisis.
The IMF, in a statement issued late Wednesday, said it would immediately disburse $4.5 billion to the government under the two-year loan agreement.
“The authorities’ program is designed to help stabilise the domestic financial system against a backdrop of global deleveraging and a domestic crisis of confidence, and to facilitate adjustment of the economy to a large terms-of-trade shock,” the Fund said.
“The authorities’ plan incorporates monetary and exchange rate policy shifts, banking recapitalization, and fiscal and incomes policy adjustments.”
In Kiev, President Viktor Yushchenko welcomed the decision, taken after Ukraine’s fractious parliament approved enabling legislation. He said it provided a “signal to the international community to boost the rating of trust in our country.”
“The economy is getting a powerful resource to develop priority sectors and guarantee the liquidity of the banking system,” he said in a statement on the presidential Web site.
Prime Minister Yulia Tymoshenko, the president’s former ally turned rival, described the loan as a “great victory” and said it would “allow us to stabilise completely the financial situation in Ukraine.”
The IMF decision was issued along with forecast indicators predicting that Ukraine would sink into recession next year, with a 3 percent fall against 6 percent growth this year.
In a statement, Murilo Portugal, IMF deputy managing director, said Ukraine’s economy, especially its banking system, was under severe stress, caused by a drop in global steel prices, the country’s main export, and global financial turmoil.
INTERVENTION, RECAPITALISATION
He said Ukraine’s program would seek to restore financial and economic stability through a more flexible exchange rate regime with targeted interventions, so-called ‘pre-emptive’ recapitalisation of banks, and tighter monetary policy.
“The flexible exchange rate regime, backed by an appropriate monetary policy and foreign exchange intervention, will help absorb external shocks and avoid disorderly exchange market developments,” Portugal said.
“The recent unification of official and market exchange rates should increase clarity about the regime.”
Exchange controls recently imposed, he said, would be phased out as confidence returns to the economy.
Ukraine’s central bank has been intervening since early October to lift the hryvnia currency from record lows last week. It began offering buy-sell rates for currencies this week after previously only selling or buying a currency.
Portugal said as credit pressures abate, tighter monetary policy will be needed to guard against inflation.
He said the government’s target of a balanced 2009 budget would be reviewed, although it could be achieved through expenditure restraint and a phased increase in energy tariffs.
Portugal said recapitalisation efforts for banks would ease liquidity pressures that could prolong an economic downturn.
“Decisive measures that have been taken to allocate public funds to recapitalise banks and to facilitate bank resolution processes will ensure that problems can be dealt with promptly,” he said.
“A proactive strategy to resolve corporate and household debt problems will also be essential to reduce banking sector vulnerabilities.”
(Editing by Andy Bruce)
Source
Key facts on Ukraine’s finances and politics
The International Monetary Fund approved a $16.5 billion (10.5 billion pound) loan programme for Ukraine late on Wednesday that includes monetary and exchange rate policy shifts to ease strains from the global financial crisis.
Following are key facts about why Ukraine is vulnerable to heightened risk aversion among international investors.
POLITICS
* Ukraine has been plagued by political turbulence since “Orange Revolution” protests in 2004 brought to power President Viktor Yushchenko and a team committed to moving closer to the West and joining NATO and the European Union.
Rows pitting Yushchenko against his former ally Yulia Tymoshenko, who twice served as his prime minister, undermined the “orange” camp and brought down governments.
Although the president dissolved parliament last month and called a December parliamentary election, he has since suspended that decree and a vote this year now seems unlikely.
* Upheaval — and trouble forming a stable ruling coalition — reflect Ukraine’s longstanding division into the nationalist west and centre, which looks to the EU and United States, and the Russian-speaking east and south, friendlier towards Moscow.
* Relations with Russia, bumpy throughout the post-Soviet period, have sunk to unprecedented lows over Yushchenko’s denunciation of Moscow’s military intervention in Georgia. Ukraine depends heavily on Moscow for energy supplies.
* The hryvnia currency hit an all-time low of 7.2 to the dollar on October 29, weakened by growing global risk aversion and regional tensions after Russia’s conflict with Georgia.
* Authorities have said they will formulate a new mechanism which would unify the market, cash and official rates.
* In mid-2008, the hryvnia had strengthened as far as 4.5/$, after the central bank abandoned a policy of keeping it in a corridor of 5.00-5.06 per dollar within a 4.95-5.25 band.
FINANCES
* Foreign exchange reserves fell to $33 billion at the end of October from $37.5 billion end-September, when they covered 3.7 months of imports.
* The current account deficit more than quadrupled in the first nine months of this year compared with the same period last year to $8.4 billion, or 5.8 percent of GDP.
* Analysts based outside Ukraine forecast its current account deficit at $21-25 billion, or 10-12 percent of gross domestic product, by year-end; Ukraine-based analysts give lower forecasts of about 6 percent of GDP.
* Prices for Ukraine’s steel exports are dropping, while Russia’s Gazprom has suggested next year’s price for gas imports could soar to $400 per 1,000 cubic metres from $179.50 now.
* The central bank risks encouraging imports and further widening the trade gap if it supports the hryvnia. However, letting it float would remove an important anchor for domestic and foreign businesses in Ukraine’s export-driven economy.
* Many people hold debt in foreign currency and would have to pay more to service it if the hryvnia weakened.
* Consumers are extremely sensitive to currency movements — they lost savings when the Soviet Union collapsed and again through hyper inflation and a currency crisis in the 1990s that more than halved the hryvnia’s value to about 4/$ and beyond.
* Ukraine was forced to restructure its debts in 2000 and made the final payments on that restructuring just last year.
FOREIGN DEBT
Ukraine’s foreign debt totalled just over $100 billion as of July 1, of which about $15 billion was government debt.
* Analysts estimate Ukraine’s 2009 external financing requirement to be $55-66 billion, of which $32-40 billion is in the private sector. Foreign banks own 40-42 percent of total banking assets and 25 percent of short-term banking debt is owed to parent banks.
Turkey will face a balance of
payments problem next year that could snuff out growth if the
government does not overcome its reticence to join the queue of
emerging countries seeking International Monetary Fund help.
Politicians are loath to ask for IMF help before municipal
elections next year given the public backlash against the six
years of fiscal austerity demanded by the IMF in return for
helping Turkey through a financial and economic crisis in 2001.
However, economists say its $70 billion foreign exchange
reserve is not a large enough buffer given the current account
deficit is seen rising to $50.4 billion in 2009 and the funding
need of the private sector is estimated at around $90 billion.
Turkey’s business community has therefore been calling for
an IMF loan deal to limit the fallout from a global financial
crisis which has already forced Ukraine, Hungary, Iceland and Serbia to seek IMF help.
Such aid comes with strings attached and while the
government is reluctant to accept big spending curbs and other
painful steps that might exacerbate the economic slowdown,
economists say IMF credit may be the only source of credit if
Turkey finds itself in a balance of payments difficulties.
“Turkey is not an EU member with access to the European
Central Bank credit lines that have been made available, nor
does it have a swap line with the (United States’) Fed as do a
few other emerging markets now to boost dollar liquidity,”
Kristin Lindow, Moody’s Investors lead sovereign analyst for
Turkey, told Reuters.
Turkey is carrying out accession negotiations with the
European Union, but is not expected to join the 27-members bloc
for several years at the earliest.
FINANCING NEEDS
Turkey’ economy is in much better shape than it was in 2001,
when it had a severe crisis and signed one of the biggest ever
IMF bailouts but some economists say the Treasury may not be
able to maintain its current cash holding.
Government spending is expected to pick up in coming months
and appetite for Turkish bonds has faded as investors favour
safe-heaven U.S. dollar assets.
Analysts say Ankara needs $15-$20 billion IMF credit to meet
its short-term financing needs, even if such help is made
contingent on measures such as cutting spending, raising taxes,
accelerating privatisation, and increasing interest rates to
correct fiscal and external imbalances and control inflation.
“For the first time in a couple of years, the balance of
payment will be a binding concern for Turkey in the sense that
Turkish corporates might have to cut back their borrowing from
international markets,” said Reinhard Cluse, economist at UBS.
It is estimated the non-bank corporate sector will roll over
roughly $20 billion in debt in the coming months.
Curbs on firms’ ability to borrow will dampen economic
activity, which has already weakened.
The economy expanded by 1.9 percent in the second quarter, a
a sharp slowdown from 6.7 percent in the first quarter, and some
economists expect it will grow by only 2-3 percent next year.
Turkish banks have strong loan/deposit and capital adequacy
ratios compared with their western peers and are tightly
regulated, but this is not the case for manufacturing firms.
“I don’t think banks will have a problem rolling over their
debt. The unknown factors are more in the non-financial sectors.
The non-financial sector firms borrowed $18 billion in the first
eight months. This is a very high figure,” said JP Morgan Chase
senior economist Yarkin Cebeci said.
“An IMF deal will cut the size of the shock waves even if it
can’t stop the financial volatility. More importantly is that an
IMF deal will comfort both the financial and non-bank corporate
sectors,” Cebeci added.
An IMF deal would also help shore up financial market
sentiment, economists said. Global financial turmoil has hit
Turkish markets in the last two months, with the lira losing one
third of its value and stocks halving in value.
“An IMF deal will ensure a gradual and softer fall. If the
market attempts to make a correction on their own, the fall will
be sharper and faster…I mean further slowdown of growth and
more lira weakening,” Merrill Lynch EMEA economist Turker
Hamzaoglu said.
Iceland raised interest rates to a record 18 per cent from 12 per cent yesterday as a “condition of a proposed $2bn loan from the International Monetary Fund” to help rescue the stricken island.
Iceland applied to the Washington-based organisation for the emergency loan after its banking system collapsed and is seeking another $4bn (€3.2bn, £2.6bn) from some Nordic and other central banks.
The application will be presented to the IMF’s board tomorrow and the central bank said a condition attached to the loan was for a rate rise to 18 per cent.
The move reversed a 3.5 per cent rate cut announced just two weeks ago by David Oddsson, central bank governor, underlining the influence the IMF now has over policymaking in Iceland.
Brian Coulton, managing director at Fitch Ratings, the credit rating agency, said Iceland’s central bank had “no choice but to work very closely with the fund”.
Following the collapse of the banking system, the Icelandic economy is expected to contract by up to 10 per cent, unemployment to rise at about 8 per cent and inflation to hit 20 per cent or more, economists say.
“Putting up interest rates means they are going to go through the mother of all recessions, but the key is stability,” Mr Coulton said.
The IMF-led rescue represents an important breakthrough for Iceland as it strives to stabilise its economy by clearing the way for other countries to come to its aid. But it has come at the price of agreeing to the organisation’s demands.
The IMF conditions at-tached to the loan are to restore confidence in the economy and stabilise the Icelandic krona, restore fiscal sustainability, and reestablish a viable banking system. Yesterday’s rate rise was an important first step towards boosting the credibility of the Icelandic krona, which lost 70 per cent of its value during the crisis before trading dried up amid the uncertainty.
The IMF and Icelandic government have agreed that the currency should refloat within a matter of weeks, regarded as a vital step in restoring Iceland’s international credibility and helping the international payment system to restart.
“It is of overarching importance to restore stability in the foreign exchange market and support the exchange rate of the crown,” Sedlabanki, the central bank, said in a statement.
The huge interest rate rise came as Iceland continued to try to rally international sup-port for multi-billiondollar loans to bolster its foreign exchange re-serves, a move that should also help support its currency once it resumes trading.
The office of Geir Haarde, prime minister, told the Financial Times yesterday Iceland had sent an application for funds to the US Federal Reserve and the European Central Bank and had also been in contact with the Bank of Japan via its embassy in Tokyo.
The Icelandic krona is expected to be floated again as soon as is practical, possibly within the next two weeks, once the IMF’s board has approved the $2bn loan.
The interest rate increase is way out of line with any logic. That is one of the reasons I don’t trust the IMF. Their Conditions. They dictate to those in need. 18% is ridiculous. This is helping Iceland how?
That kind of interest rate is insanity.
Nordic nations work on Iceland bail-out
By David Ibison in Stockholm
November 5 2008
Officials from four Nordic central banks and finance ministries held a private meeting in Stockholm on Wednesday to discuss their contributions to a $6bn rescue package for Iceland.
The gathering at the Ministry of Finance was a strong sign that Denmark, Sweden and Finland are drawing closer to announcing a multibillion euro package of loans after Norway agreed a €500m ($648m, £405m) advance last week.
Iceland hopes to be told on Thursday or Friday that its application to the International Monetary Fund for a $2bn (€1.54bn, £1.25bn) loan to support its economic revival has been approved.
Once official approval of the IMF loan has been secured, the way is clear for the Nordic countries to start considering how much they are prepared to offer, central banking officials said.
Iceland is seeking a total of about $6bn, which it will use to bolster its foreign exchange reserves to try to restore the credibility of its currency after its banking system collapsed last month.
The island’s government has also sent an application for funds to the US Federal Reserve and the European Central Bank and has been in contact with the Bank of Japan through its embassy in Tokyo, it said.
The four Nordic nations have said they are willing to support Iceland but only after it agreed to design and implement an economic stabilisation plan in association with the IMF. That plan was agreed in late October and comprises stabilising the Icelandic krona, restoring fiscal sustainability and re-establishing a viable banking system. It should also be approved by the IMF on Thursday or Friday.
The meeting at the finance ministry was attended by Ingimundur Fridriksson, one of three governors of Iceland’s central bank; Audun Gronn, the head of the international department at Norway’s central bank; Barbro Wickman-Parak, deputy governor of Sweden’s Riksbank; and similar level representatives from the central bank and finance ministries of Finland and Denmark.
Any commitment by the Nordic nations to support Iceland alongside the IMF would be an important development as the island strives to stabilise its economy. But securing approval for the loans does not mean that Iceland will have immediate access to the funds. Norway’s loan requires approval from parliament, as would others.
Following the collapse of Iceland’s banking system, its economy is expected to contract up to 10 per cent, unemployment is forecast to spike to about 8 per cent and inflation is set to reach 20 per cent or more, according to economists.
Iceland raised interest rates last week from 12 per cent to a record 18 per cent.
Some European Union member states are said to be of the opinion that Iceland should not be granted a loan from the International Monetary Fund (IMF) until an agreement with Britain in regards to the deposits of Icelandic banks has been reached.
These same EU member states allegedly also believe that Iceland should not be granted a loan from the union’s emergency fund until the dispute surrounding the deposit accounts has been solved, Fréttabladid reports.
Icelandic Committee Members of Parliament of the European Free Trade Association (EFTA) Countries (CMP) said they had been given a clear message in that regard from EU officials during a meeting in Brussels earlier this week.
“I believe that extortion is involved,” said MP for the Left-Greens Árni Thór Sigurdsson, who is on the CMP. “[EU officials] said that a loan from the IMF would not happen unless we reached an agreement with Britain. They have influence in the fund and can set terms like that, which is known as extortion.”
Katrín Júlíusdóttir, an MP for the Social Democrats and chairman for the Icelandic division of the CMP, said Iceland’s representatives on the CMP had pointed out that Iceland intended to respect laws and regulations but that they disagreed with Britain on the interpretation of some legal issues.
Júlíusdóttir said Iceland’s representatives in the committee had also pointed out that there should not be a connection between international financial aid and a dispute on insurance for deposits.
British authorities have offered a loan to the Icelandic state so that Icelandic authorities can honor their obligations to Landsbanki account holders in the UK. However, a prerequisite for such a loan is an agreement with the IMF.
According to Fréttabladid, British Chancellor of the Exchequer Alistair Darling emphasized that a loan to Iceland would not be granted otherwise in an interview with the Dow Jones news agency on Monday.
Icelandic banks Landsbanki and Kaupthing, both of which have now been nationalized, accepted deposits through their subsidiaries in some European countries, primarily in the UK and the Netherlands. Landsbanki’s Icesave is an example of such a subsidiary.
Click here to read more about the potential IMF loan and here to read more about the development of the Iceland-Britain dispute.
The most senior executives at Wall Street firms will have their bonuses slashed by as much as 70 percent, more than other employees, amid falling revenue and political pressure, according to a report by Johnson Associates.
The executives whose pay is disclosed in public filings will have the steepest reductions, while bonuses for other workers will drop by between 10 percent and 45 percent this year. Rewards are likely to decline even more in 2009 as business slows further, said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm.
A $700 billion government bailout of the financial industry has led to calls from politicians including New York Attorney General Andrew Cuomo and Rep. Henry Waxman, a California Democrat, for companies such as Goldman Sachs Group Inc. and Morgan Stanley to justify year-end rewards. That’s likely to reduce pay for senior executives whose compensation is disclosed in proxy filings by more than for other workers, Johnson said.
“The pressure from the politicians is intense,” said Johnson, whose firm is based in New York. “You’re going to be treated worse if you’re in the proxy.”
Goldman, which converted in September into the fourth- biggest bank holding company from the largest U.S. securities firm, said in its proxy filing this year that Chief Executive Officer Lloyd Blankfein received a 2007 bonus of $67.9 million and that Co-Presidents Jon Winkelried and Gary Cohn each received $66.9 million. Last month, Goldman received $10 billion as part of the government’s $700 billion bailout.
No Cash
This year, banking executives will “get almost no cash and most of any incentive they get is going to get paid in either restricted stock or options,” Johnson said. “It isn’t going to be such a good deal to be in proxy statements. I think it’s going to be a firestorm.”
For workers whose compensation isn’t disclosed, Johnson estimates that investment bankers and employees in the fixed- income departments will have bonuses reduced between 35 percent and 45 percent this year. People who work in prime brokerage departments will have their year-end awards cut by 15 percent to 20 percent, the report estimates.
“However, thanks in part to the financial bailouts and mergers we’ve seen recently, the decline in incentive payments won’t be as drastic as first thought,” Johnson said in the report.
The decline in bonuses won’t be that different from reductions seen in previous industry downturns such as in 2001, Johnson said. “What’s made it really hard on the industry is that pay is down in ’08 and it’s likely to be down in ’09 as well,” he said.
Following is an estimate of the size of bonus reductions this year in different business areas of the financial industry:
Business Area Decline in 2008 from 2007
Management Disclosed in Proxy 60% - 70%
Fixed Income 40% - 45%
Investment Banking 35% - 45%
Hedge Funds 25% - 35%
Private Equity 25% - 35%
Corporate Staff 20% - 30%
Equities 20% - 25%
Asset Management 20% - 25%
Commercial Banking 20% - 25%
Retail Banking 20% - 25%
Prime Brokerage 15% - 20%
High Net Worth Advisers 10% - 15%
Source: Johnson Associates
Source
Their bonuses were too large anyway.
I also think they were over paid for the work they did.
After all their banks did bottom out.
Not very good at their jobs.
Are they really worth the pay they get?
One has to wonder.
They won't get a pity party from me. That is for sure.
Anyone else feel sorry for the poor, sad, sops?
While most of Chicago was celebrating Tuesday night, police and Secret Service agents believe one man may have been plotting to harm the man who would become president elect.
“Police and the Secret Service are investigating whether a man arrested this afternoon in Rosemont with an assault rifle intended to harm Barack Obama, several sources have told the Chicago Sun-Times,”the paper reported.
The man was arrested during a routine traffic stop, according to the paper. Police found a laptop computer opened to a page warning of possible riots if Obama won. The man also had a stun gun, ammunition and hand guns, along with the assault rifle, sources told the paper.
“There’s an individual who we have in custody at this time. There’s no charges as of yet,” a police spokesman told the Sun Times. “As part of the investigation, we’ve gotten the assistance of other law enforcement agencies.”
Obama, who Tuesday night became the first African American elected president, has been targeted in a handful of possible assassination plots, including during theDemocratic National Convention in Denver this summer.
On Wednesday, Newsweek also reported that Obama’s Secret Service detail became aware of an increase in reports earlier this fall.
“The Obama campaign was provided with reports from the Secret Service showing a sharp and disturbing increase in threats to Obama in September and early October, at the same time that many crowds at Palin rallies became more frenzied,” the magazine reports in a special post-election edition. “Michelle Obama was shaken by the vituperative crowds and the hot rhetoric from the GOP candidates. ‘Why would they try to make people hate us?’ Michelle asked a top campaign aide.”
The computer systems of both the Obama and McCain campaigns were victims of a sophisticated cyberattack by an unknown “foreign entity,” prompting a federal investigation, NEWSWEEK reports today.
At the Obama headquarters in midsummer, technology experts detected what they initially thought was a computer virus—a case of “phishing,” a form of hacking often employed to steal passwords or credit-card numbers. But by the next day, both the FBI and the Secret Service came to the campaign with an ominous warning: “You have a problem way bigger than what you understand,” an agent told Obama’s team. “You have been compromised, and a serious amount of files have been loaded off your system.” The following day, Obama campaign chief David Plouffe heard from White House chief of staff Josh Bolten, to the same effect: “You have a real problem … and you have to deal with it.” The Feds told Obama’s aides in late August that the McCain campaign’s computer system had been similarly compromised. A top McCain official confirmed to NEWSWEEK that the campaign’s computer system had been hacked and that the FBI had become involved.
Officials at the FBI and the White House told the Obama campaign that they believed a foreign entity or organization sought to gather information on the evolution of both camps’ policy positions—information that might be useful in negotiations with a future administration. The Feds assured the Obama team that it had not been hacked by its political opponents. (Obama technical experts later speculated that the hackers were Russian or Chinese.) A security firm retained by the Obama campaign took steps to secure its computer system and end the intrusion. White House and FBI officials had no comment earlier this week.
NEWSWEEK has also learned that Palin’s shopping spree at high-end department stores was more extensive than previously reported. While publicly supporting Palin, McCain’s top advisers privately fumed at what they regarded as her outrageous profligacy. One senior aide said that Nicolle Wallace had told Palin to buy three suits for the convention and hire a stylist. But instead, the vice presidential nominee began buying for herself and her family—clothes and accessories from top stores such as Saks Fifth Avenue and Neiman Marcus. According to two knowledgeable sources, a vast majority of the clothes were bought by a wealthy donor, who was shocked when he got the bill. Palin also used low-level staffers to buy some of the clothes on their credit cards. The McCain campaign found out last week when the aides sought reimbursement. One aide estimated that she spent “tens of thousands” more than the reported $150,000, and that $20,000 to $40,000 went to buy clothes for her husband. Some articles of clothing have apparently been lost. An angry aide characterized the shopping spree as “Wasilla hillbillies looting Neiman Marcus from coast to coast,” and said the truth will eventually come out when the Republican Party audits its books.
A Palin aide said: “Governor Palin was not directing staffers to put anything on their personal credit cards, and anything that staffers put on their credit cards has been reimbursed, like an expense. Nasty and false accusations following a defeat say more about the person who made them than they do about Governor Palin.”
McCain himself rarely spoke to Palin during the campaign, and aides kept him in the dark about the details of her spending on clothes because they were sure he would be offended. Palin asked to speak along with McCain at his Arizona concession speech Tuesday night, but campaign strategist Steve Schmidt vetoed the request.
The disclosures are among many revealed in “How He Did It, 2008,” the latest installment in NEWSWEEK’s Special Election Project, which was first published in 1984. As in the previous editions, “How He Did It, 2008” is an inside, behind-the-scenes account of the presidential election produced by a special team of reporters working for more than a year on an embargoed basis and detached from the weekly magazine and Newsweek.com. Everything the project team learns is kept confidential until the day after the polls close.
Among the other revelations from the special project:
The Obama campaign was provided with reports from the Secret Service showing a sharp and disturbing increase in threats to Obama in September and early October, at the same time that many crowds at Palin rallies became more frenzied. Michelle Obama was shaken by the vituperative crowds and the hot rhetoric from the GOP candidates. “Why would they try to make people hate us?” Michelle asked a top campaign aide.
On the Sunday night before the last debate, McCain’s core group of advisers—Steve Schmidt, Rick Davis, adman Fred Davis, strategist Greg Strimple, pollster Bill McInturff and strategy director Sarah Simmons—met to decide whether to tell McCain that the race was effectively over, that he no longer had a chance to win. The consensus in the room was no, not yet, not while he still had “a pulse.”
The Obama campaign’s New Media experts created a computer program that would allow a “flusher”—the term for a volunteer who rounds up nonvoters on Election Day—to know exactly who had, and had not, voted in real time. They dubbed it Project Houdini, because of the way names disappear off the list instantly once people are identified as they wait in line at their local polling station.
Palin launched her attack on Obama’s association with William Ayers, the former Weather Underground bomber, before the campaign had finalized a plan to raise the issue. McCain’s advisers were working on a strategy that they hoped to unveil the following week, but McCain had not signed off on it, and top adviser Mark Salter was resisting.
McCain also was reluctant to use Obama’s incendiary pastor, the Rev. Jeremiah Wright, as a campaign issue. The Republican had set firm boundaries: no Jeremiah Wright; no attacking Michelle Obama; no attacking Obama for not serving in the military. McCain balked at an ad using images of children that suggested that Obama might not protect them from terrorism. Schmidt vetoed ads suggesting that Obama was soft on crime (no Willie Hortons). And before word even got to McCain, Schmidt and Salter scuttled a “celebrity” ad of Obama dancing with talk-show host Ellen DeGeneres (the sight of a black man dancing with a lesbian was deemed too provocative).
Obama was never inclined to choose Sen. Hillary Clinton as his running mate, not so much because she had been his sometime bitter rival on the campaign trail, but because of her husband. Still, as Hillary’s name came up in veep discussions, and Obama’s advisers gave all the reasons why she should be kept off the ticket, Obama would stop and ask, “Are we sure?” He needed to be convinced one more time that the Clintons would do more harm than good. McCain, on the other hand, was relieved to face Sen. Joe Biden as the veep choice, and not Hillary Clinton, whom the McCain camp had truly feared.
McCain was dumbfounded when Congressman John Lewis, a civil-rights hero, issued a press release comparing the GOP nominee with former Alabama governor George Wallace, a segregationist infamous for stirring racial fears. McCain had devoted a chapter to Lewis in one of his books, “Why Courage Matters,” and had so admired Lewis that he had once taken his children to meet him.
On the night she officially lost the Democratic nomination, Hillary Clinton enjoyed a long and friendly phone conversation with McCain. Clinton was actually on better terms with McCain than she was with Obama. Clinton and McCain had downed shots together on Senate junkets; they regarded each other as grizzled veterans of the political wars and shared a certain disdain for Obama as flashy and callow.
At the GOP convention in St. Paul, Palin was completely unfazed by the boys’ club fraternity she had just joined. One night, Steve Schmidt and Mark Salter went to her hotel room to brief her. After a minute, Palin sailed into the room wearing nothing but a towel, with another on her wet hair. She told them to chat with her laconic husband, Todd. “I’ll be just a minute,” she said.
The debates unnerved both candidates. When he was preparing for them during the Democratic primaries, Obama was recorded saying, “I don’t consider this to be a good format for me, which makes me more cautious. I often find myself trapped by the questions and thinking to myself, ‘You know, this is a stupid question, but let me … answer it.’ So when Brian Williams is asking me about what’s a personal thing that you’ve done [that’s green], and I say, you know, ‘Well, I planted a bunch of trees.’ And he says, ‘I’m talking about personal.’ What I’m thinking in my head is, ‘Well, the truth is, Brian, we can’t solve global warming because I f—ing changed light bulbs in my house. It’s because of something collective’.”
By Barry Mason
November 5 2008
Aid charities and the United Nations estimate that 5 million people in Zimbabwe, half the population, face starvation.
A USAID Famine Early Warning System Network (FEWSNET) alert issued September 24 warned of insufficient cereal imports. It stated, “Zimbabwe could face a critical shortage or exhaustion of cereals as early as the first week of November… The current in-country supply of agricultural inputs for the upcoming planting season is insufficient… Late planting could aggravate the impact of forecast below-normal rainfall in the second half of the season (January-March 2009) in the country’s main crop producing regions, increasing the potential for a poor harvest and the continued need for imports in 2009.”
A Christian Aid press release on October 14 emphasised the stark social conditions facing millions in Zimbabwe. The dire statistics indicate that “over 85 percent of the population is unemployed, 90 percent are living on less than £1 a day and 15 percent of adults are living with HIV with some 3,500 dying every week of related diseases… (Zimbabwe) has the lowest life expectancy in the world: 34 years for men and 32 years for women.”
Speaking to the BBC News web site at the beginning of October, John Holmes, the United Nations humanitarian chief, described the situation as grave and deteriorating:
“Planting season for the next harvest starts in five or six weeks’ time, at least for maize, and there is a massive shortage of seeds and fertilizers in the country because of the economic situation…
“We’re looking to see whether we can accelerate even at this late stage and get some of those seeds and fertilizers and other imports into the hands of small farmers.”
An October 17 Africa Confidential newsletter quoted a senior UN World Food Programme (WFP) official describing the situation as “very, very bad,” noting that the next harvest was six months away. Africa Confidential continued, “The WFP reckons that 28 percent of children under five are malnourished and vulnerable to disease. Many rural families get one meal a day—typically sadza, maize-meal with no protein… The hungriest fill their stomachs with umtopi, baobab (tree) roots pounded into a paste.”
The article noted research by Professor Ian Scoones of Sussex University who showed that whilst it is small farmers on communal land who provide most of the food in rural areas, their productivity has been greatly reduced following several successive droughts and their inability to afford fertilizer, etc., to improve their land.
An October 24 article in the Times of London reported on the eastern province of Manicaland. The reporter said she found “a country whose reserves of food are exhausted and where the diseases of hunger—kwashiorkor, marasmus and pellagra—are appearing to a degree never seen in the country before.”
The Times described emaciated children dying in hospital. Greg Powell, chairman of the Zimbabwe Child Protection Society, said, “In the 32 years I have worked in Zimbabwe as a paediatrician I have never known a more serious situation. We can predict an exponential increase in cases of kwashiorkor and malnutrition over the next six months.”
Geoff Foster, a paediatrician at Mutare hospital, said, “Malnutrition is a silent emergency that affects young children… There is a famine situation prevailing and it is desperate.”
The threat of a cholera epidemic is also mounting. A UN IRIN news report carried by Reuters on October 20 stated there have been 120 deaths so far due to cholera, with most being in the Mashonaland Central province. The report blamed the collapse of health and municipal services, lack of potable water and no rubbish collection or proper sanitation system. People had to resort to digging shallow wells to obtain water, but these often became polluted by sewerage spills.
The report added: “The state-owned Zimbabwe National Water Authority (ZINWA) has pumped raw sewerage into Lake Chivero, one of the reservoirs providing Harare with water; residents with access to piped water often have to contend with a smelly greenish discharge from their taps.”
An Inter Press Service article carried on AllAfrica.com October 16 quoted a statement released by the Combined Harare Residents Association (CHRA). It said: “The water and sewer management problems have seen some residential areas going for years, months and weeks without water and unattended sewer bursts respectively. The shortage of water dictates that residents fetch water from unprotected sources, thus diseases like cholera breed easily. CHRA has so far received countless cases of cholera and diarrhoea.”
A US GMA television news report of October 30 reported one person in Harare has died from cholera and 20 other people had succumbed to the disease. It quoted one resident of Eastern Harare who said that his neighbourhood had been without piped water for a year and described how the smell and smoke from the burning of uncollected rubbish was making people ill. People had to resort to digging their own wells, but he was concerned that “When the rains come all the filth will flow into our well.”
The dire social and economic situation is being exacerbated by the ongoing deadlock over the power-sharing agreement between President Robert Mugabe’s ZANU-PF and Morgan Tsvangirai’s Movement for Democratic Change. Mugabe is intent on controlling the important ministries, thus sidelining the MDC. The talks have been brokered by Thabo Mbeki, but his loss of the South African presidency has rendered him politically impotent.
The Southern African Development Community (SADC) has called for a larger regional summit to try to reach a deal.
Goldman Sachs Group Inc has begun notifying about 3,200 employees globally that they have lost their jobs, as the world’s biggest investment bank slashes expenses to ride out the financial crisis, a person familiar with the situation said.
The job cuts, which were first reported last month, are a reflection of the ongoing downturn in the credit and lending markets that triggered massive losses for banks around the world. Goldman Sachs had been considered the strongest investment bank on Wall Street, and earlier this year had expected its payrolls to expand.
Positions will be cut across Goldman’s offices globally and among various business lines, and will bring the company’s staffing to 2006 and 2007 levels, the person said yesterday. He spoke on condition of anonymity because the company hasn’t publicly disclosed details of the plan.
According to CapitalIQ, Goldman has more than 37,000 employees across its operations.
There also have been reports that Goldman’s army of bankers might see their bonuses cut in half this year.
Difficulties at the firm demonstrate that even the industry’s most powerful player is not immune to fallout from the unprecedented financial turmoil.
On Monday, Merrill Lynch analyst Guy Moszkowski predicted that Goldman would report a loss for the fourth quarter, its first since going public in 1999. The stock market’s
plunge has created a brutal atmosphere for some of Goldman’s once high-flying businesses, such as private equity and proprietary trading.
The Federal Reserve, still battling a severe credit crisis, announced on Wednesday it will pay a higher interest rate to commercial banks on their reserves.
The Fed said it was altering the formulas it was using both for reserves the banks are required to keep on deposit at the Fed, and on excess reserves that banks choose to leave at the Fed.
The changes will provide slightly higher returns to banks for these funds, providing a boost to their earnings.
It marked the second time in just two weeks that the central bank has altered its interest rate formula to boost the interest it will pay banks.
Under the change, the Fed said it would pay an interest rate equal to the average target for the federal funds rate over a two-week maintenance period for reserves that banks are required to keep with the Fed.
Previously, the central bank had paid a rate that was 10 basis points below the funds rate target. A basis point is one-hundredth of a percentage point.
The Fed last week cut its target for the funds rate, the interest that banks charge each other for overnight loans, to 1 percent, tying a low seen only once before in the past half-century. It marked the latest in a series of aggressive efforts to combat a severe financial crisis that is threatening to push the country into a deep recession.
For excess reserves, the Fed said it will now pay the lowest average target for the funds rate over a two-week maintenance period. Previously, the amount paid on excess reserves left at the Fed was 35 basis points below the funds rate.
In announcing the higher rates to be paid to banks, the central bank said policy-makers had “judged that these changes would help foster trading in the funds market at rates closer to the … target federal funds rate.”
Congress in the $700 billion bailout package that passed on Oct. 3 gave the Fed the power to start paying banks interest on reserves and excess reserves.
A case of postelection nerves sent Wall Street plunging on Wednesday as investors, looking past Barack Obama’s presidential victory, returned to their fears of a deep and protracted recession. Volatility swept over the market again, with the Dow Jones industrials falling nearly 500 points and all the major indexes tumbling more than 5 percent.
The market was widely expected to give back some gains after a runup that lifted the Standard & Poor’s 500 index more than 18 percent and that gave the Dow its best weekly advance in 34 years; moreover, many analysts had warned that Wall Street faced more turbulence after two months of devastating losses.
But investors lost their recent confidence about the economy and began dumping stocks again.
“The market has really gotten ahead of itself, and falsely priced in that this recession wasn’t going to be as prolonged as thought,” said Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. “Regardless of who won the White House, these problems are not going away.”
“We’re in a really bad recession, period,” he said. “People are locking in profits and realizing we’re not out of the woods.”
Beyond broad economic concerns, worries about the financial sector intensified after Goldman Sachs Group Inc. began to notify about 3,200 employees globally that they have been lost their jobs as part of a broader plan to slash 10 percent of the investment bank’s work force, a person familiar with the situation said. The cuts were first reported last month. Goldman fell 8 percent, while other financial names also fell; Citigroup Inc. dropped 14 percent.
Commodities stocks also fell after steelmaker ArcelorMittal said it would slash production because of weakening demand. Its stock plunged 21.5 percent.
Although the market expected Obama to win the election, as the session wore on investors were clearly worrying about the weakness of the economy and pondered what the Obama administration might do. Analysts said the market is already anxious about who Obama selects as the next Treasury Secretary, as well as who he picks for other Cabinet positions.
“The celebration is over. Today we saw a bit of reality,” said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. “President-elect Obama is coming into a situation with limited experience, having to handle an economy in serious trouble, a couple of wars and terrorism. It’s an extremely tough job.”
Analysts said investors were also uneasy in advance of the Labor Department’s October employment report, to be issued Friday. Economists, on average, expect a 200,000 drop in payrolls, according to Thomson/IFR.
Late-day selling by hedge funds helped deepen the market’s losses during the last hour. More selling by the funds is expected to weigh on the market ahead of a Nov. 15 cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end.
The Dow fell 486.01, or 5.05 percent, to 9,139.27. The blue chips had risen more than 300 on Tuesday, and last week rose 11.3 percent, their biggest weekly gain since 1974.
The S&P 500 index fell 52.98, or 5.27 percent, to 952.77. Through the six sessions that ended Tuesday, the index, the one most closely watched by market professionals, rose 18.3 percent.
The Nasdaq composite index fell 98.48, or 5.53 percent, to 1,681.64, while the Russell 2000 index of smaller companies fell 31.33, or 5.74 percent, to 514.64.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a light 5.29 billion shares compared with 5.45 billion shares traded Tuesday.
“We’re seeing people come into the market at the last minute and the low volume exaggerates moves to the downside and the upside. That really scares the heck out people,” Goldman said.
Wednesday’s trading showed that the market is living up to expectations of continued volatility as it tries to recover from the devastating losses of the last two months.
Bill Stone, chief investment strategist at PNC Wealth Management, said the uncertainty over the direction the government’s financial bailout plan will take under the next administration likely weighed on financial stocks Wednesday.
Analysts agree that Obama’s most immediate priority will be dealing with the nation’s financial crisis and deciding how to further implement the $700 billion rescue package passed by Congress last month.
Goldman said trading could remain turbulent as investors begin assessing the shape and direction of Obama’s forthcoming economic policies.
“The market has to go through a period of figuring out if they are going to gain confidence in Obama and the Congress or lose it,” he said.
Obama’s victory means that industries such as oil and gas producers, utilities and pharmaceuticals may face greater regulation and even taxes, while labor unions and automakers are expected to benefit.
In addition, banks, insurance companies, hedge funds and the rest of the financial sector will almost certainly face attempts at a regulatory overhaul by the Democratic Congress next year.
Among financials, Goldman Sachs fell $7.57, or 8 percent, to $87.43. Citigroup fell $2.05, or 14 percent, to $12.63, while Bank of America Corp. dropped $2.78, or 11.3 percent, to $21.75.
Other sectors that are being closely watched in light of the election results are pharmaceuticals and alternative energy, analysts said.
Merck & Co. fell $2.41, or 7.7 percent, to $28.72. Pfizer Inc., meanwhile, dipped $1.09, or 6 percent, to $17. SunTech Power Holdings Co. was among the alternative energy stocks that declined, falling $6.82, or 21.5 percent, to $24.88.
In addition to monitoring the direction the next administration will take, investors continue to heed the state of the credit markets. The paralysis in the credit markets that began after the bankruptcy of Lehman Brothers Holdings Inc. in mid-September has been alleviated somewhat by a series of government interventions, but they still show some signs of strain.
Banks continued to ratchet down the rates they charge one another for borrowing on Wednesday, but the key interbank lending rate — the London Interbank Offered Rate, or Libor — remains well above the Federal Reserve’s target interest rate of 1 percent. Libor for three-month dollar loans fell to 2.51 percent from 2.71 percent Tuesday.
And the bid for Treasury bills remains high. The three-month bill, considered one of the safest assets around, fell to 0.42 percent from 0.48 percent late Tuesday. A low yield indicates high demand.
The yield on the benchmark 10-year Treasury note was unchanged at 3.73 percent.
The dollar was mostly lower against other major currencies, while gold prices fell.
Light, sweet crude dropped $5.23 to settle at $65.30 a barrel on the New York Mercantile Exchange.
In Asian trading, Japan’s Nikkei index rose 4.46 percent, and Hong Kong’s Hang Seng Index rose 3.17 percent. Britain’s FTSE 100 fell 2.34 percent, Germany’s DAX index fell 2.11 percent, and France’s CAC-40 fell 1.98 percent.
Russia’s President Dmitry Medvedev makes his annual state of the nation address at the Kremlin. He pledged to station new missiles near Poland’s border in response to US plans for an anti-missile system and proposed extending the presidential term to six years from four
By Kevin O’Flynn
November 5 2008
The Russian President Dmitry Medvedev said that his country would place missiles in the Baltic region of Kaliningrad in response to US missile defence plans.
In a move that will reawaken Cold War memories, Mr Medvedev, making his first state of the union address only hours after the victory of Barack Obama, used tough rhetoric, attacking the United States for its role in the war in Georgia, the financial crisis and accusing it of moving aggressively against Russia.
“We have got the clear impression that they are testing our strength,” Medvedev said in an 85-minute speech to parliament that was interrupted more than 50 times by applause.
The short-range Iskander missile would be deployed in the enclave, between two EU states, Lithuania and Poland, after Russia’s warnings that the US plans for a defence system in Poland and the Czech Republic were a threat to Russia’s security. Russia would also station equipment that would electronically hamper the proposed defence systems.
Moscow has previously accused Washington of betraying promises made by the President George Bush Sr not to expand Nato. Mr Medvedev called it a “relentless expansion”. Russia-US relations have not been good as a financially resurgent Russia reasserted itself, but ties reached a new low after the Russia-Georgia war when Russia invaded Georgia after its southern neighbour attacked its rebel republic South Ossetia, killing Russian peacekeepers and hundreds of civilians.
Mr Medvedev said the war “was, among other things, the result of the arrogant course of the American administration, which did not tolerate criticism and preferred unilateral decisions”. The Russian President also laid much of the blame for the world financial crisis on the US. Russia’s stock market has fallen more than 70 per cent and oligarchs have lost $230bn (£140bn), Bloomberg reported.
The Russian President went on: “There is a need to create mechanisms to block those decisions made by some members of the world community that are wrong and sometimes just dangerous.” This was a clear reference to the United States.
Mr Medvedev also proposed extending the Russian presidential term to six years and parliamentary term to five years, moves he said would help implement reform. Instead, they will probably raise more doubts in the West about the President’s commitment to democracy and whether he is smoothing the way for the Prime Minister, Vladimir Putin, to return to power.
Mr Putin, who led Russia during a record period of economic growth and ebbing civil liberties, has remained a commanding figure since he left office. He has far more powers than any prime minister before him and many believe Mr Medvedev is a stop-gap figure.
Despite the rhetoric, Mr Medvedev said Russia was not anti-American and he hoped the new administration could help improve ties. “I would like to stress: we have no problems with the American people,” the President said. “We have no innate anti-Americanism.”
Russia is facing mounting economic problems. With the rouble under pressure and the price of oil sinking, Russia’s huge reserves saved under the oil boom are starting to shrink and Russians are becoming more nervous about the economic future.
President Dmitry Medvedev today said Russia will deploy missiles in territory near Nato member Poland in response to US missile defence plans.
He did not say whether the short-range Iskander missiles would be fitted with nuclear warheads.
In his first state of the nation speech, President Medvedev also blamed the US for the war in Georgia and the global financial crisis.
He said he hoped Barack Obama would act to improve relations with Russia but he did not offer congratulations to the president-elect.
President Medvedev also proposed increasing the Russian presidential term to six years from the current four, a major constitutional change that would further increase the power of the head of state and could deepen Western concern over democracy in Russia.
The president said the Iskander missiles will be deployed to Russia’s Kaliningrad region, which lies between Poland and the ex-Soviet republic of Lithuania on the Baltic Sea, but did not say how many would be used.
Equipment to electronically hamper the operation of prospective US missile defence facilities in Poland and the Czech Republic will be deployed, he said.
President Medvedev singled out the United States for criticism, casting Russia’s war with Georgia in August and the global financial turmoil as consequences of aggressive, selfish US policies.
“Mechanisms must be created to block mistaken, egotistical and sometimes simply dangerous decisions of certain members of the international community,” he said shortly after starting the 85-minute speech.
President Medvedev, whose criticism of Washington echoed addresses by his predecessor Vladimir Putin, made it clear he was referring to the US
The president said Georgia sparked the August war on its territory with what he called “barbaric aggression” against Russian-backed South Ossetia.
The conflict “was, among other things, the result of the arrogant course of the American administration, which did not tolerate criticism and preferred unilateral decisions.”
President Medvedev also painted Russia as a country threatened by growing Western military might.
“From what we have seen in recent years, the creation of a missile defence system, the encirclement of Russia with military bases, the relentless expansion of Nato, we have gotten the clear impression that they are testing our strength,” President Medvedev said.
He announced deployment of the short-range missiles as a military response to US plans to deploy missile-defence facilities in Poland and the Czech Republic – former Soviet satellites that are now Nato members.
Speaking just hours after Mr Obama was declared the victor in the US presidential election, President Medvedev said he hoped the incoming administration will take steps to improve badly damaged US ties with Russia.
He suggested it is up to the US – not the Kremlin – to seek to improve relations.
“I stress that we have no problem with the American people, no inborn anti-Americanism. And we hope that our partners, the US administration, will make a choice in favour of full-fledged relations with Russia,” President Medvedev said.
Tension in Russian-American relations has been driven to a post-Cold War high by Moscow’s war with US ally Georgia.
On the financial crisis, President Medvedev said overconfidence in American dominance after the collapse of the Soviet Union “led the US authorities to major mistakes in the economic sphere.”
The administration ignored warnings and harmed itself and others by “blowing up a money bubble to stimulate its own growth,” he said.
President Medvedev said the president’s tenure should be lengthened to six years to enable the government to more effectively implement reforms.
He said the term of the parliament also should be extended by a year to five years, and that parliament’s power must be increased by requiring the Cabinet to report to MPs regularly.
The proposals were President Medvedev’s first major initiative to amend the constitution since he was elected in March to succeed his long-time mentor Putin.
Mr Putin, who is now prime minister and has not ruled out a return to the Kremlin in the future, has said that the presidential term should be increased.
I really don’t think the US should have missiles in any country, but their own. Seems they are antagonizing other countries constantly. There is no need for any of this. Russia would not be placing missiles if the US had not decided too. Russia does have the right to protect it’s citizens as does any other country.
Bush stepped out of line with his missile defence plans.
American missiles should be kept on American soil not in other countries. This type of action endangers the countries they are placed in.
The US plans for a defence system in Poland and the Czech Republic, now endanger both of those countries.
For every action there is a reaction. Pointing missiles at my country would anger me as well.
How would you feel if Bush aimed missiles at your country? Threatened I bet.
This could have been prevented had Bush minded his own business.
Now Obama is left with the mess, Bush created. Placing missiles there does not protect the American people in any way. It’s just more war mongering.
Dozens of Afghan civilians are dead and dozens more are wounded after a series of air strikes aimed at Taliban fighters fell short of their target and exploded in the middle of a wedding party in a mountainous region north of Kandahar city, tribal elders and wedding guests told The Globe and Mail on Tuesday.
Survivors of the attacks, which occurred in the village of Wech Baghtu in the district of Shah Wali Kowt on Monday evening, said the majority of the dead and injured were women – the bombs struck while male and female wedding guests were segregated, as is customary in Kandahar province.
They said the bodies of at least 36 women have been identified, and hundreds more men and women have been injured. Local leaders have yet to establish a firm casualty count because many of the victims remain buried beneath rubble, said Abdul Hakim Khan, a tribal elder from the district.
In interviews at Mirwais Hospital in Kandahar city, where at least 16 male victims and dozens of female victims were being treated Tuesday night, several villagers described the attack. While Mr. Khan corroborated much of the information witnesses gave during a separate interview, it was not possible to independently verify their account or the numbers of dead and injured they gave.
Witnesses gave conflicting statements about the identity of troops who arrived at the scene after the air attacks, with some saying they saw Canadian soldiers while others said they saw U.S. troops.
It was not immediately clear which international forces were responsible for the air strikes.
A Canadian military source denied that Canada, which has responsibility for Kandahar province, had any involvement. “Task Force Kandahar has not been in any significant military engagement in Shah Vali Kowt in the last two days,” the source said.
The sparsely populated mountainous region surrounding the village is a known Taliban stronghold. In the past the area has been a target of various anti-insurgent special operations.
Mr. Khan said his village is situated at the foot of a mountain frequented by Taliban insurgents. At the time of the wedding, insurgents on the mountain had attempted to attack troops in the area with an improvised explosive device, Mr. Khan said. Fighting broke out between troops and insurgents after the Taliban began firing from the top of the mountain, which triggered the air strike, he said.
Abdul Zahir, 24, the brother of the bride, said fighting broke out between Taliban and international troops near a crossroads in the village early on Monday. Wedding guests first heard shots from the mountain about 4 p.m. Air strikes followed about half an hour later and lasted about five hours, he said.
While Mr. Zahir was not injured, his sister was severely hurt, as were three of his young cousins, Noor Ahmad, Hazrat Sadiq and Mohammad Rafiq, who range in age from three to five years old. During the interview, they lay sprawled out next to him on tiny hospital cots. Mr. Zahir said that in all eight members of his family were killed, including two of his brothers, Qahir and Twahir, and his grandmother. Fourteen other family members were injured.
The bombing wasn’t the end of the ordeal, witnesses said. When the air strikes were over, they said, international troops arrived in three sand-coloured armoured vehicles.
Villagers reported they were intimidated and prevented from leaving to seek medical treatment while the soldiers took pictures.
The governor of Kandahar province will hold a press conference on the incident Wednesday morning, a spokesman said.
“We are collecting information right now about this incident. It’s not complete,” the spokesman said.
Alex Strick van Linschoten is a freelancer based in Kandahar
Taliban insurgents in a remote village northeast of Kandahar provoked an attack by coalition troops that devastated a wedding party on Monday and resulted in dozens of civilian deaths, the top politician in Kandahar has told The Globe and Mail.
Ahmed Wali Karzai, chairman of Kandahar’s provincial council, said he and his brother, President Hamid Karzai, were told by villagers during a teleconference on Wednesday that between 300 and 350 Taliban fighters invaded Wech Baghtu, a mountain village in the district of Shah Wali Kowt, 60 kilometres northeast of Kandahar city, during the lead-up to a wedding ceremony. Inside the village, insurgents stationed themselves on rooftops, including those of homes that were holding wedding events.
From there they began firing rocket-propelled grenades at a convoy of four military vehicles, Ahmed Karzai said he and his brother were told. The troops retaliated on a massive scale, killing and injuring dozens of villagers, including several family members of the bride and groom.
The precise number of casualties has yet to be determined, but figures reported by witnesses and district leaders range from 38 to 90 dead. As of Wednesday, about 50 victims, most of them women, had checked into Mirwais Hospital in Kandahar with serious injuries, including burns and severed limbs. Some with more severe injuries were taken to Quetta, Pakistan, district elders said.
It remains unclear from reports gathered from survivors whether troops launched an air strike or a mortar attack on the village. Women who were helping the bride plait her hair before the wedding told a Globe researcher they remembered hearing shooting, but they blacked out when bombs struck the mud-walled home.
When the women awoke, they said, they were with the bride in hospital. While none of the coalition forces fighting in Afghanistan has taken responsibility for the attack, the U.S. military and the Afghan Ministry of the Interior announced a joint investigation into the incident.
“Though the facts are unclear at this point, we take very seriously our responsibility to protect the people of Afghanistan and to avoid circumstances where non-combatant civilians are placed at risk, said Commander Jeff Bender, a spokesman for the U.S. military. “If innocent people were killed in this operation, we apologize and express our condolences to the families and the people of Afghanistan. We have dispatched coalition personnel to the site to quickly assess the situation and take actions as appropriate.”
Although Canadian troops are responsible for Kandahar province, the Canadian Forces is adamant about its lack of involvement in the attack, which came to light late Tuesday after victims began arriving at Mirwais Hospital.
Major Jay Janzen, a spokesman for the Canadian military, said troops occasionally patrol the district centre of Shah Wali Kowt, but they rarely venture the 20 kilometres north to the village that was attacked.
At an afternoon press conference Wednesday, Rahmatullah Raoufi, the governor of Kandahar, identified U.S. forces as the troops involved in the attack. He also said the troops called in an air strike on the village in response to enemy fire. His office is still working to confirm numbers of casualties. In the meantime, Ahmed Karzai and the President said they have dispatched a team of trusted elders from the Shah Wali Kowt district to conduct a separate investigation.
Ahmed Karzai said the attack is a sign of the Taliban’s increasing reliance on terrorist tactics to turn locals against the government and coalition forces.
“People go against the government when civilian casualties happen,” Mr. Karzai said. “But the people know it’s because of [the Taliban] these casualties are happening.”
The issue of civilian casualties has been an increasing point of friction between Afghan government officials and coalition forces.
Between 2006 and 2007, there was a three-fold increase in civilian deaths from aerial attacks, according to a report released in September by the New York-based group Human Rights Watch. The deaths are largely due to unplanned air strikes called in by U.S. forces, said the report, which put the number of civilian deaths due to air strikes at more than 300 for 2007.
This year, the use of air power has increased. During the past three months alone, more than 100 civilians have died in unplanned air strikes in southern Afghanistan, including at least 17 in Helmand province two weeks ago and 90 in Herat in August. A U.S. military investigation into that raid acknowledged the death of only 33 civilians.
Ahmed Karzai acknowledged that Afghan security forces have been hard-pressed to counter insurgents in the remote areas where militants control swaths of land and frequently exploit villagers to provoke attacks. He said that locals in rural Shah Wali Kowt rely mainly on police for protection, but their ranks are thin.
“The police have a problem there. They aren’t really able to control the area,” he said. “The job of the police is to maintain law and order.
“They are not trained to fight guerrilla war. That’s the job of the military,” he said.
Problems are compounded by the poor economic state of the region, which suffered further in Monday’s attack when farm fields were destroyed.
“I feel sorry for them,” Ahmed Karzai said. “If the people could be armed, or if they were able to create a group to fight the Taliban, a lot of people would pick up arms.”
The Federal Reserve Bank is drawing jeers for hiring a former top executive from the now-defunct investment bank Bear Stearns to help it gauge the health of other banks.
The Federal Reserve Bank has hired the former head of risk management for Bear Stearns, which imploded this spring.
“How’s this for sweet irony?” business publication Portfolio.com needled the pick.
November 4 2008
By Justin Rood
Michael Alix was head of risk management for Bear Stearns for two years until the institution imploded this spring, a victim of its (risky) subprime-mortgage related investments.
Last Friday, the Federal Reserve Bank of New York quietly announced it had hired Alix to advise it on bank supervision.
“You’re kidding me,” said economic policy expert Dean Baker, of the Washington, D.C.-based Center for Economic Policy and Research. While he didn’t know Alix personally, he said, “You would think [his record] would be a big strike against him.”
The collapse of Bear Stearns led to its pennies-on-the-dollar buyout by J.P. Morgan Chase; the bank’s shareholders saw their wealth plummet. To facilitate the buyout, the Fed agreed to assume potential billions in losses on bad Bear Stearns investments.
“[Alix] was the guy on the mast charged with yelling ‘iceberg’ just before the Titanic introducted its bow to a floating chunk of ice,” wrote financial expert and blogger John Carney on the web site Clusterstock.com, where he flagged the hire.
The Fed’s move “is sure to put to rest the notion that there are no second acts in American life,” Carney observed drily.
A spokesman for the Federal Reserve declined to comment.
August 6 1993
Did You Know 