Paulson has shelved the original plan

By Greg Ro

November 12, 2008

WASHINGTON

Treasury Secretary Henry Paulson laid out details for the next stage of the government’s financial-market rescue package Wednesday, announcing that he has shelved the original plan to buy troubled mortgage assets while turning his attention to nonbank financial institutions and consumer finance.

In a broad and deep review of the controversial $700 billion effort, Paulson defended the steps taken to date, but in the same breath said that financial markets remain fragile and that the focus must remain on “recovery and repair.” See MarketWatch First Take commentary.

“I believe we have taken the necessary steps to prevent a broad systemic event. Both at home and around the world, we have already seen signs of improvement,” Paulson said in a speech at the Treasury Department. See the full text.

But in a striking admission, Paulson said that buying up mortgage assets “is not the most effective way” to use government funding.
Purchasing these so-called “toxic” assets was once the cornerstone of the rescue plan for financial markets and was almost the entire focus of Congress when the package was being debated before its enactment. But almost as soon as Treasury received the money, it decided that giving capital to banks in return for preferred stock was a better use of the funds.
Paulson said that he was “still comfortable” with the $700 billion price tag for the rescue plan and that he didn’t need to go to Congress for additional funds: “I still am comfortable that with the $700 billion we have what we need.”
The Treasury Secretary said he met with members of President-elect Barack Obama’s economic team to discuss the rescue package earlier this week.
Some of the money saved from not buying mortgage assets will now be used to shore up the market for credit-card receivables, auto loans and student loans, according to Paulson.
“This market, which is vital for lending and growth, has for all practical purposes ground to a halt. With the Federal Reserve, we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities,” he said.
The plan to shore-up asset back securities is not ready yet, he added. “This will take weeks to design and then it will take longer to get up and going.”
Paulson declined to say how much it would cost, saying only that “it would need to be significant in size to make a difference.”
Alex Merk, president of Palo Alto Calif.-based Merk Investments, a mutual-fund firm, said that market participants were frustrated with Paulson’s communication skills and changing tactics.
“He’s been flip-flopping on every plan and it doesn’t look like he has a plan,” Merk said in an interview.
According to Merk, the rescue plan is failing to get banks to lend money, and that holders of mortgage assets who had been hoping to sell to the government at a good price have now seen these hopes dashed.
Earlier Wednesday, federal bank regulators issued a joint statement jawboning banks to start lending money to consumers. But Merk said that there are many factors that are making banks hoard capital.
“They don’t trust their own balance sheets, and why lend to consumers when the consumer sector is going down the drain?” he commented.
Markets are also looking beyond Paulson to the Obama administration, which is likely to be much more focused on helping consumers and homeowners — putting some of Paulson’s plans at risk, Merk added.
Brian Bethune, U.S. economist at HIS Global Insight, said that Paulson’s Treasury remains “behind the curve in the sense of understanding the systemic risk.”
The Treasury would also consider giving some capital to nonbank financial institutions, following completion of bank funding. Banks that are publicly traded have until Friday to request government assistance.
At a sensitive stage
“Although the financial system has stabilized, both banks and nonbanks may well need more capital, given their troubled asset holdings, projections for continued high rates of foreclosures and stagnant U.S. and world economic conditions,” Paulson said.
Paulson only described nonbank financial institutions in general terms, saying they “provide credit that is essential to U.S. businesses and consumers.”
However, many are not directly regulated and are active in a wide range of businesses, and taxpayer protections in a program of this sort would be more difficult to achieve,” he commented.
Bethune of HIS Global Insight said that insurance companies and the financial arms of the auto companies were the likely candidates for government assistance.
Economists said the plan would not stem the sharp drop in consumer spending.
“I doubt this is going to have a big offset to the really dramatic fall in consumer spending that we’re going to see in the coming year,” said Martin Feldstein, an economics professor at Harvard University.
Meanwhile, sweeping proposals to modify mortgages remain on the table, Paulson said. The cost of these programs will be substantial and don’t belong under this rescue package, he added.
On a related matter, the Treasury secretary pointed out that funding for the U.S. auto industry should not come out of the financial-market rescue plan. Congress has other vehicles to use to fund for the troubled sector, he said, adding that the key to any program for the industry was “long-term viability.”
G20 summit
Over the weekend, leaders of 20 countries will gather in Washington to discuss how to improve cooperation to foster stability in the global financial system.
Paulson took a cautious line on the meeting. “To adequately reform our system, we must make sure we fully understand the nature of the problem, which will not be possible until we are confident it is behind us.”
The White House won’t support a plan under which the International Monetary Fund would be responsible for devising a strategy to solve the problems, “unless member nations all see that they have a shared interest in a solution.”
Paulson said that the U.S. had a major role in the global crisis but wasn’t the only culprit. Global trade imbalances — the high U.S. deficit between imports and exports as well as matching surpluses in Asia — also played a role, along with Europe’s rigid structural regimes.
“Those excesses cannot be attributed to any single nation,” he remarked.

Figuring out oversight issues won’t be enough. “If we only address regulatory issues — as critical as they are — without addressing the global imbalances that fueled recent excesses, we will have missed an opportunity to dramatically improve the foundation for global markets and economic vitality going forward,” according to Paulson.

Should the US Experts be trusted?

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Under Bush Administration were you Better Off?

Probably Not

Since Bush took office, workers’ paychecks have stagnated and the cost of energy and food has gone way up—as have corporate profits.

November 1 2008

By Ellen Gibson
“Are you better off?” It’s a question the candidate of the challenging party asks during each Presidential campaign. The economy, of course, is the No. 1 issue this election, and that question has been raised in cities, suburbs, and small towns across the country. With the recent stock market meltdown and the collateral damage to 401(k) plans, many voters are indeed poorer. But in terms of real wages and the cost of consumer goods, are we truly worse off? For most Americans, the answer is, sadly, yes.

On Jan. 22, 2001, when President George W. Bush took over the White House, the Nasdaq was in the midst of a post-dot-com freefall. Bush had the bad luck of taking office just before the economy went into a recession that March. But after a mini downturn, the American economy experienced a period of recovery and expansion, with the gross domestic product growing at a steady clip and productivity surging 22%. That measure of prosperity, however, hasn’t translated into gains for most families.

In 2000 the median U.S. household income was $50,557 (adjusted for inflation), according to the U.S. Census Bureau. Seven years later, the median income fell to $50,233. “That might not sound too bad,” says Edward Wolff, professor of economics at New York University, “but normally, median income increases. That’s not good news for the middle class.” Consider that the median household income would be almost $64,000 had paychecks kept pace with the GDP.
Overblown Claims?
While workers’ paychecks have stagnated, corporate profits jumped an average of 10.8% per year, according to data from the Bureau of Economic Analysis. “The fact that middle-income households ended up below where they were in 2000 despite strong productivity growth—that’s the heart of the problem,” says Jared Bernstein, an economist at the Economic Policy Institute, a liberal think tank. “It’s one thing if you’re looking at a period like now, when the macroeconomy is dysfunctional, but for most of this decade the economy has been pumping along.” However, economists at the conservative American Enterprise Institute counter that claims of income stagnation are overblown, pointing out, for example, that household income data does not take into account total compensation, including companies’ burgeoning contributions to employee health insurance.

Even though inflation has not been severe for most of the decade, the cost of living has outpaced wages. The consumer price index has risen by 25% since January 2001, while core inflation jumped 18%. But the core consumer price index can be deceptive because it excludes food and energy. Once, after reporting that core inflation had been relatively tame that quarter, Conference Board economist Ken Goldstein came back to the office to find an irate e-mail: “Hey, dummy, what the hell do you think we spend our money on?” The point was taken: When energy and food skyrocket, families feel it.

And skyrocket they have. In early 2001 you could fill your car with regular gas for $1.47 a gallon. But on Oct. 24, three months after regular unleaded peaked at $4.11 a gallon, the average cost was leveling off around $2.78, according to the AAA online Daily Fuel Gauge Report. Grocery store sticker shock has been almost as acute. Take, for example, the price of a dozen eggs, which has risen 97% since 2001, from a nationwide average of $1.01 to $1.99. “You could look at inflation and think it hasn’t been that much of a problem, but in fact, if you look at the components of the middle-income consumption basket—tuition, housing, childcare, gas, food—all of those have been rising a lot more quickly,” says Bernstein.
Retirees Are Really Feeling It
There are consumer goods that have come down in price. And some economists don’t buy the argument that families are being hit where it hurts most. “People are more attuned to price increases than declines, so their perceptions are biased,” says Wolff. He points out that the price of goods such as toys and clothing have remained fairly stable because we have benefited from inexpensive imports. Electronics have come down, too, especially when adjusted for advances in technology. In 2001 the base model of Apple’s iBook, with its paltry 500MHz chip and 10GB hard drive, sold for $1,499. Today, the basic white 13-inch MacBook laptop will run you $999 for a 2.1 GHz chip and 120GB drive. That’s $500 less for nearly four times the speed and 12 times the storage capacity.

For consumers, there’s no argument over the impact of the current economic crisis. They’re feeling it, especially retirees. Take Patricia Wehrs, a Washington State resident who retired from her federal government job in 2000. She and her husband were all set for a comfortable, though modest, retirement. Then their retirement fund started losing money every month, while the cost of living crept up. “Our basic bills—electric, telephone, water, and cable—went up, in some cases 90%, over the past two years. I’ve kept the food bills under control with a budget and a diet,” jokes Wehrs. “However, fuel costs have drained any extra money, so no more theater, no dinners out, and smaller gifts to the grandchildren for special occasions.”
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THE BUSH LEGACY
Bad policies and a lack thereof
November 1, 2008

Long before the credit crisis that almost buried Wall Street and forced the U.S. government to effectively nationalize a chunk of the American financial system, President George W. Bush had shown himself to be a dismal caretaker of his country’s economic and fiscal well-being.

Then the housing bubble exploded, the value of complex, mortgage-related securities plummeted and credit markets froze solid. The ensuing collapse of some of the biggest and best-known names in banking, the controversial bailouts and the serious slowdown that has reached every corner of the globe will always colour the way economic historians evaluate Mr. Bush’s presidency.

Much like President Herbert Hoover in the Great Depression, Mr. Bush’s main contribution to the crisis was his failure to recognize its dimensions until irreparable damage had been inflicted.

His administration’s belated move to flood the financial system with credit and capital and to prop up ailing institutions may well prove the correct response. But it will inevitably worsen the dire fiscal situation that will face Barack Obama or John McCain, one that Mr. Bush’s misguided policies caused in the first place.

President Bush was spending like a Texas oilman on a Las Vegas gambling spree long before emergency rebates and massive bailouts became administration policy. In eight years, a supposedly conservative president made big government considerably bigger and more intrusive, and destroyed years of hard work by the Clinton administration to balance the books. His reckless combination of heavy tax cuts – even as the costs of the Iraq war climbed into the stratosphere – and significantly higher spending has left the government so awash in red ink that his successor has little hope of resurrecting even a modest surplus and still keeping the sputtering economy from crashing. The record budget deficit of $454.8-billion (U.S.) in the latest fiscal year pales in comparison to cautious forecasts of about $750-billion for this year. A figure as high as $1.6-trillion has been kicked around.

Long-term deficits are not benign. They raise the cost of capital, restrict growth and, in normal times, undermine the currency. Panicky investors have recently flocked to the U.S. dollar as a rare safe harbour in a wide sea of uncertainty. But people will soon reassess the greenback’s long-term future, in light of the sky-high debt and severe structural problems left untouched or worsened by Mr. Bush’s policies or lack of them. The net result will be bad for the United States, and also for Canada and for the global economy, which still depend on a buoyant U.S. market. That, too, is part of the Bush legacy.

The Bush administration is not directly responsible for the current mess. Cheap credit, subprime mortgages, greedy investment bankers and opaque derivatives trading on a massive scale were already features of the landscape before Mr. Bush became president. But his strenuous efforts, along with those of Treasury Secretary Henry Paulson and Ben Bernanke, the chairman of the Federal Reserve Board, to play down the potentially devastating consequences of the bursting credit bubble inspired a dangerous level of complacency.

That brings us to the ignominious end of Mr. Bush’s economic management. But what about the beginning?

It is not hard to pinpoint where and how he went off the fiscal rails. He squeaked into office in 2000 on the promise of deep income-tax cuts, which seemed the right medicine when the Internet stock bubble was bursting and the U.S. economy was showing serious signs of stress after a long period of growth. But then came 9/11 and the enormous security and military expenditures that followed. The war in Iraq cost billions, and the peace has proved many times more expensive. The final tally will be in the trillions.

Yet, even as the U.S. economy pulled out of the doldrums, Mr. Bush stubbornly refused to abandon the low-tax, big-spend policies that were weakening public finances. What’s worse, after 9/11, he narrowed his focus dramatically, dropping ambitious plans to reform Social Security and allowing the United States to become even more dependent on foreign capital and foreign oil.

When government borrowing is rocketing skyward to pay for military adventures, that is not the time for unaffordable tax cuts, increased subsidies or a major expansion in Medicare for which there was no money.

Fortunately, Mr. Bush never proceeded with his idea to have Americans take responsibility for managing their own assets set aside for retirement. Had he succeeded in pushing through this privatization, the cost to the public purse could have been as high as $2-trillion. And the damage to Americans’ pension prospects after the credit meltdown and stock market plunge would have been incalculable.

But that does not mean the U.S. social safety net should have been left to slowly unravel. His successor is now saddled with that problem, as well as a raft of other costly domestic issues ignored or mismanaged by the current administration. Raising the necessary capital may well require scaling back the “temporary” Bush income-tax cuts, which are due to expire by 2010, imposing a national sales tax along the lines of the GST and even a gasoline tax. None would be popular. But there may be little choice.

Any Canadian leader who left people so vulnerable to future financial risk would have been run out of politics after a single term, regardless of the shape of the economy.

For three-quarters of Mr. Bush’s time in office, the U.S. economy was quite robust, which only underlines the poverty of his policies. Instead of taking advantage of the windfall revenues to cap the rising deficit, pay down debt, repair crumbling infrastructure and reduce dependence on Middle Eastern oil, he earmarked large expenditures to cover the spiralling costs of his domestic security agenda and the disastrous war. He also proffered more tax breaks and higher subsidies to favoured industries, including oil and agriculture, which saw its trade-distorting federal handouts double between 2002 and 2005.

It was an opportunity squandered, and it will haunt U.S. policy-makers for years to come.

Today, the steady drumbeat of economic success is a distant memory. President Bush is not to blame for that. But the most profligate leader in U.S. history certainly bears a large share of responsibility for the dangerous holes in the leaky ship of state left for his successor to patch.

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Then there is the 11 trillion dollar debt he has run up.

Of course we also must remember the wars he has started as well.

Lest we forget

A chronology of how the Bush Administration repeatedly and deliberately refused to listen to intelligence agencies that said its case for war was weak

January 29, 2004

Former weapons inspector David Kay now says Iraq probably did not have WMD before the war, a major blow to the Bush Administration which used the WMD argument as the rationale for war. Unfortunately, Kay and the Administration are now attempting to shift the blame for misleading America onto the intelligence community. But a review of the facts shows the intelligence community repeatedly warned the Bush Administration about the weakness of its case, but was circumvented, overruled, and ignored. The following is year-by-year timeline of those warnings.

In 2001 and before, intelligence agencies noted that Saddam Hussein was effectively contained after the Gulf War. In fact, former weapons inspector David Kay now admits that the previous policy of containment – including the 1998 bombing of Iraq – destroyed any remaining infrastructure of potential WMD programs.

OCTOBER 8, 1997 – IAEA SAYS IRAQ FREE OF NUCLEAR WEAPONS: “As reported in detail in the progress report dated 8 October 1997�?and based on all credible information available to date, the IAEA’s verification activities in Iraq, have resulted in the evolution of a technically coherent picture of Iraq’s clandestine nuclear programme. These verification activities have revealed no indications that Iraq had achieved its programme objective of producing nuclear weapons or that Iraq had produced more than a few grams of weapon-usable nuclear material or had clandestinely acquired such material. Furthermore, there are no indications that there remains in Iraq any physical capability for t he production of weapon-usable nuclear material of any practical significance.” [Source: IAEA Report, 10/8/98]

FEBRUARY 23 & 24, 2001 – COLIN POWELL SAYS IRAQ IS CONTAINED: “I think we ought to declare [the containment policy] a success. We have kept him contained, kept him in his box.” He added Saddam “is unable to project conventional power against his neighbors” and that “he threatens not the United States.” [Source: State Department, 2/23/01 and 2/24/01]

SEPTEMBER 16, 2001 – CHENEY ACKNOWLEDGES IRAQ IS CONTAINED: Vice President Dick Cheney said that “Saddam Hussein is bottled up” – a confirmation of the intelligence he had received. [Source: Meet the Press, 9/16/2001]

SEPTEMBER 2001 – WHITE HOUSE CREATES OFFICE TO CIRCUMVENT INTEL AGENCIES: The Pentagon creates the Office of Special Plans “in order to find evidence of what Wolfowitz and his boss, Defense Secretary Donald Rumsfeld, believed to be true-that Saddam Hussein had close ties to Al Qaeda, and that Iraq had an enormous arsenal of chemical, biological, and possibly even nuclear weapons that threatened the region and, potentially, the United States�?The rising influence of the Office of Special Plans was accompanied by a decline in the influence of the c=I.A. and the D.I.A. bringing about a crucial change of direction in the American intelligence community.” The office, hand-picked by the Administration, specifically “cherry-picked intelligence that supported its pre-existing position and ignoring all the rest” while officials deliberately “bypassed the government’s customary procedures for vetting intelligence.” [Sources: New Yorker, 5/12/03; Atlantic Monthly, 1/04; New Yorker, 10/20/03]

Throughout 2002, the CIA, DIA, Department of Energy and United Nations all warned the Bush Administration that its selective use of intelligence was painting a weak WMD case. Those warnings were repeatedly ignored.

JANUARY, 2002 – TENET DOES NOT MENTION IRAQ IN NUCLEAR THREAT REPORT: “In CIA Director George Tenet’s January 2002 review of global weapons-technology proliferation, he did not even mention a nuclear threat from Iraq, though he did warn of one from North Korea.” [Source: The New Republic, 6/30/03]

FEBRUARY 6, 2002 – CIA SAYS IRAQ HAS NOT PROVIDED WMD TO TERRORISTS: “The Central Intelligence Agency has no evidence that Iraq has engaged in terrorist operations against the United States in nearly a decade, and the agency is also convinced that President Saddam Hussein has not provided chemical or biological weapons to Al Qaeda or related terrorist groups, according to several American intelligence officials.” [Source: NY Times, 2/6/02]

APRIL 15, 2002 – WOLFOWITZ ANGERED AT CIA FOR NOT UNDERMINING U.N. REPORT: After receiving a CIA report that concluded that Hans Blix had conducted inspections of Iraq’s declared nuclear power plants “fully within the parameters he could operate” when Blix was head of the international agency responsible for these inspections prior to the Gulf War, a report indicated that “Wolfowitz ‘hit the ceiling’ because the CIA failed to provide sufficient ammunition to undermine Blix and, by association, the new U.N. weapons inspection program.” [Source: W. Post, 4/15/02]

SUMMER, 2002 – CIA WARNINGS TO WHITE HOUSE EXPOSED: “In the late summer of 2002, Sen. Graham had requested from Tenet an analysis of the Iraqi threat. According to knowledgeable sources, he received a 25-page classified response reflecting the balanced view that had prevailed earlier among the intelligence agencies–noting, for example, that evidence of an Iraqi nuclear program or a link to Al Qaeda was inconclusive. Early that September, the committee also received the DIA’s classified analysis, which reflected the same cautious assessments. But committee members became worried when, midway through the month, they received a new CIA analysis of the threat that highlighted the Bush administration’s claims and consigned skepticism to footnotes.” [Source: The New Republic, 6/30/03]

SEPTEMBER, 2002 – DIA TELLS WHITE HOUSE NO EVIDENCE OF CHEMICAL WEAPONS: “An unclassified excerpt of a 2002 Defense Intelligence Agency study on Iraq’s chemical warfare program in which it stated that there is ‘no reliable information on whether Iraq is producing and stockpiling chemical weapons, or where Iraq has – or will – establish its chemical warfare agent production facilities.’” The report also said, “A substantial amount of Iraq’s chemical warfare agents, precursors, munitions, and production equipment were destroyed between 1991 and 1998 as a result of Operation Desert Storm and UNSCOM (United Nations Special Commission) actions.” [Source: Carnegie Endowment for Peace, 6/13/03; DIA report, 2002]

SEPTEMBER 20, 2002 – DEPT. OF ENERGY TELLS WHITE HOUSE OF NUKE DOUBTS: “Doubts about the quality of some of the evidence that the United States is using to make its case that Iraq is trying to build a nuclear bomb emerged Thursday. While National Security Adviser Condi Rice stated on 9/8 that imported aluminum tubes ‘are only really suited for nuclear weapons programs, centrifuge programs’ a growing number of experts say that the administration has not presented convincing evidence that the tubes were intended for use in uranium enrichment rather than for artillery rocket tubes or other uses. Former U.N. weapons inspector David Albright said he found significant disagreement among scientists within the Department of Energy and other agencies about the certainty of the evidence.” [Source: UPI, 9/20/02]

OCTOBER 2002 – CIA DIRECTLY WARNS WHITE HOUSE: “The CIA sent two memos to the White House in October voicing strong doubts about a claim President Bush made three months later in the State of the Union address that Iraq was trying to buy nuclear materials in Africa.” [Source: Washington Post, 7/23/03]

OCTOBER 2002 — STATE DEPT. WARNS WHITE HOUSE ON NUKE CHARGES: The State Department’s Intelligence and Research Department dissented from the conclusion in the National Intelligence Estimate on Iraq’s WMD capabilities that Iraq was reconstituting its nuclear weapons program. “The activities we have detected do not … add up to a compelling case that Iraq is currently pursuing what INR would consider to be an integrated and comprehensive approach to acquiring nuclear weapons.” INR accepted the judgment by Energy Department technical experts that aluminum tubes Iraq was seeking to acquire, which was the central basis for the conclusion that Iraq was reconstituting its nuclear weapons program, were ill-suited to build centrifuges for enriching uranium. [Source, Declassified Iraq NIE released 7/2003]

OCTOBER 2002 – AIR FORCE WARNS WHITE HOUSE: “The government organization most knowledgeable about the United States’ UAV program — the Air Force’s National Air and Space Intelligence Center — had sharply disputed the notion that Iraq’s UAVs were being designed as attack weapons” – a WMD claim President Bush used in his October 7 speech on Iraqi WMD, just three days before the congressional vote authorizing the president to use force. [Source: Washington Post, 9/26/03]

Instead of listening to the repeated warnings from the intelligence community, intelligence officials say the White House instead pressured them to conform their reports to fit a pre-determined policy. Meanwhile, more evidence from international institutions poured in that the White House’s claims were not well-grounded.

LATE 2002-EARLY 2003 – CHENEY PRESSURES CIA TO CHANGE INTELLIGENCE: “Vice President Dick Cheney’s repeated trips to CIA headquarters in the run-up to the war for unusual, face-to-face sessions with intelligence analysts poring over Iraqi data. The pressure on the intelligence community to document the administration’s claims that the Iraqi regime had ties to al-Qaida and was pursuing a nuclear weapons capacity was ‘unremitting,’ said former CIA counterterrorism chief Vince Cannistraro, echoing several other intelligence veterans interviewed.” Additionally, CIA officials “charged that the hard-liners in the Defense Department and vice president’s office had ‘pressured’ agency analysts to paint a dire picture of Saddam’s capabilities and intentions.” [Sources: Dallas Morning News, 7/28/03; Newsweek, 7/28/03]

JANUARY, 2003 – STATE DEPT. INTEL BUREAU REITERATE WARNING TO POWELL: “The Bureau of Intelligence and Research (INR), the State Department’s in-house analysis unit, and nuclear experts at the Department of Energy are understood to have explicitly warned Secretary of State Colin Powell during the preparation of his speech that the evidence was questionable. The Bureau reiterated to Mr. Powell during the preparation of his February speech that its analysts were not persuaded that the aluminum tubes the Administration was citing could be used in centrifuges to enrich uranium.” [Source: Financial Times, 7/30/03]

FEBRUARY 14, 2003 – UN WARNS WHITE HOUSE THAT NO WMD HAVE BEEN FOUND: “In their third progress report since U.N. Security Council Resolution 1441 was passed in November, inspectors told the council they had not found any weapons of mass destruction.” Weapons inspector Hans Blix told the U.N. Security Council they had been unable to find any WMD in Iraq and that more time was needed for inspections. [Source: CNN, 2/14/03]

FEBRUARY 15, 2003 – IAEA WARNS WHITE HOUSE NO NUCLEAR EVIDENCE: The head of the IAEA told the U.N. in February that “We have to date found no evidence of ongoing prohibited nuclear or nuclear-related activities in Iraq.” The IAEA examined “2,000 pages of documents seized Jan. 16 from an Iraqi scientist’s home — evidence, the Americans said, that the Iraqi regime was hiding government documents in private homes. The documents, including some marked classified, appear to be the scientist’s personal files.” However, “the documents, which contained information about the use of laser technology to enrich uranium, refer to activities and sites known to the IAEA and do not change the agency’s conclusions about Iraq’s laser enrichment program.” [Source: Wash. Post, 2/15/03]

FEBURARY 24, 2003 – CIA WARNS WHITE HOUSE ‘NO DIRECT EVIDENCE’ OF WMD: “A CIA report on proliferation released this week says the intelligence community has no ‘direct evidence’ that Iraq has succeeded in reconstituting its biological, chemical, nuclear or long-range missile programs in the two years since U.N. weapons inspectors left and U.S. planes bombed Iraqi facilities. ‘We do not have any direct evidence that Iraq has used the period since Desert Fox to reconstitute its Weapons of Mass Destruction programs,’ said the agency in its semi-annual report on proliferation activities.” [NBC News, 2/24/03]

MARCH 7, 2003 – IAEA REITERATES TO WHITE HOUSE NO EVIDENCE OF NUKES: IAEA Director Mohamed ElBaradei said nuclear experts have found “no indication” that Iraq has tried to import high-strength aluminum tubes or specialized ring magnets for centrifuge enrichment of uranium. For months, American officials had “cited Iraq’s importation of these tubes as evidence that Mr. Hussein’s scientists have been seeking to develop a nuclear capability.” ElBaradei also noted said “the IAEA has concluded, with the concurrence of outside experts, that documents which formed the basis for the [President Bush’s assertion] of recent uranium transactions between Iraq and Niger are in fact not authentic.” When questioned about this on Meet the Press, Vice President Dick Cheney simply said “Mr. ElBaradei is, frankly, wrong.” [Source: NY Times, 3/7/03: Meet the Press, 3/16/03]

MAY 30, 2003 – INTEL PROFESSIONALS ADMIT THEY WERE PRESSURED: “A growing number of U.S. national security professionals are accusing the Bush administration of slanting the facts and hijacking the $30 billion intelligence apparatus to justify its rush to war in Iraq . A key target is a four-person Pentagon team that reviewed material gathered by other intelligence outfits for any missed bits that might have tied Iraqi President Saddam Hussein to banned weapons or terrorist groups. This team, self-mockingly called the Cabal, ‘cherry-picked the intelligence stream’ in a bid to portray Iraq as an imminent threat, said Patrick Lang, a official at the Defense Intelligence Agency (DIA). The DIA was “exploited and abused and bypassed in the process of making the case for war in Iraq based on the presence of WMD,” or weapons of mass destruction, he said. Greg Thielmann, an intelligence official in the State Department, said it appeared to him that intelligence had been shaped ‘from the top down.'” [Reuters, 5/30/03 ]

JUNE 6, 2003 – INTELLIGENCE HISTORIAN SAYS INTEL WAS HYPED: “The CIA bowed to Bush administration pressure to hype the threat of Saddam Hussein’s weapons programs ahead of the U.S.-led war in Iraq , a leading national security historian concluded in a detailed study of the spy agency’s public pronouncements.” [Reuters, 6/6/03]

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