Saturday, July 28, 2007

The Dying Priest

The Dying Priest

The old priest lay dying in the hospital. For years he had faithfully served the people of the nation's capital. He motioned for
his nurse to come near.

"Yes, Father?" said the nurse.

"I would really like to see George Bush and Dick Cheney before I die." whispered the priest.

"I'll see what I can do, Father" replied the nurse.

The nurse sent the request to the White house and waited for a response.

Soon the word arrived. Bush and Cheney would be delighted to visit the priest. As they went to the hospital, Cheney commented to Bush "I don't know why the old priest wants to see us, but it will certainly help our images." Bush couldn't help but agree.

When they arrived at the priest's room, the priest took Cheney's hand in his right hand and Bush's hand in his left. There was silence and a look of serenity on the old priest's face.

Finally Cheney spoke. "Father, of all the people you could have chosen, why did you choose us to be with you as you near the end?"

The old priest slowly replied "I have always tried to pattern my life after our Lord and Savior Jesus Christ."

"Amen" said Cheney.

"Amen" said Bush.

The old priest continued... "He died between two lying thieves. I would like to do the same."

DOW Giveth, DOW Taketh Away - Part Two

DOW Giveth, DOW Taketh Away - Part Two
By Carlos T Mock, MD
July 27, 2007

Just as we were celebrating the benchmark of the DOW 14,000, Wall Street pulled back, starting last Friday, retreating from record levels following disappointing results from longtime favorites Caterpillar Inc. and Google Inc. Revelations by Mr. Bernanke that the subprime crisis was spilling over the prime markets and perhaps cost the economy over 100 billion dollars further help the collapse of the average. The Dow Jones industrial average closed today at 13,265.47. The index plunged by more than six percent for the week.

When it comes to the economy, the national mood is a combination of dissatisfaction and fear. A recent Gallup poll found that 66 percent of Americans think national economic conditions are “only fair” or “poor.”

Even though unemployment stands at 4.5 percent, down from the peak rate of 6.3 percent four years ago that does not paint a correct picture of the job market. Six years ago, unemployment was 4.5% also; but the jobs were paying a higher salary. This is one of the painful, personal back stories of the dramatic demise of American heavy manufacturing, especially in the Midwest. In old industrial cities such as Dayton, home of the Wright brothers and creative spark for the electric ignition, shock absorbers and the automatic transmission, thousands of manufacturing workers who lost their jobs are absorbing the bitter reality that their new jobs almost always pay substantially less than their old ones did. In spite of the fact that Mr. and Mrs. Average American are both working, they can barely keep up.

You see, when the Fed rates were at 1.25%, a very large number of Americans refinanced their homes and went on a shopping spree. What’s worse, even under-qualified Americans refinance their homes at subprime rates. Most took ARM mortgages or interest-only mortgages because there was a housing boom and house values kept going up. If they overspent, they went again and took more money out of their homes.

Unfortunately, the Bush Administration went on the same shopping spree. Fueled by low interest rates, they borrowed over one trillion dollars in debt in six years. They issued bonds until every pork bill passed by the Republican Congress was properly funded. Of course, Mr. Bush found his Veto stamp after the Republicans lost the congress.

The results are now beginning to take effect. Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market to a tune of 100 billion dollars as investors showed their worries with a flight to quality, seeking refuge in government bonds and other, safer assets. A surprising increase in late loan payments and defaults among homeowners with good credit is so far coming from traditional woes, such as divorces, job losses and unexpected medical bills. Analysts said the trend could continue, particularly in areas of the country that have been hardest hit by job losses in general or seen a decline in speculation-driven construction, such as South Florida, parts of California and Las Vegas.

This has created a real estate nightmare. Sales of new homes in the US fell by the most this year last month in a sign of continued weakness in the housing market. Purchases fell 6.6 per cent to an annual rate of 834,000 in June, according to the Commerce Department, which also said 22,000 fewer homes were sold in May than previously thought. The glut of existing homes has become an increasing concern for builders, who have cut construction and increased discounts in an effort to clear an inventory of single-family houses now at its highest level since 1992. The median price of a new home fell 2.2 percent last month, to $237,900. The number of homes for sale held at 537,000 during the month, and the supply of homes at the current sales rate rose to 7.8 months' worth, the most since March, up from 7.4 months. Purchases fell 27 percent in the Northeast, 23 percent in the West and 17 percent in the Midwest. Builders Also Thursday, D.R. Horton Inc and Beazer Homes USA Inc posted a third-quarter loss after writing down the value of unused land and warned there was no recovery in sight for the troubled housing industry.

So now, Mr. and Mrs. Average American can’t afford to go back and ask for more money on the value of their homes. They can’t afford to pay their higher mortgage payments, nor can they sell their over-valued homes. They are trapped, and the only alternative is foreclosure.

The share of all mortgages entering foreclosure rose to 0.58 percent in the first quarter from 0.54 percent in the fourth quarter, according to a quarterly report from the Mortgage Bankers Association. Subprime loans entering foreclosure jumped to a five-year high of 2.43 percent from 2 percent in the fourth quarter, and prime loans rose to 0.25 percent, the highest ever, from 0.24 percent. It was worse for subprime borrowers who took out adjustable-rate mortgages. The association said the percentage of payments that were 30 or more days past due for subprime ARMs jumped to 15.75 percent in the first quarter. That's the highest level ever and up from 14.44 percent in the fourth quarter. The percentage of subprime ARMs that started the foreclosure process climbed to 3.23 percent, also a high, from 2.70 percent. People who have taken out subprime mortgages, especially ARMs, have been clobbered as rising interest rates and weak home prices have made it increasingly difficult for them to keep up with their monthly payments. Some lenders in the subprime market have been forced out of business. Analysts estimate that nearly 2 million ARMs will reset to higher rates this year and next. Some subprime borrowers were lured by initially low "teaser" rates offered during the five-year housing boom that ended in 2005. But those rates can spike upward after the first few years, causing payment shocks.

I believe that we have bought the rose-colored view of our current administration to our detriment. The coming catastrophe is not going to surprise everyone, but it will surprise quite a few.

International Herald Tribune Editorial - Loaded energy dice

China steps up defense of its products' safety
By David Barboza
Copyright by The International Herald Tribune
Published: July 27, 2007

SHANGHAI: After years of being accused by the West of making only token gestures to fight fake goods, and months of complaints about the safety of its exports, China is taking extraordinary steps to change its image.

This week alone, Beijing unveiled new controls aimed at fighting counterfeit drugs and substandard exports. High-ranking bureaucrats and government regulators vowed to strengthen China's food safety system, tighten controls over chemical use by large seafood and meat producers, and create a system that held producers more accountable for selling unsafe products.

The government also announced that it had broken up a series of criminal rings that operated huge manufacturing centers, producing everything from pirated Microsoft software and fake Viagra to imitation Crest and Colgate toothpaste.

And the authorities have even reached out to the international public relations consultancy Ogilvy to help the country refurbish its image.

"This is a very concerted effort to show they are doing something," Russell Leigh Moses, a longtime political analyst based in Beijing, said. "They are using work groups, issuing directives and closing factories. They are rolling out the artillery."

Spurred on by a sense of economic realpolitik, Beijing has grown particularly fearful that mounting international pressure could lead to sanctions or embargoes, and thereby dent China's booming economy. It is unclear whether promising to overhaul its regulatory regime and stepping up enforcement is enough to tame what some view as the Wild, Wild East of capitalism, analysts say, because some of the problems are so deeply rooted.

"There's no quick fix," Henk Bekedam, the World Health Organization's top representative in China, said. "China has perhaps been cutting some corners because the focus has been on growth. But they have 5,000 companies that produce medicine. That's far too many. The government has a limited ability to enforce things. They need to start with simple things: reduce the number of people you monitor."

Still, even critics have been impressed with the catalog of changes.

The latest bold actions, experts say, are partly aimed at dampening political pressure from the United States and the European Union, where regulators and politicians are pressing for assurances about the quality and safety of goods made here after a string of recalls involving everything from tainted pet food and toothpaste to defective tires and dangerous toys.

For example, in Washington, President George W. Bush established a panel of cabinet officials to make recommendations aimed at minimizing dangers from imported foods or other products. The announcement coincided with U.S. congressional hearings on food safety.

Those issues will be at the top of the agenda of Treasury Secretary Henry Paulson, Jr. as he arrives for talks with Chinese officials this weekend.

Europe is also concerned. Top European Union officials are planning to meet in Beijing next month to discuss food safety and other issues. During a government-sponsored tour of a testing lab and toy factory near the city of Nanjing on Wednesday, the European consumer protection commissioner, Meglena Kuneva, pressed Chinese regulators to improve their standards.

Kuneva said she was hopeful that China would make progress but that if its products continued to be a problem, the EU would block market access.

"Toys like this can be in the hands of children, so do a good job," Kuneva told a young inspector examining a doll in a government toy testing lab in the city of Yangzhou. "The good name of this country is in your hands."

Many experts, however, doubt whether China can follow through on its promises, some of which have been made before. They also say that Beijing needs a better legal system and more serious enforcement.

But the strong pronouncements from the highest levels of government in Beijing hint at a new sense of urgency to ease a lingering crisis of confidence in the "Made in China" label.

Indeed, just two weeks ago, in a bold and unusually swift and decisive action, China executed the former head of the State Food and Drug Administration for accepting bribes and failing to police the marketplace.

Now, Beijing is undertaking the more difficult task of policing a wild marketplace, where counterfeiting and cutting corners are endemic.

Chinese officials have not, however, conceded that all the problems are Chinese in origin. Regulators have repeatedly accused the international news media of exaggerating the number of problem goods from China.

And some Chinese business owners complain of China-bashing, saying that protectionists in the West are seizing upon isolated incidents to drum up support for trade sanctions at a time when China is amassing a huge trade surplus with the rest of the world.

n similar tones, China has also argued that its food exports are no worse than the shipments of U.S. food entering China. After the U.S. Food and Drug Administration said last month that it would block five types of Chinese seafood, including shrimp, eel and catfish, from entering the U.S. market, China responded this month by banning imports of frozen poultry and chicken from the United States, insisting they were tainted by antibiotic residues.

Some observers called it payback. Others said it was first battle in a long simmering trade war.

But many experts say that China has also become increasingly candid about the challenges facing the country.

The government recently acknowledged that 20 percent of consumer goods and 14 percent of large truck tires made in China failed to pass inspections. Regulators also said they had confirmed that two makers of pet food ingredients and some seafood companies were indeed using banned or illegal chemicals to bolster production and profit.

The admissions of serious problems in the nation's production system is a surprising about face for China, which initially denied shipping troubled pet food ingredients to the United States and also insisted that European traders and not Chinese chemical producers were responsible for tainted cough medicine that killed at least 100 people in Panama last year.

Analysts say that as the evidence and bad news began to mount this year, China was forced to respond in a less reactionary way, particularly because the country's booming economy is built on foreign investment and trade.

Recently, the government has even sought crisis management advice from Western consultants.

"They have not historically been advice takers," said Scott Kronick, president of Ogilvy Public Relations Worldwide China, part of the WPP Group. "But they are reaching out in a genuine way to seek advice. I think they recognize everything doesn't have to be rosy."

Since then, officials from a variety of regulatory agencies and ministries have held press conferences to announce new regulations or to brief the media on successful crackdowns.

The local government of Beijing even arrested a Chinese television journalist last week after he broadcast a story about how food vendors in Beijing were making steamed buns, or baozi, by using softened cardboard as filler.

The government said the reporter was detained and that other television officials were punished for what was a hoax.

But, in perhaps one indication of how little confidence the public has in China's ability to safeguard its food supply, Internet chat rooms were quickly bombarded by people insisting the story was probably not a hoax.

"The government really knows how to fool normal people," said a person called the magician, who posted on the web site

"Now the whole world knows about this news, but you can't fool people like this. We have the right to know what is the real truth. Don't do the same thing as 2003, when SARS came."

Wealthy spend more as middle class cuts back

Wealthy spend more as middle class cuts back
Copyright © 2007, Chicago Tribune
July 28, 2007

While the average American is keeping a lid on expenses, the wealthy are going on a shopping spree.

Consumer spending slowed to a 1.3 percent annual growth rate in the second quarter, down from a 3.7 percent pace in the first quarter. But among the well-to-do, spending surged an average 9 percent, according to a survey from Unity Marketing.

Home goods, jewelry and entertainment accounted for the biggest jumps in expenditures. Affluent shoppers increased spending for wall and window coverings by 62 percent, jewelry by 55 percent, entertainment by 53 percent and tabletop coverings by 42 percent, the report said.

Shoppers under age 40, a group Unity Marketing calls the "Want-It-All" generation, outspent their elders by 39 percent.

"The most aggressive future buying lies with the younger, uppermost income segments of the luxury population," said Pamela Danziger, president of the Stevens, Pa.-based luxury-market research firm. "As opposed to the older luxury consumers, the young affluents are more likely to see their financial situation improving over the next 12 months, which gives them greater confidence to spend more on the luxuries they desire."

Affluent consumers spent an average of $15,283 on luxury goods and services in the second quarter, a 9 percent increase from the average expenditure of $14,024 in the first quarter. Unity Marketing surveyed 1,000 consumers with an average income of $155,000.

DESIGNER BUY: Citigroup Global Markets Inc. analyst Deborah Weinswig upgraded Nordstrom Inc. to a "buy" Thursday, citing the department store chain's efforts to grow its designer business.

The move should help "insulate" the Seattle-based retailer from the macroeconomic pressures -- high gas prices, food inflation and the housing market decline -- that are taking a toll on moderate retailers.

Weinswig estimates Nordstrom's designer business accounts for about 3 percent to 5 percent of total sales. Expanding the high-end merchandise "should help increase sales with existing customers while attracting new customers," she wrote in a report.

Meanwhile, Macy's Inc. stopped selling designer apparel at its Water Tower Place store on North Michigan Avenue, deciding instead to consolidate its designer business in the Chicago market at one store: the 28 Shop at Macy's State Street.

Instead, Macy's plans to bring a younger, more contemporary attitude to the Mag Mile outpost.

The makeover, slated to take place from August to November, will include expanding junior and sportswear departments, adding in-store shops for St. John and BCBG Max Azria, introducing several contemporary lines including Tracey Reese and Genetic, and installing new carpeting and lighting.

Macy's, with headquarters in New York and Cincinnati, converted Marshall Field's to Macy's last fall as part of a national rebranding of about a dozen regional department-store chains.


Bush faces a lonely road - These days even some Republicans are questioning his course

Bush faces a lonely road - These days even some Republicans are questioning his course
Copyright © 2007, Chicago Tribune
By Mark Silva
July 29, 2007

WASHINGTON — President Bush risks becoming increasingly isolated as he approaches his final year in the White House, experts say, as close advisers drift away, many in his own party turn against him, his policies meet strong resistance and even formerly ardent party supporters question his path.

The public has largely rejected the Iraq war, the central project of Bush's presidency, and Democrats are attacking the president with a new aggressiveness as his popularity reaches historic lows. More dramatically, Bush faces growing defections from his party, including the conservative wing that has previously supported him enthusiastically. And several of his closest aides—such as Chief of Staff Andrew Card and counselor to the president Dan Bartlett—are no longer in the administration, leaving Bush with fewer friends whose judgment he is willing to rely on.

Meanwhile, the Republican presidential candidates are carefully distancing themselves from Bush in certain key areas. Even U.S. Sen. John McCain (R-Ariz.), Bush's strongest defender on Iraq, is offsetting that support with scorching commentary on the administration's conduct of the war.

For all his travails, Bush's isolation does not approach that of President Richard Nixon, who reportedly spoke to portraits in the White House as Watergate closed in on him. And even some Democrats say that though Bush has suffered an erosion of support, he still has been able to stare down Congress, even on Iraq.

But it is important for a chief executive to have multiple lines of support and advice, presidential scholars and other experts say.

"Under any circumstances, the greatest danger that faces any president is isolation," said Leon Panetta, who was chief of staff for President Bill Clinton. "If you look at the great presidents in our history, they always kept their fingers on the pulse of where the people were."

Bush's political adversaries have always accused him of taking advice only from an insular circle of trusted aides and refusing to listen to opposing views. But these days, the circle has grown even smaller, with several former Bush aides and officials openly criticizing the president and his team.

Matthew Dowd, Bush's chief campaign strategist in 2004, spoke in an agonized New York Times interview earlier this year of his loss of faith in Bush, whom he described as "secluded and bubbled in." More recently, former Surgeon General Richard Carmona told Congress that the Bush administration repeatedly interfered with his reports for political reasons.

In Congress, erstwhile allies are criticizing the administration with a new vigor. Bush's refusal to let White House officials testify on the firing of federal prosecutors has led to a legal standoff, angering such Republicans as Sen. Arlen Specter of Pennsylvania. Other Republicans openly call for the resignation of Atty. Gen. Alberto Gonzales. And Bush's push for immigration reform sparked vilification and rage from many of the conservatives who had formed the bedrock of his support.

But it is the Iraq war, opposed by a great majority of Americans, that has driven Bush's public approval to the lowest point of his presidency. His job approval, averaging 31.8 percent during the past three months in the Gallup Poll, ranks among the lowest of any president measured since 1945.

Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania, detects "a sense of fatalism" at the White House.

"I think President Bush has reached a point where he perceives he doesn't have options other than what he is doing—a course has been put in place and you have to see the course through," Jamieson said. "If people get locked down psychologically, it makes it possible for them to think that they are doing something heroic, even in the face of public criticism."

In Bush's eyes, and those of his staunchest supporters, the unwavering prosecution of the Iraq war is a measure of the resolve of a commander in chief who places national security ahead of his political standing.

"I guess I'm like any other political figure; everybody wants to be loved," Bush said at a recent news conference. "Sometimes the decisions you make, and the consequences, don't enable you to be loved. ... If you ever come down and visit the old, tired me down there in Crawford, I will be able to say I looked in the mirror and made decisions based upon principle, not based upon politics."

Even some Democrats argue that Bush should not be called isolated as long as opponents of the war in Congress cannot muster enough votes to override a veto.

"Does he have an erosion problem? Yes, he does," said Lee Hamilton, a former Democratic congressman from Indiana. But "I think the word 'isolated' at this time is not appropriate. He is not isolated."

That could change in September, when some Republicans have said they will re-evaluate their support for the Iraq war.

While many Republicans remain committed to the president and his Iraq policy, "war fatigue" is growing significantly.

"You do see that Republicans themselves are frustrated with Bush, even if they don't say so directly," said Andrew Kohut, president of the Pew Research Center, a non-partisan polling institute in Washington.

That unrest has surfaced in Congress, where a growing number of GOP senators stand ready to support Democratic demands for a timeline for withdrawal. And short of timelines, two of the most influential Senate Republicans, John Warner of Virginia and Richard Lugar of Indiana, are pressing for legislation to compel the president to start making his own withdrawal plans.

Some Republicans say that even if Bush is increasingly finding himself in the minority on the war, he is doing so consciously.

"I'm convinced that the president is not isolated in terms of not knowing what the public sentiment is," said Neil Newhouse, a Virginia-based GOP pollster. "I think he knows very clearly where the public sentiment is, and he is very clearly standing up for what he believes in, in the face of negative public opinion."

Bush, for his part, says he is willing to let history judge him. "I'll be dead before, long gone, before people fully are able to capture the essence of, the full essence of a presidency," Bush said recently.

Bush, Congress dig in for fight over privilege

Bush, Congress dig in for fight over privilege
By Mark Silva | Washington Bureau
Copyright © 2007, Chicago Tribune
July 28, 2007

WASHINGTON - In an escalating conflict between Congress and President Bush over the privileges and prerogatives of the presidency, the two sides could be headed for a court battle that outlasts Bush's term in office, pushing the outcome of any congressional investigation over the firings of federal prosecutors into the next administration.

Beyond the legal battle, an equally important political fight is playing out, with the White House painting congressional leaders as obsessed with "political theater" and raging out of control over overblown controversies surrounding a wiretapping program and the dismissals of U.S. attorneys. Democrats, meanwhile, complain of a politically motivated White House that considers itself above the law.

For now, neither side seems in the mood to yield on even the smallest matters. Congressional leaders are armed with subpoenas and contempt citations, and are threatening to conduct a perjury investigation and seek a special counsel. The White House is defiantly defending Atty. Gen. Alberto Gonzales, not only regarding the dismissals of prosecutors last year but also regarding his increasingly controversial performance as the nation's chief law-enforcement officer.

Bush also is aggressively asserting his presidential privileges regarding the right to hire and fire prosecutors and the confidentiality of his staff's internal communications. And the White House has lashed out at a congressional move to hold senior administration officials in contempt of Congress for refusing to testify in a probe of the prosecutor firings.

The White House suggests Democrats have lost their moorings.

"Every day this Congress gets a little more out-of-control: a new call for a special prosecutor, a new investigation launched, a new subpoena issued, an unprecedented contempt vote and an old score somehow settled," White House spokesman Tony Fratto said this week.

"In our view, this is pathetic," added White House spokesman Tony Snow, denouncing the "political theater" as the House Judiciary Committee voted to cite two senior Bush advisers for contempt of Congress.

Democratic leaders insist they have demonstrated patience in months of negotiations with the White House over records and testimony, and they maintain they have no choice but to press a legal challenge of the administration's broad assertion of presidential privilege.

Even if Democrats never manage to secure the testimony they want, the conflict could help them attain a political goal: Painting the Bush White House as obstructionist and obsessed with power.

"There is a cloud over this White House and a gathering storm," Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said this week as his committee subpoenaed two senior White House officials.

Subpoenas, contempt citations

The committee issued subpoenas ordering Bush chief political adviser Karl Rove and another White House official to testify about their roles in the shuffling of federal prosecutors last year. And the House Judiciary Committee has cited White House Chief of Staff Josh Bolten and former White House counsel Harriet Miers for contempt of Congress in refusing to obey similar subpoenas.

In addition, Sen. Charles Schumer of New York and three other Democrats have called for the appointment of a special counsel to investigate whether Gonzales has given false testimony to Congress. Gonzales has said that he had not discussed the firings with his staff, while one staffer said he had.

Gonzales and others also have given apparently conflicting testimony about a secretive Terrorist Surveillance Program. Gonzales has said there was no internal administration dispute about the program, while FBI Director Robert Mueller has spoken of a great debate. Yet the White House maintains that Gonzales testified accurately, with Snow vigorously backing him up on Friday.

Even some critical of the White House response to the firings complain that Democrats are playing a political hand rather than deploying a legal strategy.

"I think that much of what Sen. Schumer has done has been politically motivated," said Sen. Arlen Specter (R-Pa.). "We're not going to find out anything seeking to enforce these subpoenas."

The White House insists that it has offered its best compromise: allowing congressional investigators to question administration officials privately, not under oath and without transcripts. The White House also says it is "laying down a marker" on executive privilege, refusing to allow Congress to force public testimony about internal communications.

The principle of presidential privilege is not as clear-cut as the White House would have it, and is not specifically enshrined in the Constitution. Still, presidents long have asserted the privilege as an outgrowth of the separation of powers, and the Supreme Court has found a qualified, though not absolute, executive privilege.

Abner Mikva, a former federal judge and White House counsel to President Bill Clinton, said invoking it is a risky strategy.

"There is a big political price that the executive branch pays," Mikva said. "If they don't have anything to hide, why won't they testify? ... On the other hand, if the executive maybe wants to stall, they can stall it for two years."

The White House argues that after receiving thousands of pages of documents, Congress has found no wrongdoing in the firings of prosecutors, who serve at the pleasure of the president.

With the House preparing to vote on contempt-of-Congress charges in September, the White House has signaled it will block federal prosecutors from pursuing them, likely leading to a long court battle. The Justice Departments of the Reagan and Clinton administrations have maintained that Congress cannot make federal prosecutors enforce contempt citations against aides to the president for obeying orders to invoke executive privilege in refusing to testify to a committee.

'Statute does not apply'

An aide to Gonzalez wrote to House Judiciary Committee Chairman John Conyers (D-Mich.), "It is important that the committee appreciate fully the long-standing Department of Justice position, articulated during administrations of both parties, that the criminal contempt of Congress statute does not apply to the president or presidential subordinates who assert executive privilege."

Still, with its resistance to subpoenas, the White House could be playing into a picture that Democrats are happy to paint of a stonewalling administration.

"The message from this White House is that the president, vice president and their loyal aides are above the law," Leahy complained, "No check. No balance. No accountability."

Democrats also insist that they have proceeded carefully, exhausting all avenues for cooperation with the White House before pulling the trigger on a potentially protracted legal confrontation.

Specter, as a moderate Republican frustrated with the administration but also angry at the Democrats, has perhaps the best perspective on the theatrics of both sides.

"There's a little bit of Don Quixote here," Specter said. "We are moving through a minuet."

- - -

Targeted by Congress

For contempt:

White House Chief of Staff Josh Bolten and former White House counsel Harriet Miers: Facing citations for contempt of Congress issued by House Judiciary Committee for refusing to comply with committee subpoenas for information about firings of federal prosecutors. The White House has invoked executive privilege in refusing to comply with subpoenas and says Justice Department is unlikely to refer any contempt charges to a U.S. attorney.

For testimony:

White House chief political adviser Karl Rove and deputy Scott Jennings: Facing subpoenas from the Senate Judiciary Committee to testify in prosecutor probe. The White House has a week to reply, is likely to cite executive privilege.

For alleged false statements:

Atty. Gen. Alberto Gonzales: Challenged by Sen. Charles Schumer (D-N.Y.) and three other Senate Judiciary Committee members for alleged conflicting testimony about the prosecutor firings and the administration's Terrorist Surveillance Program. Senators are asking the solicitor general to appoint a special counsel outside the Justice Department. The White House says Gonzales has told the truth. Sen. Arlen Specter (R-Pa.) suggests any special counsel is unlikely.


Subprime pain spreads into office market

Subprime pain spreads into office market
As business volume plunges for real estate firms hurt by the housing slump, they and companies that service them are abandoning office space and leaving landlords and surrounding communities suffering
By Susan Diesenhouse
Copyright © 2007, Chicago Tribune
July 28, 2007

The scrupulously groomed office buildings that blanket Schaumburg, the economic engine for Chicago's northwest suburbs, boast abundant amenities such as parking, views, cafes and health clubs. But behind the gleaming glass and manicured lawns one critical element is becoming increasingly scarce: tenants.

Signaling the seepage of residential real estate woes into the office market and perhaps other economic sectors, many housing-related businesses that for years have buoyed this slice of suburban offices have been giving back space they leased, industry experts said.

"The downturn in the residential sector has spilled over into the commercial side as the mortgage lenders, title companies, real estate and mortgage brokers shut down or downsize," said Doug Shehan, a senior director at Cushman & Wakefield Illinois Inc.

Over the past several months the contraction of these firms has kept vacancy rates high, rents modest and building sales uncertain, he said.

"It's changed the landscape of the suburban markets dramatically," Shehan said. "Now, what will be the next industry to absorb the space?"

With job growth slowing in the metropolitan region, the answer might be a long time coming.

Clearly, the contagion of the housing sector's ailments -- defaults on home loans, Wall Street losses on real estate-backed securities and the tightening debt market -- is to be expected because capital markets are interconnected, said Mark "Sam" Davis, senior managing director of real estate for Northbrook-based Allstate Corp.

"The biggest source of capital for real estate now comes from Wall Street, with the same hedge funds that invested in subprime mortgages also investing in commercial property," he explained. As a result, turmoil in the housing and debt markets has led "to the most volatile period we've seen in commercial real estate since the tech bust of 2001."

How much this will hurt Main Street is another big question.

"If enough companies vacate offices and put people out of work, the problem moves from a technical to a fundamental one for the regional or national economy," Davis said.

In Schaumburg, well-located, high-quality office buildings, enhanced by hotels and ample retail space, have created a diversified economy that will help it weather the storm, said Christopher Huff, the community's development director.

"We're the downtown for 19 suburbs, and our business climate is pretty well balanced, but there will be space available," he said.

Indeed, by midyear this 25 million-square-foot submarket, which also includes Rolling Meadows, Itasca and Hoffman Estates, had at least 19 percent of its offices vacant.

About 1 million square feet was put back on the market in the first six months of the year by real estate-related businesses, including Argent Mortgage Co. LLC, a division of the large subprime lender ACC Capital Holdings; and WMC Mortgage, a unit of General Electric Capital Corp.

The space give-backs reflect the contraction of several real estate-related companies in the Schaumburg area and elsewhere. So far this year Schaumburg-area firms have laid off at least 1,500 employees, according to state records.

Throughout metropolitan Chicago, job growth fell 27.5 percent for the 12-month period that ended in May, to 44,200 jobs from 61,000 a year earlier, according to research done for the Tribune by the Federal Reserve Bank of Chicago.

But the pain is not restricted to companies in real estate. Businesses that provide their technology, accounting and marketing also might be feeling the pinch, said Faith Ramsour, Cushman's research director.

"Business service companies are signing fewer, smaller deals than in the past," she said.

This mix of dynamics will eventually lower office sale prices. "Buildings may sell, but not for the prices anticipated," said Joseph Stevens, a leasing broker for Transwestern Commercial Services LLC.

Meanwhile, as fewer people buy lunch at noon or shop after work near suburban office buildings, the community as a whole could suffer.

"The ripple effect could be very deleterious because no other industry is growing enough to fill the space," said Geoffrey Hewings, an economics professor and regional job market expert at the University of Illinois.

For Schaumburg, which raises substantial revenue from local retail sales and Cook County property tax receipts, "this could be a great loss, and it still has to provide public services like police and lighting," Hewings explained.

Already, the problem is all too real for suburban landlords, especially those who borrowed heavily to buy buildings that were supposed to be filled with rent-paying tenants. "It's never a good thing for a landlord," said Michael Newman, president of Golub & Co., which in late 2004 bought the well-leased Meadows Corporate Center in Rolling Meadows.

Still lushly landscaped, its parking lot in recent weeks has become a sea of empty spots since anchor tenant Argent vacated 230,000 of its 270,000 square feet.

"We're trying to figure out what to do," Newman said. "We'll look at it from a legal, or hopefully, a business standpoint."


Graphic/Map: Suburban properties emptying out Turmoil in the real estate industry has contributed to high vacancies in many suburban office properties.

PROPERTIES VACANT (SQ. FT.) TOTAL (SQ. FT.) 1600 McConnor Pky. 167,679 (55.9%) 300,034 Windy Point II
2550 W. Golf Rd. 230,836 (85.5%) 270,000 Meadows Corporate Ctr. East Tower
1701 Golf Rd. 190,785 (67.8%) 281,528 Continental Towers II
1100 E. Woodfield Rd. 138,016 (57.3%) 240,880 Two Woodfield Lake
1 Pierce Pl. 197,925 (37.7%) 525,422
Note: Vacancy figures include space left by real estate-related companies and others. Source: CoStar Group Inc. Chicago Tribune/Max Rust and Phil Geib -See microfilm for complete graphic
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Financial Times Editorial Comment: Tour de Farce

Financial Times Editorial Comment: Tour de Farce
Copyright The Financial Times Limited 2007
Published: July 27 2007 19:04 | Last updated: July 27 2007 19:04

We will never know who the best cyclist in the world was this year. The field of this summer’s Tour de France has been decimated, losing its leader, pre-race favourite and several entire teams after riders failed drug tests. Even the suspicion of drug-taking destroys the joy of sport. Big-hitting Barry Bonds of baseball’s San Francisco Giants is closing in on a 30-year-old record for career home runs, but because he is caught up in the BALCO steroids scandal, few are inspired.

There are only two solutions. The first – find a way to detect and disqualify all those who cheat using drugs – just will not work. New compounds, for which there are no tests, are regularly invented, and because the incentives and desire for glory are so great, some athletes will always take them.

The second is to legalise at least some performance-enhancing substances. Under the present anti-doping rules a drug can be banned if it meets two of the following three conditions: it is a risk to athletes’ health, it boosts performance, or it violates “the spirit of sport”.

Relaxing the first condition would be a mistake. The borderline sociopaths who play elite endurance and power sports are not going to resist any legal drug they think will give them an advantage: indeed, they are more likely to compete to see who can take the most of it. Fatal overdoses and illnesses would do even less for the popularity of sport than doping disqualifications.

Performance enhancement, the second condition, is already a matter of drawing the line. There are many legal ways to get better at sport, from sleeping in an oxygen tent, to living at altitude, to doing lots of exercise; Tour de France riders drug their bodies with a plate of pasta every morning. All cause physiological changes and the line could easily be moved to allow more chemicals that do the same.

The real question is the last: does doping violate “the spirit of sport”? Or, to put the question another way, would the legal use of safe drugs make sport more or less exciting, competitive and inspirational? A major argument against drugs is that sport would become less a test of athletes than of pharmaceuticals, resembling Formula One motor racing – where the car matters more than the driver – rather than the purity of a 100m sprint.

But that purity is an illusion in most sports. Golfers use titanium or graphite super-clubs; modern tennis rackets, in the hands of a professional, resemble firearms. Even 100m sprinters have hi-tech running shoes and clothes – quite aside from any undetectable, illegal drugs.

Allowing a free-for-all of drug-taking in sport would be wrong. But given that doping is near impossible to stop, and the corrosive effects when an athlete is suspected or caught, it is time to think about relaxing the rules. Performance-enhancing drugs might be bad for sport, but cheating is a lot worse.

Asian currencies sink as credit fears bite

Asian currencies sink as credit fears bite
By Joe Leahy in Mumbai and Jack Burton in Singapore
Copyright The Financial Times Limited 2007
Published: July 27 2007 10:11 | Last updated: July 27 2007 10:11

Asian currencies fell sharply on Friday on concern that the deterioration in the US housing market could raise credit costs and put a brake on the global economy.

The Australian dollar, Indian rupee, Indonesian rupiah, and Philippine peso were among the biggest losers as risk-averse investors moved to less volatile assets.

The Japanese yen was the region’s sole gainer as investors unwound carry trades, whereby they borrow in low-yielding currencies such as the yen for investment in other currencies or markets with higher yields. That drove the yen to a three-month high against the dollar and a six-week peak versus the euro.

“The real epicentre of this seems to be in the credit default swap market but what we’re seeing today is that it’s shifting to the equity side,” said Claudio Piron, Asia currency strategist with JP Morgan in Singapore.

He said crossover investors, such as hedge funds and fixed-income funds, were selling non-core equities portfolios, putting pressure on currencies such as the Indian rupee, as the process of “re-pricing risk” stemming from the turmoil in the US sub-prime mortgage market spread to other markets and investment instruments.

However, dedicated equities investors, such as mutual funds and pension funds, were not yet among the sellers.

The rise in risk aversion and the related move away from higher-yielding currencies and stocks in Asia follows negative housing data from the US this week.

This was reinforced by Countrywide Financial, the biggest US mortgage lender, which reported its third straight quarterly earnings decline after a growing number of borrowers fell behind on home-equity loan repayments.

Among the region’s currencies, the Australian dollar was down 2.27 per cent against the US dollar, as investors unwound carry trade transactions, at $0.8648, according to Reuters data.

The rupee, meanwhile, was down 0.44 per cent at Rs40.52 against the dollar, off a nine-year high of 40.20 hit on Tuesday.

The Indonesian rupiah fell as low as Rp9,240 per dollar, down more than 1.3 per cent and at its lowest level since mid-March.

The Philippine peso also fell as much as 1 per cent to 45.8 per dollar and the Malaysian ringgit was down by a similar percentage at a one-month low of 3.468 per dollar.

Adrian Foster with Capital Markets at Dresdner Kleinwort in Beijing said: “The Asian markets are dominated by real money instead of speculative money so I don’t think the downturn will last and markets will soon stabilise.

“The markets have been pretty frothy so what we’re seeing is that some of the speculative money is being taken away.”

He said Asia’s hefty foreign exchange reserves and sovereign funds would prevent large-scale deterioration in the region’s currencies and markets.

“We went through a similar period in February and the markets recovered, although the recovery this time may not be as strong.”

Global overview: Equities tumble on credit woes

Global overview: Equities tumble on credit woes
By Neil Dennis
Copyright The Financial Times Limited 2007
Published: July 27 2007 17:40 | Last updated: July 27 2007 21:29

A sharp sell-off in global equities this week was prompted by persistent concerns over the quality of credit markets and the knock-on effect this was likely to have in funding future takeovers.

The caution prevalent in the market led high volatility to return to equity markets. In London, the FTSE 100 by midday on Friday had swung 120 points either side of its opening level.

Risk aversion hit its highest levels since September 2001 according to the risk index of Swiss investment bank UBS. The VIX index, compiled by the Chicago Board of Options Exchange to measure volatility and investor anxiety, rose to a 13 month high.

Ongoing concerns that sub-prime mortgage losses in the US would spill over into other markets started the rot. On Wednesday, banks helping to finance buy-outs of Chrysler and Alliance Boots postponed the sale of loans on both deals as debt markets turned wary. The equity markets also reacted to the prospect that leveraged buy-outs could dry up.

The global asset allocation team at UBS said such concerns were unjustified and that underlying economic fundamentals – characterised by high levels of profitability and solid, non-inflationary growth in leading economies – did not suggest a backdrop normally associated with financial panic and malaise. Friday’s second-quarter economic growth in the US at an annualised 3.4 per cent was slightly higher than market expectations and remained broadly in line the Federal Reserve’s estimates.

UBS said: “It is impossible to know whether fear will trump fundamentals. Therefore, it is best to stand back and assess market conditions before making portfolio decisions.” The FTSE 100, which on Thursday plunged more than 3 per cent – its worst single session percentage loss since March 2003 – fell 5.6 per cent over the week – its poorest weekly performance since January 2003. In the US, the Dow Jones Industrial Average fell more than 300 points, or 2.3 per cent on Thursday, its worst daily showing since February’s market correction.

Late in New York on Friday, the Dow was down more than 4.2 per cent over the five sessions, its worst weekly performance this year.

Among the emerging markets, Turkey had, until Tuesday, been soaring at record highs after the success of the ruling AK party in the weekend election. The ISE National 100 index subsequently fell 8 per cent over the remainder of the week.

The flight to quality lifted government bond prices, driving yields lower as equities remained on the ropes.

German bunds got an additional lift from a softer-than-expected Ifo business confidence index.

The yield on the 10-year bund fell 11.6 basis points to 4.32 per cent over the week. “The market is very overbought at present but the chances of a significant reversal are relatively limited under the current circumstances,” said Charles Diebel at Nomura.

The yield on the 10-year Treasury note fell 19bp to 4.76 per cent, while the 10-year JGB yield was down 11bp to 1.77 per cent.

Risk aversion in the currency markets ensured that the yen was one of the week’s best performers as investors unwound carry trades, a risky strategy where low yield currencies are sold to fund higher-yielding purchases.

The New Zealand dollar, backed by one of the highest interest rates in the industrial world, fell nearly 5 per cent against the yen this week, in spite of the country’s central bank lifting rates by a further 25 basis points to 8.25 per cent.

Other high yielders also fell sharply. The Australian dollar lost 4.1 per cent and sterling fell 3 per cent.

The yen carry trade shake-out also forced the US dollar higher. It climbed 1.3 per cent over the week against both the euro and the pound, but fell 2 per cent against the yen.

Growing fears that a wider slowdown could dent demand for raw materials hit commodities markets.

Friday’s strong US growth data helped fuel a late rally for oil prices, however. Brent crude bounced back $1.08 cents on the day to close at $76.26 a barrel, just under 0.5 per cent lower over the week.

Astronauts drunk before flight

Astronauts drunk before flight
By Rebecca Knight in Boston
Copyright The Financial Times Limited 2007
Published: July 27 2007 20:02 | Last updated: July 27 2007 23:44

Nasa astronauts who turned up to work drunk were authorised to fly on two occasions, even after warnings from doctors that they posed a potential flight-safety risk, according to a report issued on Friday.

The independent report on astronaut health found “heavy use of alcohol” before launch, a practice in violation of the US space agency’s set 12-hour “bottle-to-throttle” rule.

The report panel, convened in February following the arrest of Lisa Nowak, an astronaut, on charges she tried to kidnap her rival in a love triangle, comprised military and civilian physicians, psychologists, lawyers, safety experts and astronauts.

Nasa said on Friday it was unaware of any astronauts drunk before a flight but that it was investigating the report’s findings. It said the panel did not provide the space agency with any details of the allegations.

The news coincided with a separate report of sabotage to the cargo of a coming mission at the US space agency.

At a press conference in the James Webb Auditorium at Nasa headquarters in Washington, Shana Dale, deputy administrator, said the agency would act immediately on the reports of alcohol use, conduct an internal safety review and then “recommend corrective actions”.

The agency has taken the report's suggestion for implementing an astronaut code of conduct “very seriously”, Ms Dale added.

Nasa has historically had a policy that prohibits any drinking in the 12 hours before an astronaut flies a training jet. But in light of the panel's report, the rule will officially be applied to space flights, as well.

The panel found that Nasa was not set up in such a way as to deal with alcohol use by astronauts.

“The medical certification of astronauts for flight duty is not structured to detect such episodes, nor is any medical surveillance programme by itself likely to detect them or change the pattern of alcohol use,” its report said.

Officials inspecting the shuttle Endeavor, due to launch from Cape Canaveral space centre on August 7, meanwhile found electrical wires on a computerised monitoring device had been severed. Nasa said it believed the damage was caused by an agency subcontractor, but emphasised that it posed no danger to the shuttle or its astronauts. Bill Gerstenmaier, Nasa's associate administrator, said that the non-essential device, which measures physical stresses on the International Space Station's external arms, “will be repaired and it will fly on this flight”.

Wake-up call’ for investors

Wake-up call’ for investors
By Michael Mackenzie and Saskia Scholtes in New York and Paul J Davies in London
Copyright The Financial Times Limited 2007
Published: July 27 2007 19:16 | Last updated: July 27 2007 23:41

Wall Street closed lower on Friday after a tumultuous week in which the S&P 500 index experienced its worst performance since September 2002 as heightened credit market concerns battered stocks.

London saw all this year’s gains wiped out. There were also heavy falls in Asian stock markets, European stocks were lower and corporate debt markets saw further sell-offs.

The selling rounded off a week that finally saw equity traders waken to the growing problems in debt markets.

The heaviest stock selling on Thursday was sparked by news that banks had been forced to pull debt sales for two of the biggest private equity backed buy-outs in the market.

Chrysler, the US carmaker, failed to attract demand for loans valued at $12bn and Alliance Boots debt worth £5bn was left on banks’ balance sheets.

Fears about an end to the leveraged buy-out boom added to the expanding crisis in US mortgage markets, where one of the biggest US lenders said this week that problems in the risky subprime market were spreading to more conventional loans.

Mr Paulson said in an interview on CNBC television that both the mortgage lending and leveraged buy-out markets had been marked by excesses.

“I think we could use some more discipline. We are seeing a reassessment of risk and that is leading to a market adjustment,” he said, adding that it was “healthy” that risk was being repriced.

Mr Paulson said problems in the US mortgage sector should remain “largely contained”, but stressed “this is something that will take a while to make its way through the economy”.

Stocks briefly rallied after Mr Paulson’s remarks but then resumed their descent.

By the close of trading in New York, the S&P 500 index was down 4.9 per cent for the week at 1,458.95 while the Nasdaq Composite Index was 4.7 per cent lower at 2,562.24. The Dow Jones Industrial Average was 4.2 per cent lower at 13,265.47 for the week.

News that the US economy had expanded at a 3.4 per cent annual rate and that core inflation moderated during the second quarter failed to improve sentiment.

The FTSE 100 finished at 6,215.2, erasing all its gains for the year. It hit a peak of 6,732.4 on June 15, when it was 8.2 per cent higher on the year. The FTSE Eurofirst 300 fell 5 per cent, its worst weekly performance since March.

A flight to safety saw US government bonds rally, the yen strengthen and emerging market debt and equities stumble. An index of the main indicators of risk across asset classes compiled by UBS showed that risk-aversion had hit its highest level since the terrorist attacks in September 2001.

The strengthening of the Japanese currency indicates an unwinding of the carry trade, in which investors borrow in cheaper currencies to buy higher-yielding assets elsewhere, which has been a significant source of liquidity in global markets.

Corporate debt markets slid, with investors doubting that a $300bn backlog of US bond and loan deals would clear quickly. Issuance of new US high-yield debt this month has sunk to the lowest level since October 2002 at the trough of the last credit crunch, said Thomson Financial.

Friday, July 27, 2007

A Stem-Cell Surprise - Sixty percent of infertility patients are willing to donate extra embryos to research.

A Stem-Cell Surprise - Sixty percent of infertility patients are willing to donate extra embryos to research.
By Sarah Kliff
© 2007 Newsweek, Inc.

July 30, 2007 issue - After a successful series of infertility treatments, Kristen Cohen and her husband, Lee, had two sets of twin boys, now ages 6 and 2. They also had about a dozen embryos that they no longer needed but could not imagine going to waste. "We went through so much to create these embryos," says Kristen. "This was much more than blood, sweat and tears." The Cohens had also benefited firsthand from medical research; Lee, who has cystic fibrosis, has been helped by advanced treatments. So in 2006, when Kristen saw an article about the Harvard Stem Cell Institute, she contacted it and began the process of donating their embryos, which could be used to create new lines of embryonic stem cells. After five months of paperwork and counseling for the couple, the Cohen embryos were in the hands of researchers. "We know they might be destroyed without making a single stem-cell line," Kristen says. "I don't need to know that my embryo helped save patient X. It's the greater good."

In the ongoing, often-heated debate over embryonic-stem-cell research—last month President George W. Bush once again vetoed a stem-cell bill, one that would have authorized federal funding for research on surplus frozen embryos—one party has been largely unheard from: the owners of the frozen embryos. "These embryos have very special and moral meaning for the people who create them," says Ruth Faden, head of the Johns Hopkins Berman Institute of Bioethics. "If we want to engage deeply with what ought to be done, we need to know their preferences." Now, thanks to the efforts of Faden and Anne Lyerly of Duke University, we do.

A recent survey the two conducted of more than 1,000 infertility patients found that 60 percent were willing to donate their frozen embryos for stem-cell research. Only 22 percent were interested in donating their embryos to another couple, while 24 percent indicated that they were likely to discard them. Faden calls the results "hugely surprising," especially when compared with the only previous national survey, from 2003, which found that slightly less than 3 percent of patients were interested in donating for science. That data, Faden notes, came from a survey of infertility clinics, not the patients themselves.

Couples who choose research often attribute the decision to the wonders and hardships of infertility treatment. "Once you've been through it, you're so appreciative of the science," says Amanda Bergen Peressutti. "So much has gone into helping you have this baby that I personally have a debt of gratitude. I want to do anything that I can do to help others." Bergen Peressutti and her husband, Gian-Carlo Peressutti, spent three years trying to conceive their first daughter. In clinic waiting rooms they saw dozens of others struggling with the same problems. After that experience, Gian-Carlo could not imagine discarding the embryos. "Terminating those embryos when they could potentially be of use to another person, in my mind, was like not checking the box on the back of your license to be an organ donor." The couple donated their additional embryos to a stem-cell lab in New York last month.

Other infertility patients choose not to offer their embryos for stem-cell research. Michelle DeCrane and her husband, Barry, whose daughter was born in February, have six embryos in storage. And that, says Michelle, is where they will stay while the couple decides whether to have more children (indecision is the reason many embryos remain stored). "For me, it would be destroying my children," she says. "That's a human life that we created."

The clear preference revealed in the survey for research over adoption appears to grow out of a sense of kinship. "They're a bunch of cells that could grow into your child," says Bergen Peressutti. "I'm just not comfortable having that child out in the world being raised by somebody I don't know and didn't choose." When infertility patients make their embryos available to other couples, they typically relinquish the right to know who gets them or even if they are used at all.

The willingness of infertility patients to donate their frozen embryos to science could have a tremendous impact on stem-cell research. While the ban on federal funding for research that destroys human embryos is a roadblock, the lack of embryos for private and state-funded research is also a major obstacle. "Right now, the flow of human embryos to stem-cell research is at a trickle," says Susan Fisher, acting director of the Human Embryonic Stem Cell Center at the University of California, San Francisco. "What we need is a flood." Faden estimates that if even half of those surveyed who say they are willing to donate actually did so, it could mean an additional 2,000 to 3,000 stem-cell lines. That is about 100 times the number of federally funded lines currently available. The survey by no means indicates that a steady supply of embryos will become available—many willing couples may never donate—but it does add a new and necessary voice to the discussion, one that, until now, has rarely been heard.

Yes, We Can All Be Insured

Yes, We Can All Be Insured
By Jane Bryant Quinn
© 2007 Newsweek, Inc.

July 30, 2007 issue - Prepare to be terrorized, shocked, scared out of your wits. No, not by jihadists or Dementors (you do read "Harry Potter," right?), but by the evil threat of ... universal health insurance! The more the presidential candidates talk it up, the wilder the warnings against it. Cover everyone? Wreck America? Do you know what care would cost?

But the public knows the American health-care system is breaking up, no matter how much its backers cheer. For starters, there's the 46 million uninsured (projected to rise to 56 million in five years). There's the shock of the underinsured when they learn that their policies exclude a costly procedure they need—forcing them to run up an unpayable bill, beg for charity care or go without. And think of the millions who plan their lives around health insurance—where to work, whether to start a business, when to retire, even whom to marry (there are "benefits" marriages, just as there are "green card" marriages). It shocks the conscience that those who profit from this mess tell us to suck it up.

I do agree that we can't afford to cover everyone under the crazy health-care system we have now. We can't even afford all the people we're covering already, which is why we keep booting them out. But we have an excellent template for universal care right under our noses: good old American Medicare. When you think of reform, think "Medicare for all."

Medicare is what's known as a single-payer system. In the U.S. version, the government pays for health care delivered in the private sector. There's one set of comprehensive benefits, with premiums, co-pays and streamlined paperwork. You can buy private coverage for the extra costs.

Health insurers hate this model, which would end their gravy train. So they're trying to tar single-payer as a kind of medical Voldemort, ready to destroy. Here are some of their canards, and my replies:

Universal coverage costs too much. No—what costs too much is the system we have now. In 2005, the United States spent 15.3 percent of gross domestic product on health care for only some of us. France spent 10.7 percent and covered everyone. The French comparison is good because its system works very much like Medicare-for-all. The other European countries, all with universal coverage, spent less than France.

Why are U.S. costs off the charts? Partly because we don't bargain with providers for a universal price. Partly because of the money that health insurers spend on marketing and screening people in or out. Medicare's overhead is just 1.5 percent, compared with 13 to 16 percent in the private sector. John Sheils of the Lewin Group, a health-care consultant, says that the health insurers' overhead came to $120 billion last year, of which $40 billion was profit. By comparison, it would cost $54 billion to cover all the uninsured.

Eeeek, your taxes would go up! Maybe not, if Sheils is right. Both the Congressional Budget Office and the General Accounting Office have testified that the United States could insure everyone for the money we're spending now. But even if taxes did rise, you might still come out ahead. That's because your Medicare plan would probably cost less than the medical bills and premiums you're paying now.

We get world-class care; don't tamper with it. On average, we don't. International surveys put France in first place. On almost all measures of health care and mortality, we lag behind Canada and Europe. Many individuals do indeed get superior care, but so do people in single-payer countries, and at lower cost.

They have long waiting times. No advanced country has waiting periods for emergency surgery or procedures that are urgently needed. The United States has shorter waits than Canada and England for elective surgery. Still, queues are developing here, at the doctor's door. In a study of five developed countries, the Commonwealth Fund looked at how many sick adults had to wait six days or more for an appointment. By this measure, only Canada's record was worse than ours. But waits depend on how well a system is funded, not with the fact that it's single-payer. Many countries that cover everyone, including France, Belgium, Germany and Japan, report no issue with waits at all.

There's no problem; people get care even if they're uninsured. They don't. They get emergency treatment but little else. As a group, the uninsured are sicker, suffer more from chronic disease and rarely get rehabilitation after an injury or surgery. They also die sooner—knowing that, with insurance, they might have lived.

Right now, Congress is trying to bring 3.3 million uninsured children into the State Children's Health Insurance Program. President George W. Bush says he'll veto the expansion as "the wrong path for our nation." He objects to "government-run health care" (like Medicare?) and says that SCHIP "deprives Americans of ... choice" (like the choice to go uninsured?). Buzzwords like "government run" are supposed to summon up monsters like "socialized medicine" that apparently still lurk under our beds. If these terror tactics work, prepare for another 46 million uninsured.

Reporter Associate: Temma Ehrenfeld

Chicago Sun-Times Editorial - Don't add to tax misery - Continue relief program for another 3 years/How the '7%' property tax formula works

Chicago Sun-Times Editorial: Don't add to tax misery - Continue relief program for another 3 years
Copyright by The Chicago Sun-Times Editorial
July 27, 2007

If the value of your house soared in the last few years, you're going to pay more property taxes. Will it be a staggering increase, or only a big one? That all depends on what happens in Springfield, where the fate of a key tax relief measure is up in the air. Lawmakers are leaning toward an overly complicated bill that ultimately scales back relief for most homeowners. That measure is better than letting the program expire this year, but we think the relief should continue as is.

The program, known as the "7 percent solution," seeks to prevent Cook County homeowners from getting hit with huge property tax increases as the value of their homes increases. It allows people to exempt up to $20,000 of their home's taxable value in order to limit the value's growth to 7 percent a year, or 21 percent for three years. For people living in rapidly appreciating areas, that can make a huge difference. In Chicago, where many areas saw double-digit increases when they were reassessed last year, the median tax bill this fall would go up 18.4 percent if the program were continued as is, according to an analysis by the Civic Federation. Without it, the median bill would rise 43.6 percent.

The program is set to expire this year, but Cook County Assessor Jim Houlihan has been pushing for its renewal. He argues that the exemption should be raised to $40,000 a year. But the Civic Federation determined that the $20,000 exemption helped many homeowners without being overly burdensome on businesses, apartments and most other classes of property. That might not be the case if the exemption were raised.

Instead of supporting a $20,000 or even $40,000 exemption, the Legislature looks likely to approve a bill backed by House Speaker Michael Madigan (D-Chicago). It would raise the exemption to $30,000, then drop it to $24,000 and then $18,000 before ending the program entirely. But it would grant new exemptions for homeowners who have been in their homes for more than 10 years and whose household income is less than $75,000. As Laurence Msall of the Civic Federation points out, that final provision makes it difficult if not impossible to analyze the impact of the change because we don't know how many people it would cover.

Our property tax system is crazy enough -- let's not complicate things even more. The program should be continued as is, for another three years. It worked to spread out the huge increases of the real estate boom years without negatively affecting too many other taxpayers. It can do it again. But there is one part of Madigan's bill that we do like: the creation of a reform task force. Maybe we can finally make some sense of our property tax system.

For an example of how the tax exemptions work see below

Chicago Sun-Times Editorial - How the '7%' property tax formula works
Copyright by The Chicago Sun-Times
July 27, 2007

To illustrate how the "7 percent solution" works, here's a hypothetical example:

Say you have a house with an equalized assessed value, or taxable value, of $100,000. This value is determined by taking the home's actual worth, or market value, and multiplying it by 16 percent. That assessed value is then multiplied by another number which the state determines each year in order to bring the values of all Cook County properties to 33.3 percent of market value, the standard in other counties.

Say that home's taxable value rises to $150,000 in the next year. Under the current program, the $50,000 rise would be limited to 7 percent. So the taxable value should be $107,000. But wait -- the law only allows a $20,000 exemption. That means we can only shave $20,000 off the $50,000 increase in value, giving the home a taxable value of $130,000.

What's the bottom line? Let's make it easy and say the property tax rate is 5 percent. Five percent of $130,000 is $6,500. That's $1,000 less than the $7,500 the homeowner would pay if the taxable value was $150,000.

What if the taxable value rose to $120,000 from $100,000? Again, a 7 percent increase would be $107,000. That means we have exempted $13,000, which is under the $20,000 cap. So our taxable value is $107,000.

The tax difference? At 5 percent, you'd pay $6,000 without the program, but just $5,350 with it.

Despite being called the "7 percent solution," the $20,000 property tax exemption cap means that the taxable values of some homes could be more than 7 percent.

International Herald Tribune Editorial - Loaded energy dice

International Herald Tribune Editorial - Loaded energy dice
Copyright by The International Herald Tribune
Published: July 26, 2007

The names of some of the corporate big shots and industry lobbyists who helped shape the deliberations and conclusions of the super-secret Cheney energy task force in 2001 are now beginning to surface, thanks to a former White House aide who provided a list to The Washington Post.

The task force, which developed a national energy policy, had all the time in the world for the big energy producers - some 40 meetings with the oil, gas and coal companies and their trade associations - but barely a moment for environmentalists. It's not surprising that its report favored producers of fossil fuels at the expense of conservation and alternative fuels.

Some energy experts say the Cheney report appears better balanced in retrospect than its critics claimed. But while it did assess a range of energy strategies, its actual recommendations were heavily weighted toward finding new sources of supply and removing regulatory impediments to oil and gas exploration and burning coal.

The report had immediate influence on Capitol Hill, where both the House and Senate produced alarmingly unbalanced energy bills, with billions in tax breaks and other subsidies for traditional energy producers and only peanuts, relatively speaking, for efficiency and alternative fuels.

Fortunately, the energy debate itself has moved on. The energy bill passed by the Senate last month is much less solicitous of big producers and much more favorable to newer, cleaner fuels. Some of the very companies that appeared before the task force in 2001 are now demanding more aggressive steps on climate change and oil dependency. Think how much more quickly we could have reached this point had the task force truly opened itself to new ideas six years ago.

International Herald Tribune Editorial - The imperial presidency

International Herald Tribune Editorial - The imperial presidency
Copyright bhy The International Herald Tribune
Published: July 26, 2007

The judiciary committee of the House of Representatives did its duty Wednesday, voting to cite Harriet Miers, the former White House counsel, and Joshua Bolten, the White House chief of staff, for contempt. The Bush administration has been acting lawlessly in refusing to hand over information that Congress needs to carry out its responsibility to oversee the executive branch and investigate its actions when needed. If the White House continues its obstruction, Congress should use all of the contempt powers at its disposal.

The committee really had no choice but to hold Miers in contempt. When she was subpoenaed to testify about the administration's possibly illegal purge of nine U.S. attorneys, she simply refused to show up, citing executive privilege. Flouting a congressional subpoena is not an option.

Bolten has refused to provide Congress with documents it requested in the attorney purge investigation, also citing executive privilege. Together, Miers' and Bolten's response to Congress has simply been: "Go away."

The Supreme Court has held that a president's interest in keeping communications private must be balanced against an investigator's need for them. In this case, the president's privacy interest is minimal, since the White House has said he was not involved in purging the U.S. attorneys. Congress' need for the information, though, is substantial. It has already turned up an array of acts by administration officials that may have been criminal.

Congress must not capitulate in the White House's attempt to rob it of its constitutional powers. Now that the committee has acted, the whole House must vote to hold Miers and Bolten in contempt. The administration has indicated that it is unlikely to allow the U.S. attorney for the District of Columbia to bring Congress' contempt charges before a grand jury. In that case, Congress can and should proceed against Miers and Bolten on its own, using its inherent contempt powers.

It is not too late for President Bush to spare the country the trauma, and himself the disgrace, of this particular constitutional showdown. There is a simple way out. He should direct Miers and Bolten to provide Congress with the information to which it is entitled.

Markets tumble amid worries on U.S. growth

Markets tumble amid worries on U.S. growth
By Floyd Norris and Vikas Bajaj
Copyright by The International Herald Tribune
Published: July 26, 2007

NEW YORK: Stock prices tumbled across much of the world Thursday amid worries of slowing economic growth in the United States and more difficult borrowing conditions that could make everything from leveraged corporate buyouts to purchases of new homes more difficult.

In the United States, major indexes including the Dow Jones industrial average and the Standard & Poor's 500 were down more than 2 percent. Losses were comparable throughout Europe, and larger in many developing countries.

"The preconditions for a shock are in place," said Mark Zandi, chief economist at Moody's "Until very recently investors were very nonchalant about risks."

Stock markets have been volatile in recent weeks, as continued strong profits for many companies and an economic boom in Asia have contrasted with signs of slowing in the American economy and new difficulties in borrowing for many that are highly leveraged or have poor credit.

The plunge came a day after the private equity firm buying Chrysler from Daimler-Chrysler said it would complete the transaction despite an inability to borrow the money in credit markets, as had been planned. Banks will hold on to those loans, as they will for a similar deal involving Alliance Boots, a British pharmacy chain. Daimler Chrysler fell $3.95 to $89.07.

"There is fear, but not a fear of recession," said William Gross, the chief investment officer of Pimco, a money management firm. "The fear is directed toward the question of who will be willing to lend $200 billion to provide takeout financing for previously announced private equity deals."

The credit difficulties began in the United States with investors growing worried about losses on securities that helped to finance sub-prime mortgages for borrowers with substandard credit, but now they have spread to highly leveraged companies as well.

"The really good times are over," said Simon Ballard, a global credit strategist at ABN Asset Management in London. "What we have now is a very weak market in terms of credit globally. It will change the environment for higher leverage-type transactions going forward, especially leveraged buyouts."

The credit tightening has come just weeks after Blackstone Group, one of the largest private equity firms that do leveraged buyouts, went public in a widely anticipated initial public offering. The shares, sold for $31, rose as high as $38 on the first day of trading. They rose 19 cents to $25.70 in late trading.

Even as the stock market has gyrated in recent weeks - with the Dow industrials having alternated rising and falling days over the past eight trading days - financial stocks have been coming under pressure. Citigroup dropped $1.40 to $47.81, and Goldman Sachs fell $8.04 to $195.12.

The falling stock markets helped turn oil markets lower. After rising above $77 a barrel in early trading - the first time since last summer that level was hit - the nearby crude oil future fell back below $75.

Exxon Mobil reported its first earnings decline in years, saying it made $10.3 billion in the second quarter, about $100 million less than in the same period of 2006. Earnings per share were up, due to an aggressive share-repurchase plan, but Exxon stock fell $4.56 to $88.23.

American investors were also depressed by a report of slowing sales of new homes, and by reports of losses from homebuilders. Beazer fell $1.48 to $15.56, and has now lost two-thirds of its value this year.

Beazer faces a criminal investigation for arranging government-guaranteed mortgages for buyers who should not have qualified, but other homebuilders have also plunged. Pulte Homes fell 63 cents to $20.04 and Ryland Group rose 35 cents to $33.27. They are off about 40 percent this year.

Not all stocks were lower. Apple, which lost 8 percent of its value on Tuesday amid fears that its iPhone had not sold as well as expected, has regained all of that loss as it reported strong profits. MMM, which reported record profits, was the only one of the 30 Dow industrials to be up in late trading.

The yield on 10-year U.S. Treasury bonds fell to 4.79 percent from 4.90 percent the day before, as some investors sought safety, but yields rose as prices fell for bonds of lower quality, and some were difficult to sell at all.

"We needed to clean house and it's getting cleaned," said Kingman Penniman, the president of KDP Investment Advisors, which focuses on high-yield bonds. "It's the market going from too much liquidity to none. Many of the participants have never seen it."

Standard & Poor's, in its leveraged commentary report, said the decline in high-yield bond prices this week was the largest since the plunge after the Sept. 11 terrorist attacks.

"It's pretty clear that this is a big move away from taking risk," said Jerry Webman, senior investment officer and chief economist for OppenheimerFunds, a mutual fund company. "People have been borrowing unusually cheaply to buy assets, and that whole transaction made sense whether it was houses or companies - if the asset was going to appreciate. But if that asset was not going to appreciate, your loan was not going to work."

The fall in Treasury bond rates has also done little for mortgage rates, Freddie Max reported that the average rate for 30-year mortgage loans was 6.69 percent. Since mid-June, Treasury rates have fallen by half a percentage point, but only a tenth of that move has carried over to the mortgage market.

In the past, a sudden seize up of lending has sometimes led to sharp market falls. A leveraged buyout boom in the 1980's came to a halt when a planned buyout of UAL, the parent of United Airlines, could not be financed. The S&P 500 fell 6 percent in one day when that was announced, but regained all the lost ground within 12 weeks.

In those days, a financial crisis raised fears of failures for large financial firms.

Now, policy makers like Ben Bernanke, the chairman of the Federal Reserve, have argued, markets can deal with shocks better today than in the past because risks are more dispersed.

Securities backed by risky mortgages that have been a top concern, for instance, are held by pension funds, hedge funds and many other investors around the world. So, they argue, even if the market for those bonds collapses, no major firm is likely to be seriously injured.

But the big banks now find themselves taking on more loans because they had promised to do so if the loans could not be sold. And the market for some types of securities has all but vanished.

Countrywide Financial, the nation's largest mortgage lender, said this week it would no longer try to sell the riskier mortgage securities that it used to routinely unload. Countrywide fell 82 cents to $29.25, a three-year low.

"Everybody now recognizes that the elimination of creative finance in housing leaves us with a problem for new homebuyers," said Robert Barbera, the chief economist of ITG, because their income is not high enough to buy homes with interest rates and home prices at current levels.

"You can make the case that we are simply witnessing a reverse of the late 1990's - Asia collapse, long-term interest rates swoon and U.S. housing booms."

This time, he said, interest rates may not fall much, due to the Asian boom, and that will put more pressure on housing prices.

International Herald Tribune Editorial - Taxes in the global economy

Fidel's shadow looms as brother presides over Revolution Day
By James C. McKinley Jr.
Copyright by The International Herald Tribune
Published: July 26, 2007

CAMAGUEY, Cuba: A year ago, Fidel Castro led thousands of Cuban Communist Party faithful in enthusiastic cheers to celebrate the guerrilla attacks on army barracks that sparked his revolution a half century ago.

But Thursday, for the first time, it was Castro's brother, Raúl, who gave the traditional revolutionary harangue, deepening the widespread feeling among Cuba's citizens that their once all-powerful leader has slipped into semi-retirement and is unlikely to return.

And Raúl Castro, the acting president and defense minister, left little doubt he intended to shake up the island's centralized Soviet-style economy. He scolded the nation for having to import food when it possesses an abundance of rich land. He vowed to increase and streamline agricultural production. He also said Havana was studying ways to secure more foreign investment in industries without abandoning socialism.

"No one, no individual or country, can afford to spend more than what they have," he said. "It seems elementary, but we do not always think and act in accordance with this inescapable reality. To have more we have to begin producing more."

Raúl Castro spoke before about 100,000 people. His hourlong speech was studded with references to his charismatic brother's ideals. He ended the talk with one of Fidel Castro's more famous quotes about the nature of a socialist revolution, a passage the crowd mumbled along with him, like a prayer.

At times it seemed almost as if Castro were eulogizing his brother. "Not even during the most serious moments of his illness did he fail to bring his wisdom and experience to each problem and essential decision," he said. "These have truly been very difficult months, although with the opposite effect than our enemies expected, those who dreamed chaos would erupt and Cuban socialism would end up collapsing."

But Fidel Castro is still very much alive. Since the Communist Party has yet to officially replace him as the head of state, his presence in the wings continues to exert a strong influence in politics here, making it difficult for his brother to make significant changes to the island's state-managed economy, experts on Cuban politics said.

It was after two strenuous National Rebellion Day speeches last year that Castro suffered from an acute infection and bleeding in his colon from diverticulitis. Five days later, he handed power to his brother and a small group of cabinet officials on a temporary basis.

But since then, what looked like at the time like a temporary measure seems to have taken on a permanent aspect. He has had several surgeries and has acknowledged that at least one went badly. He has not been seen in public and has missed military parades and other events he usually attends.

The authorities periodically have released photographs and videos showing the 80-year-old leader looking first gaunt, then later more robust, the last of which appeared on television in early June.

He spends much of his time these days writing essays for the Communist Party newspaper on a range of topics, from the war in Iraq to the defection of Cuban boxers during the Pan American games.

He recently blamed the use of dollars and remittances from the Cubans in the United States for "irritating inequalities and privileges." The columns are rambling and sometimes humorous. He wrote last week that he was so engrossed in the games that he had forgotten to take his medicine.

"I don't have time now for films and photos that require me to constantly cut my hair, beard and mustache and get spruced up every day," he grumbled in one of his essays, entitled "Reflections of the Commander in Chief."

Raúl Castro, 76, has taken several small but meaningful steps over the past year that suggest he wants to open up Cuban society and perhaps move to a market-driven system, without ceding one-party control, not unlike what Communist China is endeavoring to do. In the 1990s, he supported limited private enterprise and foreign investment.

Since becoming acting president, Raúl Castro has twice offered to open negotiations with the United States to end a half-century of enmity and sanctions. He repeated that stand Thursday, noting that President George W. Bush would soon be leaving office "along with his erratic and dangerous administration."

"The new administration will have to decide whether it will maintain the absurd, illegal and failed policy against Cuba or if will accept the olive branch that we offered," he said.

Fewer dissidents have been arrested this year than in the past, and cadres of party militants have stopped harassing government critics, said Manuel Cuesta Morúa, a moderate opposition leader.

On the economic front, the younger Castro has allowed the importation of televisions and video players. He has told the police to let pirate taxis operate without interference. He has pledged to spend millions to refurbish hotels, marinas and golf courses. He even ordered one of the state newspapers to investigate the poor quality of service that state-controlled bakeries and other stores provide to people.

But perhaps the most important step he has taken was to pay the debts the state owes to private farmers and to raise the prices the state pays for milk and meat. Ordinary Cubans still live on rations and cope with chronic shortages of staples like beef. Salaries average about $12 a month, and most people spend the three-quarters of their pay on food, according to a study by Armando Nova González, an economist at the Center for the study of the Cuban Economy.

"What a person makes is not enough to live on," said Jorge, a museum guard who asked his last name not be used because he feared persecution. "You have to resort to the black market to get along. No, not just to get along, to survive." He said he and his wife together make about $30 a month, just enough to support their family of four.

Raúl Castro has disappointed many Cubans who had expected dramatic changes when he took over. One reason is he has always deferred to his older brother in the past and seems to lack the political power to take major actions until Fidel Castro either relinquishes total control or dies, said experts on Cuba.

"I would say what is remarkable over the last year is how little has changed," said Robert Pastor, a former aide to President Jimmy Carter and a political scientist at American University. "People have been calm, but of course, big brother has been watching."

Fidel's influence extends far beyond his new role as columnist in chief. Even as Raúl Castro appears headed toward permanent rule, leaders seem reluctant to roll back the elder Castro's decision to centralize the economy again and restrict the small-scale private enterprises that emerged in the 1990s after the fail of the Soviet Union, several economists and political scientists say. "His main impact on Cuba is not his writings but that he's alive, and it means Raúl and the others are reluctant to take major initiatives," said Jorge Dominguez, a professor at Harvard who studies Cuba.

In his speech, Raúl Castro acknowledged the stubborn problem of low wages and the lack of productivity, saying the economic problems were eating away at the social fabric. He urged Cuba to be patient. The problems could not be solved right away and he did not want to raise expectations too high, he said.

"Wages today are markedly not enough to satisfy all needs," he said, adding, "This has bred forms of social indiscipline and tolerance which, having taken root, prove difficult to eradicate."

Prime loans joining default flood

Prime loans joining default flood
Copyright © 2007, Chicago Tribune and The Associated Press
July 27, 2007

Here's a scary thought about the latest bad news on housing: A surprising increase in late loan payments and defaults among homeowners with good credit is so far coming from traditional woes, such as divorces, job losses and unexpected medical bills.

The next and biggest wave of problem loans could come as monthly payments soar for both prime and subprime borrowers who took out adjustable-rate loans with little or no documentation, or who used piggyback loans on top of their first mortgages to make up for small down payments, analysts said.

These exotic loans were the only way many borrowers, even those with good incomes and sterling credit histories, could afford to get into the housing market as home prices soared in the last decade. But now those decisions are looking suspect.

That was one of the messages that sent a jolt through the mortgage industry and the stock market Tuesday after Countrywide Financial Corp. reported that its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults. Countrywide laid part of the blame for the uptick in delinquencies on borrowers with good credit who had taken out prime home equity loans.

Analysts said the trend could continue, particularly in areas of the country that have been hardest hit by job losses in general or seen a decline in speculation-driven construction, such as South Florida, parts of California and Las Vegas.

"As housing values weaken broadly and the job market slows in these areas that we're focused on, all borrowers will be touched," said Mark Zandi, chief economist at Moody's

The mortgage industry has already tightened lending standards in response to the jump in defaults by subprime borrowers. With fewer first-time buyers entering the market, homeowners in the middle of the market, who tend to be among the most creditworthy borrowers, are having a tougher time selling their homes.

"The same problems you saw in the subprime sector that caused the big meltdown in March is now a broader industry problem that's hitting the prime sector," said Christopher Brendler, an analyst with Stifel Nicolaus & Co.

Zandi and other economists said the housing slump could lead to billions of dollars in losses for Wall Street as it drags on for at least another year and mortgage defaults increase.

The outlook on eroding credit quality in the U.S. mortgage market by Moody's anticipates that more than 1.2 million first mortgage loans will default this year and 1.3 million will follow next year.

That compares with about 900,000 defaults last year and about 800,000 in 2005, said Zandi, who said he thinks hedge fund investors will lose between $100 billion and $125 billion as a result.

Home sales sink; 2 builders lose

Home sales sink; 2 builders lose
D.R. Horton, Beazer take land write-downs
Copyright © 2007, Chicago Tribune
July 27, 2007

The bad news for the housing industry continued Thursday, when the government said new-home sales in June fell more than expected and two major home builders said they swung to quarterly losses after taking massive charges for unsold inventory and unused land.

Sales of new homes declined 6.6 percent, the most since January, to an annual rate of 834,000, the Commerce Department said. Economists expected a drop to a pace of 890,000.

The median price of a new home fell 2.2 percent last month, to $237,900. The number of homes for sale held at 537,000 during the month, and the supply of homes at the current sales rate rose to 7.8 months' worth, the most since March, up from 7.4 months. Purchases fell 27 percent in the Northeast, 23 percent in the West and 17 percent in the Midwest. Sales rose 7.6 percent in the South.

Economists consider sales of new homes a leading indicator of market demand because they are recorded when a contract is signed. Home resales are compiled mainly from closings that usually reflect contracts signed a month or two earlier. Purchases of new homes account for about 15 percent of total home sales.

Also Thursday, D.R. Horton Inc. posted a third-quarter loss after writing down the value of unused land and warned there was no recovery in sight for the troubled housing industry.

"It is now clear that the selling season did not materialize this year," said Chief Executive Donald Tomnitz. "It is unclear to us when the housing recovery will begin. We don't see one on the horizon."

Horton was pushed to a loss by pretax charges of $852 million reflecting lower value of land and other holdings and $426 million in the value of intangibles such as brand name.

The Ft. Worth-based builder said it lost $823.8 million, or $2.62 a share, compared with a profit of $292.8 million, or 93 cents a share, a year earlier. Analysts expected a loss of 35 cents a share in the most recent period, according to Thomson Financial. Revenue from home building fell 30 percent, to $2.5 billion, as the number of homes closed plummeted to 9,643 from 13,377 a year ago.

Beazer Homes USA Inc. also said it swung to a third-quarter loss after it cut prices to spur sales and took major charges.

The Atlanta-based company posted a loss of $123.01 million, or $3.20 a share. Wall Street was expecting a loss of 32 cents a share. A year ago Beazer earned $102.62 million, or $2.37 a share. The latest quarter included pretax charges of $188.5 million to write down the value of inventory and goodwill, as well as to forfeit options on land. Revenue fell nearly 37 percent, to $761.01 million, as home closings plunged to 2,666 from 4,156.

Shares of D.R. Horton declined by 32 cents, or 1.8 percent, Thursday to close at $17.16. Beazer stock lost $1.48, or 8.7 percent, to close at 15.56. Both trade on the New York Stock Exchange.