New Fiscal Year’s Resolution
Volume XIV No. 43: October 23, 2009
It appears Autumn has finally arrived in Washington. The days are shorter, the leaves are turning, and the air is a bit more crisp. But perhaps the most tell-tale sign is that a new fiscal year has come, yet Congress hasn’t finished writing the checks that will fund government for the next year.
Actually, they are not even close to finished. As of October 1st, the beginning of the fiscal year, Congress had sent only one of the twelve spending bills to the President—the legislative branch appropriations bill that funds their operations. That bill also contained an extension, or “continuing resolution”, to fund all government programs at last year’s spending levels through October 31st. Since then, one more bill (Agriculture) has been enacted and a couple more are ready for the President to sign (Energy and Water, and Homeland Security).
So with a week left in budgetary overtime, eight bills remain, including enormous, critical spending bills like Defense and Labor-Health and Human Services-Education.
You might think, what’s the big deal? So government operates for a while under another stopgap continuing resolution that provides funding at last year’s levels? So what? Well for one thing, it becomes more likely we’ll end up with a dreaded “omnibus” – combining all of the spending bills into one massive, must-pass kitchen sink package that becomes a treasure trove of giveaways and is almost impossible to analyze.
The budgetary delay also has an enormous impact on federal agencies. It paralyzes operations, staff cannot be hired, travel and training is stopped, and this continues for a while even after the bill is finally signed. It takes a while for the actual budget numbers to trickle down through the various departments and agencies, leaving managers in the ridiculous position of catching up with a twelve month budget in nine or ten months.
As an example, for years veterans’ groups have complained about how budget delays negatively impact the delivery of services for needy vets. In an effort to deal with this, the President recently signed legislation requiring portions of the Department of Veterans Affairs budget be funded a year in advance to ensure continuity and predictability. Many in Congress and the administration claimed this was a victory for veterans, but in reality it was more about budgetary failures in Washington. Instead of facing the problems, Congress just threw their hands in the air and gave up.
There are no good excuses. Budgetary delays happen under both parties, with mixed or single-party control in the House, Senate and White House. This year, with healthy Democratic majorities in the House and the Senate, and a Democrat in the White House, cries of Republican intransigence are just a red herring. The House crammed their spending bills through (by limiting amendments and debate), but in the Senate five spending bills still have not been passed even though all but Defense were approved in committee before the August recess. And it’s not like the Senate floor has been bogged down by major legislation. Health care reform hasn’t seen the floor of either chamber, but legislation has gone through naming dozens of Post Offices, awarding golfer Arnold Palmer the Congressional Gold Medal, and establishing a Ronald Reagan Centennial Commission.
Lawmakers are fond of pointing out that the Constitution gave Congress the power of the purse and they rightfully guard that power. But as Spiderman’s Uncle Ben pointed out, with great power comes great responsibility. It’s not like the fiscal year sneaks up on anyone, but still Congress usually finishes the work a couple months late. How about they adopt a New Fiscal Year’s Resolution to get started on FY2011 early and pull a few purse strings to get government funded on time.
Going on at Taxpayer.net This Week
UPDATE: Congress Passes Final $42.8 DHS Approps Bill
Contractor Accountability Legislation in Defense Authorization
Watchdogs to Defense Secretary Gates: Tell Congress Earmarks Cannot be Tolerated
UPDATE: Fiscal Year 2010 Earmark Databases – Senate Defense Added (9/24)
Bailout Transparency Continues to Fall Short
Bailout Bank Bios
TCS Staff are compiling profiles of all financial institutions receiving funds under the 2008 Emergency Economic Stabilization Act. See all completed bios here.
TCS in the News
TCS was cited in dozens of stories this past week. Check them all out in the Headlines About TCS section of our redesigned website
Current Action Items
Stop Billions in Treasury-Backed Loan Guarantees for Risky Energy Projects
Stop Subsidizing Wealthy Companies
Not Saving Salmon Could Cost Taxpayers
“The adrenaline is all moving now and then there’ll be a let-down, and I don’t know if people are going to be excited about tackling another great big complicated thing right away, I mean, this Congress hasn’t tackled hardly any big thorny policy issues for a long, long time. Two in 12 months? I think that that would be remarkable. And I’m not holding my breath.”
-Sen. Claire McCaskill (D-MO) on the potential for passing climate change legislation after addressing health care reform, Congress Daily
Got a quote or article about wasteful spending you think should be featured in the wastebasket? Send us your ideas and comments
From: weekly wastebasket at www.taxpayer.net www.taxpayer.net
Why Do Bankers Make So Much Money?
by Rick Bookstaber
A tenet of economics is that in competitive markets there are no economic rents. That is, people get fairly paid for their efforts, their capital input, and for bearing risk. They are not paid any more than is necessary as an incentive for production. In trying to understand the reason for the huge pay scale within the finance industry, we can either try to justify the pay level as being a fair one in terms of the competitive market place, or ask in what ways the financial industry deviates from the competitive economic model in order to allow economic rents.
Do the banks operate in a competitive market?
No one expects competitive levels of compensation when there are deviations from a competitive market. In what ways might the banks (and here I mean the largest banks and those banks that morphed over the past year from being investment banks ) fall away from the model of pure competition?
One way is through creating inefficiencies to keep competitive forces atbay. Banks can do this, for example, by constructing informational asymmetries between themselves and their clients. This gets into those pages of small print that you see in various investment and loan contracts. What we might call gotcha clauses and what the banks call revenue enhancers. And it also gets into the use of complex derivatives and other innovative products that are hard for the clients to understand, much less price.
Another way is to misprice risk and push it into other parts of the economy. The fair economic payoff increases with the amount of risk taken. If a bank takes on more risk it should get a higher expected payoff. If the bank can get paid as if it is taking on risk while actually pushing the risk onto someone else, then it will start to pull in economic rents. The use of innovative products comes up again in this context. They provide a vehicle for the banks to push risk to others at a less than fair price. Or, they can push the risk onto the taxpayers by hiding the risk and then invoking the too-big-to-fail protections when it comes to be realized. The current “heads I win, tails you lose” debate centers precisely on this point.
A third, and most obvious reason banks might not be economically competitive entities is the organization of the industry. There are barriers to entry. No one can just decide to set up a major bank. And there are constraint in the amount of business any one bank can do. As we have seen with Citigroup, there finally are diseconomies of scale ? after a point the communication and management issues make the bank less efficient and more prone to crisis. If there is fixed supply, then the banks can push up the price of their services. The crisis over this past year has made matters worse. If you are one of those still standing, you are a beneficiary of that crisis, which has choked off the supply even further.
Are the workers getting paid fairly for their efforts?
An alternative to the idea that the industry is not competitive is that the industry really is competitive and those who are getting these outsized paychecks are being fairly compensated for their efforts. This comes back to the term we hear bandied about in conversations on banker compensation: talent.
There is no denying there are many smart people in the banking industry. (Though I think from a social welfare standpoint, we might have done better if some of those physicist and mathematicians that populate the ranks of the banks had found greener pastures in, say, the biological sciences). But I don?t buy the notion that there are so many who have the level of talent that justifies tens and even hundreds of million in compensation. I think this level of compensation, and the notion of talent behind it, is the result of the inherent uncertainty in the financial enterprise, one that makes it very difficult to assess talent. Indeed, I think the invocations of talent for money producers in finance are akin to those that, in times past, were set aside for the mystical powers of saints and witches.
Far more than other fields of endeavor, it is difficult in finance to tell if someone is good or lucky. A top trader or hedge fund manager might have a Sharpe Ratio of 1.0 or 2.0. But that Sharpe Ratio is nothing less that a statement that if you get a hundred people trading, a few will do well just by luck. (And it doesn’t matter if that Sharpe Ratio occurred over the period of one year or twenty though the greater sample size helps, it is still the same point in terms of statistical inference, so a long track record does not get you away from this problem).
How does this tie in with saints and witches? People want certainty, and if they can?t get the certainty they want from the empirical, they fall back on superstition and witchcraft, or at least they used to way back when. In some medieval village, a priest prayed and a supplicant was healed. The odds that the supplicant would have healed spontaneously was whatever it was, but it provided more of a sense of certainty to feel that it was the manifestation of healing power.
There were false saints and true saints, which became manifest over time by how frequently the prayers were answered with affirmative results. Not that any saint had to bat a thousand. Sometimes there were understandable, exogenous circumstances that inhibited the saint?s healing talents from being operative, most commonly a lack of righteousness on the part of the supplicant, occasionally an inevitability, a higher power that overshadowed that of the saint. Maybe the will of God, maybe an unknown, evil curse.
I hope the analogy is apparent. And there is a related one, an analogy to Pascal’s Wager. The bank should wager that the talent of its star employee exists, because it has much to gain over time if it does, while if it does not exist, the bank will lose little in expected terms. And in a competitive world, it is even worse if they incorrectly let the talent go for lack of proper compensation, because then some competitor will pick it up.
Complete article at:
Book by Richard Bookstaber
A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation ~ Richard Bookstaber
How Moody’s sold its ratings – and sold out investors
By Kevin G. Hall
WASHINGTON — As the housing market collapsed in late 2007, Moody’s Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.
A McClatchy investigation has found that Moody’s punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.
Instead, Moody’s promoted executives who headed its “structured finance” division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: “toxic assets.”
As Congress tackles the broadest proposed overhaul of financial regulation since the 1930s, however, lawmakers still aren’t fully aware of what went wrong at the bond rating agencies, and so they may fail to address misaligned incentives such as granting stock options to mid-level employees, which can be an incentive to issue positive ratings rather than honest ones.
The Securities and Exchange Commission issued a blistering report on how profit motives had undermined the integrity of ratings at Moody’s and its main competitors, Fitch Ratings and Standard & Poor’s, in July 2008, but the full extent of Moody’s internal strife never has been publicly revealed.
Moody’s, which rates McClatchy’s debt and assigns it quite low value, disputes every allegation against it. “Moody’s has rigorous standards in place to protect the integrity of ratings from commercial considerations,” said Michael Adler, Moody’s vice president for corporate communications, in an e-mail response to McClatchy.
Insiders, however, say that wasn’t true before the financial meltdown.
“The story at Moody’s doesn’t start in 2007; it starts in 2000,” said Mark Froeba, a Harvard-educated lawyer and senior vice president who joined Moody’s structured finance group in 1997.
“This was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy-and-quality oriented (culture), a getting-the-rating-right kind of culture, with a culture that was supposed to be ‘business-friendly,’ but was consistently less likely to assign a rating that was tougher than our competitors,” Froeba said.
After Froeba and others raised concerns that the methodology Moody’s was using to rate investment offerings allowed the firm’s profit interests to trump honest ratings, he and nine other outspoken critics in his group were “downsized” in December 2007.
“As a matter of policy, Moody’s does not comment on personnel matters, but no employee has ever been let go for trying to strengthen our compliance function,” Adler said.
Moody’s was spun off from Dun & Bradstreet in 2000, and the first company shares began trading on Oct. 31 that year at $12.57. Executives set out to erase a conservative corporate culture.
To promote competition, in the 1970s ratings agencies were allowed to switch from having investors pay for ratings to having the issuers of debt pay for them. That led the ratings agencies to compete for business by currying favor with investment banks that would pay handsomely for the ratings they wanted.
Wall Street paid as much as $1 million for some ratings, and ratings agency profits soared. This new revenue stream swamped earnings from ordinary ratings.
“In 2001, Moody’s had revenues of $800.7 million; in 2005, they were up to $1.73 billion; and in 2006, $2.037 billion. The exploding profits were fees from packaging . . . and for granting the top-class AAA ratings, which were supposed to mean they were as safe as U.S. government securities,” said Lawrence McDonald in his recent book, “A Colossal Failure of Common Sense.”
He’s a former vice president at now defunct Lehman Brothers, one of the highflying investment banks that helped create the global crisis.
From late 2006 through early last year, however, the housing market unraveled, poisoning first mortgage finance, then global finance. More than 60 percent of the bonds backed by mortgages have had their ratings downgraded.
“How on earth could a bond issue be AAA one day and junk the next unless something spectacularly stupid has taken place? But maybe it was something spectacularly dishonest, like taking that colossal amount of fees in return for doing what Lehman and the rest wanted,” McDonald wrote.
Ratings agencies thrived on the profits that came from giving the investment banks what they wanted, and investors worldwide gorged themselves on bonds backed by U.S. car loans, credit card debt, student loans and, especially, mortgages.
Before granting AAA ratings to bonds that pension funds, university endowments and other institutional investors trusted, the ratings agencies didn’t bother to scrutinize the loans that were being pooled into the bonds. Instead, they relied on malleable mathematical models that proved worthless.
“Everyone else goes out and does factual verification or due diligence. The credit rating agencies state that they are just assuming the facts that they are given,” said John Coffee, a finance expert at Columbia University. “This system will not get fixed until someone credible does the necessary due diligence.”
Nobody cared about due diligence so long as the money kept pouring in during the housing boom. Moody’s stock peaked in February 2007 at more than $72 a share.
Billionaire investor Warren Buffett’s firm Berkshire Hathaway owned 15 percent of Moody’s stock by the end of 2001, company reports show. That stake, largely still intact, meant that the Oracle from Omaha reaped huge financial rewards while Moody’s overlooked the glaring problems in pools of subprime mortgages.
A Berkshire spokeswoman had no comment.
One Moody’s executive who soared through the ranks during the boom years was Brian Clarkson, the guru of structured finance. He was promoted to company president just as the bottom fell out of the housing market.
Several former Moody’s executives said he made subordinates fear they’d be fired if they didn’t issue ratings that matched competitors’ and helped preserve Moody’s market share.
Froeba said his Moody’s team manager would tell his team that he, the manager, would be fired if Moody’s lost a single deal. “If your manager is saying that at meetings, what is he trying to tell you?” Froeba asked.
In the 1990s, Sylvain Raynes helped pioneer the rating of so-called exotic assets. He worked for Clarkson.
“In my days, I was pressured to do nothing, to not do my job,” said Raynes, who left Moody’s in 1997. “I saw in two instances — two deals and a rental car deal — manipulation of the rating process to the detriment of investors.”
When Moody’s went public in 2000, mid-level executives were given stock options. That gave them an incentive to consider not just the accuracy of their ratings, but the effect they’d have on Moody’s — and their own — bottom lines.
“It didn’t force you into a corrupt decision, but none of us thought we were going to make money working there, and suddenly you look at a statement online and it’s (worth) hundreds and hundreds of thousands (of dollars). And it’s beyond your wildest dreams working there that you could make that kind of money,” said one former mid-level manager, who requested anonymity to protect his current Wall Street job.
Moody’s spokesman Adler insisted that compensation of Moody’s analysts and senior managers “is not linked to the financial performance of their business unit.”
Clarkson couldn’t be reached to comment.
Clarkson’s own net worth was tied up in Moody’s market share. By the time he was pushed out in May 2008, his compensation approached $3 million a year.
Clarkson rose to the top in August 2007, just as the subprime crisis was claiming its first victims. Soon afterward, a number of analysts and compliance officials who’d raised concerns about the soundness of the ratings process were purged and replaced with people from structured finance.
“The CEO is from a structured finance background, most of the people in the leadership were from a structured finance background, and it was putting their people in the right places,” said Eric Kolchinsky, a managing director in Moody’s structured finance division from January 2007 to November 2007, when he was purged, he said, for questioning some of the ratings. “If they were serious about compliance, they wouldn’t have done that, because it isn’t about having friends in the right places, but doing the right job.”
Another mid-level Moody’s executive, speaking on the condition of anonymity for fear of retribution, recalls being horrified by the purge.
“It is just something unthinkable, putting business people in the compliance department. It’s not acceptable. I was very upset, frustrated,” the executive said. “I think they corrupted the compliance department.”
One of the new top executives was Michael Kanef, who was experienced in assembling pools of residential mortgage-backed securities, but not in compliance, the division that was supposed to protect investors.
“What signal does it send when you put someone who ran the group that assigned some of the worst ratings in Moody’s history in charge of preventing it from happening again,” Froeba said of Kanef. Clarkson and Kanef, who remains at Moody’s, were named in a class-action lawsuit alleging that Moody’s misled investors about its independence from companies that paid it for ratings.
Kanef went after Scott McCleskey, the vice president of compliance at Moody’s from the spring of 2006 until September 2008, and the man that Moody’s said was the one to see for all compliance matters.
“It’s speculation, but I think Scott was trying to get people to follow some rules and people weren’t ready to accept that there should be rules,” Kolchinsky said.
McCleskey testified before the House of Representatives Oversight and Government Reform Committee on Sept. 30 and described how he was pushed out on the heels of the people he’d hired.
“One hour after my departure, it was announced that I would be replaced by an individual from the structured finance department who had no compliance experience and who, to my recollection, had been responsible previously for rating mortgage-backed securities,” McCleskey testified.
His replacement, David Teicher, had no compliance background. SEC documents describe him as a former team director for mortgage-backed securities from 2006 to 2008.
McCleskey had raised concerns about the integrity of the ratings process, and Moody’s had excluded him from meetings in January 2008 with the Securities and Exchange Commission about the eroding quality of pools of subprime loans that Moody’s had blessed with top ratings.
SEC officials, however, didn’t bother to seek out McCleskey, even though he was the “designated compliance officer” in company filings with the agency. The SEC maintains that its officials met with Kanef because he was McCleskey’s superior.
SEC spokesman Erik Hotmire said that officials met with Kanef because “we ask to interview whomever we determine is appropriate.”
Another former Moody’s executive, requesting anonymity for fear of legal action by the company, said the agency might’ve understood what was going wrong better if it had talked to the hands-on compliance officials.
“If they had known he’d (Kanef) come from structured finance, the conflict of having him in that position should have been evident from the start,” the former executive said.
Others who worked at Moody’s at the time described a culture of willful ignorance in which executives knew how far lending standards had fallen and that they were giving top ratings to risky products.
“I could see it coming at the tail end of 2006, but it was too late. You knew it was just insane,” said one former Moody’s manager. “They certainly weren’t going to do anything to mess with the revenue machine.”
Moody’s wasn’t alone in ignoring the mounting problems. It wasn’t even first among competitors. The financial industry newsletter Asset-Backed Alert found that Standard & Poor’s participated in 1,962 deals in 2006 involving pools of loans, while Moody’s did 1,697. In 2005, Standard & Poor’s did 1,754 deals to Moody’s 1,120. Fitch was well behind both.
“S&P is deeply disappointed in the performance of its ratings on certain securities tied to the U.S. residential real estate market. As far back as April of 2005, S&P warned investors about increased risks in the residential mortgage market,” said Edward Sweeney, a company spokesman. S&P revised criteria and demanded greater buffers against default risks before rating pools of mortgages, he said.
Still, S&P continued to give top ratings to products that analysts from all three ratings agencies knew were of increasingly poor quality. To guard against defaults, they threw more bad loans into the loan pools, telling investors they were reducing risk.
The ratings agencies were under no legal obligation since technically their job is only to give an opinion, protected as free speech, in the form of ratings.
“As an analyst, I wouldn’t have known there was a compliance function. There was an attitude of carelessness, or careless ignorance of the law. I think it is a result of the mentality that what we do is just an opinion, and so the law doesn’t apply to us,” Kolchinsky said.
Experts such as Columbia University’s Coffee think that Congress must impose some legal liability on credit rating agencies. Otherwise, they’ll remain “just one more conflicted gatekeeper,” and the process of pooling loans — essential to the flow of credit — will remain paralyzed and economic recovery restrained.
“If (credit) remains paralyzed, small banks cannot finance the housing demand. They have to take them (investment banks) these mortgages and move them to a global audience,” said Coffee. “That can’t happen unless the world trusts the gatekeeper.”
(This article is part of an occasional series on problems in mortgage finance.)
Complete article at:
State Rankings (energy rankings)
Thursday, October 22, 2009
State Rankings (10/22/2009) http://tonto.eia.doe.gov/state/state_energy_rankings.cfm tonto.eia.doe.gov
EIA has released 12 new State Rankings pages that display charts and maps ordered by data value. The rankings cover energy production, consumption, and price, as well as carbon dioxide emissions from electric power plants, as follows:
Total Energy Production
Crude Oil Production
Natural Gas Marketed Production
Total Net Electricity Generation
Carbon Dioxide Emissions by Electric Power Producers
Total Energy Per Capita
No. 2 Heating Oil Residential Prices
Motor Gasoline Retail Prices
No. 2 Diesel Fuel Retail Prices
Natural Gas Residential Prices
Electricity Residential Prices
Great Power Confrontation in the Indian Ocean: The Geo-Politics of the Sri Lankan Civil War
By Mahdi Darius Nazemroaya
Global Research, October 23, 2009
The support and positions of various foreign governments in regards to the diabolic fighting between the Tamil Tigers and the Sri Lankan military, which cost the lives of thousands of innocent civilians, says a great deal about the geo-strategic interests of these foreign governments. The position of the governments of India and a group of states that can collectively be called the Periphery, such as the U.S. and Australia, were in support of the Liberation Tigers of Tamil Ealam (LTTE) or Tamil Tigers, either overtly or covertly. Many of these governments also provided this support tacitly, so as not to close any future opportunity of co-opting Sri Lanka after the fighting was over.
In contrast, the governments of a group of states that can jointly be called Eurasia as a collective entity, such as Iran and Russia, supported the Sri Lankan government. The polar nature of the support by Eurasia and the Periphery for the two different combating sides in the Sri Lankan Civil War betrays the scent or odour of a much broader struggle. This is a struugle that extends far beyond the borders of the island of Sri Lanka and its region.
Why is this so? Much of the answer to such a question has to do with the formation of a growing alliance in the Eurasian landmass against the international domination of the U.S. and its allies. This Eurasian alliance was formed on the basis of the growing cohesion between Moscow, Tehran, Beijing, and their allies that has seen the animation of the Primakov Doctrine. The Shanghai Cooperation Organization (SCO), a security body with real military dimensions that has been called “the NATO of the East” within some foreign policy circles is a real symbol of this geo-political dynamic. In 2009, the last chapter of the Sri Lankan Civil War was very much a theatre within this process.
Enter the Chinese Dragon: The start of Sri Lankan Estrangement from the U.S. and India
2007 was a milestone year for Sri Lanka. On March 12, 2007, Colombo agreed to allow the Chinese to build a massive naval port on its territory, at Hambantota. An agreement on the construction of the port was finalized and signed by the Sri Lankan Port Authority with two Chinese companies, the China Harbor Engineering Company and the Sino Hydo Corporation.  The Sri Lankan government’s decision was mostly formed on the basis of economic benefits and Chinese support to end the fighting on their island.
What followed was the estrangement of Sri Lanka from the U.S. and India. It has been a U.S. policy to encircle China and to prevent it from building any ports or bases outside of Chinese territory. As a result, the U.S. shortly cut its military assistance to the Sri Lankan military.  Indian support for the Tamil Tigers also increased through pressure on Colombo to make Sri Lanka a federal state with autonomy for the Tamils. Beijing threw its political weight behind Colombo and also began sending large arms shipments to Sri Lanka. As an additional comparison, Chinese aid to Sri Lanka in 2008 was about a billion U.S. dollars, while U.S. aid was only 7.4 million U.S. dollars. 
It is from 2007 onward that Sri Lanka became a part of the alliance in Eurasia through its agreement with China and its subsequent estrangement from the U.S. and India. By the end of 2007, Sri Lanka had entrenched itself in the geo-strategic trenches with Russia, Iran, and China. These reasons and not humanitarian concern(s) are the primary rationale for support provided, in one way or another, to the Tamil Tigers by the governments of India, the U.S., Britain, Japan, Australia, Canada, and the European Union.
Sri Lankan Military ties to the Moscow-Beijing-Tehran Axis
Chinese military ties with Sri Lanka started in the 1990s, but it was in 2007 that Chinese and Sri Lankan military relations started to flower. According to Brahma Chellaney of the Centre for Policy Research in New Delhi, India: “China’s arms sales [were] the decisive factor in ending the military stalemate [in the Sri Lankan Civil War.]”  In April, just one month after the 2007 agreement between the Sri Lankan Port Authority and both the China Harbor Engineering Company and the Sino Hydo Corporation, China signed a major ammunition and ordnance deal with the Sri Lankan military.  Beijing also transferred, free of charge, several military jets to the Sri Lankan military, which were decisive in defeating the Tamil Tigers. 
Iran and Russia also began to rapidly develop their military ties with Sri Lanka after Colombo agreed to host the Chinese port in Hambantota. In this regard, Beijing, Moscow, and Tehran all have cooperation and military agreements with Sri Lanka. The visits of Sri Lankan leaders and military officials to Tehran, Moscow, and Beijing in 2007 and 2008 were all tied to Sri Lankan preparations to militarily disarm the Tamil Tigers with the help of these Eurasian states.
China, Russia, and Iran all ultimately helped arm the Sri Lankan military before the last phase of the Sri Lankan Civil War. For the Eurasian alliance the aim of ending the Sri Lankan Civil War was to ensure the materialization of the Chinese port and to prevent any possibility of regime change in Colombo, which would ensure the continuity of a Sri Lankan government allied to China, Russia, and Iran. Along with Sri Lankan officials, the governments of Iran, Russia, and China believed that unless the Tamil Tigers were neutralized as a threat that the U.S. and its allies, in possible league with India, could make attempts to overthrow the Sri Lankan government in order to nullify the Sri Lankan naval port agreement with China and to remove Sri Lanka from the orbit of Eurasia. In this context, they all threw their weight behind Sri Lanka during the fighting in 2009 and in the case of China and Russia at the U.N. Security Council.
Associated Press (AP) reported on December 23, 2007:
In the wake of the United States Senate slashing military assistance to Sri Lanka, the Russian Federation has stepped in to fill the vacuum, sending the first ever top level military delegation to Colombo to discuss military cooperation. A high level Russian military delegation led by [Colonel-General] Vladimir Moltenskoy last week met Defence Secretary Gotabhaya Rajapaksa, Army Commander [Lieutenant-General] Sarath Fonseka and Air Force Commander, Roshan Goonathilake and had visited several major military installations in the island. [Colonel-General] Molpenskoy, a veteran combat General in the Russian Army was formerly the operational commander of the Russian Forces in Chechnya. 
The Russian Federation, China, and Iran also all face their own separatist movements like Sri Lanka. All four nations see these movements as being supported by outside players for geo-strategic reasons. In 2007, not only did Moscow, like China, move in to fill the vacuum of military supplies left by the U.S. government after Sri Lanka agreed to build the Chinese naval port; the Kremlin also sent Colonel-General Vladimir Moltenskoy who oversaw the Russian military campaign against the separatist movement in Chechnya. Moltenskoy arrived in Sri Lanka as a military advisor to Colombo.
The aid of Tehran was also crucial for the Sri Lankan military. The Island, a Sri Lankan news source reported: “Iran had come to Sri Lanka’s rescue (…) when an LTTE [or Tamil Tiger] offensive had threatened to overwhelm the [Sri Lankan] army in Jaffna [P]eninsula. Sources said that several plane loads of Iranian [military] equipment were made available immediately after Sri Lanka sought assistance from the Iranian leadership.”  The Island also reported, before the arrival of a high level Iranian military delegation to Sri Lanka in 2009, that Iran, which is “widely believed to [sic.; be] a leading strategist in” the use of tactical boats, and Sri Lanka “have over the year developed strategies relating to small [tactical] boat operations.” 
The extent of the help Iran, Russia, and China provided to Sri Lanka also included economic support within the framework of the Sri Lankan military preparations leading to the assaults on the Tamil Tigers in 2009. The Hindu on September 21, 2009 published an article partially revealing the depth of the level and importance of the help that Sri Lanka had been receiving from Iran alone:
Iran has extended by another year the four-month interest-free credit facility granted to Sri Lanka after President Mahinda Rajapaksa’s visit to Iran in November 2007, state-run Daily News reported on Monday.
It said that consequent to talks with Iranian President Mahmoud Ahmadinejad, the Iranian government granted the facility from January 2008 to August 31.
In 2008, Sri Lanka imported crude oil under this facility to the tune of $1.05 billion, nearly all of its requirements, easing the pressure on the country’s foreign exchange requirements in a year of significance for the government’s war with the LTTE [or the Tamil Tigers].
An additional three-month credit package at a concessionary rate of interest was also accommodated in Sri Lanka’s favour on September 3  at a meeting between the representatives of the countries in Tehran. 
Chinese Naval Interests and Energy Security Concerns and Sri Lanka
Why a Chinese port in Sri Lanka? Why in Sri Lanka of all places? Sri Lanka is situated at a vital maritime corridor in the Indian Ocean. This position is at a vital juncture in the maritime shipping paths of the Indian Ocean that is important for trade, security, and energy supplies. This is why Moscow, Tehran, and Beijing stand behind Colombo.
The Chinese naval port under construction and at Hambantota is part of a New Cold War to secure energy routes.  Most of the energy supplies going to Asia pass the southern tip of Sri Lanka. It is for this reason that the Chinese have included Sri Lanka within their project of establishing a chain of naval bases in the Indian Ocean to protect their energy supplies coming from the Middle East and Africa. Myanmar (Burma) is also part of this project and in many cases the pressure on the governments in both states is linked to their agreements to build Chinese ports with Beijing.
In league with China, Iran also has naval ambitions in Sri Lanka and the broader Indian Ocean as part of an initiative to protect the maritime routes between itself and China. China and Iran have both been expanding their naval forces. This is part of a growing trend. The seas and bodies of water around all Eurasia from the Baltic Sea, the Black Sea, the Red Sea, the Gulf of Aden, the Persian Gulf, and the the Arabian Sea to the Bay of Bengal, the South China Sea, and the East China Sea have all been under heavy militarization over the years. In no point in history have the oceans seen such large numbers of warships at one time. This militarization process on the waves of Eurasia is ultimately tied to controlling movement and encircling the Eurasian landmass in a coming showdown.
Sri Lanka enters the Shanghai Cooperation Organization (SCO)
In 2009, Sri Lanka joined the SCO, as did Belarus. The entry of Sri Lanka into the Eurasian organization was announced at the SCO conference in Yekaterinburg, where the light was on Mahmoud Ahmadinejad following the election riots in Iran. While the SCO put its weight behind the re-election of the Iranian President, Sri Lanka thanked the organization for its collective support against the Tamil Tigers.
Both Sri Lanka and Belarus, which is also a member of the Russian-led Collective Security Treaty Organization (CSTO), entered the SCO as dialogue partners.  The entry of Sri Lanka into the SCO as a dialogue partner confirms its strategic ties and alliance with Russia, China, and Iran. Dialogue partner status in the SCO puts Sri Lanka under the umbrella of China and Russia. Although it is not spelled out in Article 14 of the SCO Charter, a dialogue partner can request protection and defensive aid under such a relationship. Dialogue partners are also financially tied to the SCO, which facilitates their integration into the coming Eurasian Union that will emerge from the cohesion of Russia, China, Iran, and their partners.
Sri Lanka and the Broader Conflict in Eurasia
In the so-called Western World double-standards were applied to the final chapter of the Sri Lankan Civil War. While the U.S. and its allies supported the military actions of Georgia to secure its territorial integrity by bringing South Ossetia and Abkhazia under its control through force in 2008 they did not do this in regards to Sri Lanka in 2009. In essence the actions of the Sri Lankan and Georgian governments were almost exactly the same: establishing government control of break-away territory through the use of military force. Yet, the reaction of the U.S. and its allies were contrastingly different in both cases. Georgia received support and Sri Lanka did not.
In addition, Georgia was legally obligated under international agreement not to use any military force to solve its internal conflict, but Sri Lanka was not. In legal terms, Abkhazia and South Ossetia, before the conflict, also enjoyed autonomous statuses within the framework of Georgia as a polity. This in no means justifies any of the deaths in Sri Lanka or the fighting in Georgia, but it does illustrate that double-standards were applied.
The reason that the U.S. and its allies supported Georgia and not Sri Lanka is tied to the encirclement of Eurasia. If there was no Chinese port being built in Sri Lanka or any ties between the Sri Lankan government and China the reaction of the U.S. government would have been much different. Most probably the American reaction would have been the same as when Israel acts against Palestinian civilians or when Saddam Hussein, as an American ally, gased the Iraqi Kurds.
The people of Sri Lanka from the Tamils to the Sinhalese are in the cross-hairs of a much larger and all enveloping global struggle. In the scenario of a possible conflict with the U.S. and the Periphery the maritime route that passes by Sri Lanka would be vital as an energy lifeline to the Chinese. The U.S. and its allies would ensure that this sea route is less secure for the Chinese by taking Sri Lanka out of the orbit of China and its allies. Even the balkanization of Sri Lanka could lead to a Tamil state that would most likely be allied to the U.S. and India, which may grant them military bases that would be in close proximity to Chinese positions in Sri Lanka.
Mahdi Darius Nazemroaya is a Research Associate of the Centre for Research on Globalization (CRG) specializing in geopolitics and strategic issues.
 Sri Lankan gov’t, Chinese companies sign port building agreement, Xinhua News Agency, March 13, 2007.
 US out, enter Russia, Associated Press (AP), December 23, 2007.
 Jeremy Page, Chinese billions in Sri Lanka fund battle against Tamil Tigers, The Times (U.K.), May 2, 2009.
 B. Muralidhar Reddy, Iran extends credit facility to Sri Lanka, The Hindu, September 21, 2009.
 Shamindra Ferdinando, High level Iranian military delegation due in Colombo, The Island, October 9, 2009.
 US out, enter Russia, Op. cit.
 Mahdi Darius Nazemroaya, The Globalization of Military Power: NATO Expansion, Centre for Research on Globalization (CRG), May 17, 2007.
 B. Muralidhar Reddy, SCO dialogue partner status for Sri Lanka, The Hindu, July 18, 2009.
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Britons believe ‘Afghan war is failing’ –An overwhelming 84 per cent believe British troops are currently losing the war in Afghanistan, as thousands march on London urging an end to the conflict.
24 Oct 2009
Almost half of the UK public believe that military victory in Afghanistan is impossible and significant majorities think British troops are not winning the war and should be withdrawn either immediately or within the next year, according to a poll published today. Just 6 per cent of those taking part in today’s poll said that British troops were winning the war, compared with 36 per cent who said they were not winning yet but eventual victory was possible, and 48 per cent who said that victory was not possible.
Complete article at:
From: CLG News
Afghan Policy a “Script” for Escalation
Friday, October 23, 2009
ELIZABETH GOULD and PAUL FITZGERALD, firstname.lastname@example.org, http://www.invisiblehistory.com
Gould and Fitzgerald recently wrote the book “Invisible History: Afghanistan’s Untold Story.” They began covering Afghanistan in 1981 for CBS and produced the documentary “Afghanistan Between Three Worlds” for PBS.
They said today: “Opinion here indicates that the administration is behind the runoff, expects Karzai to win, which will in their view legitimize the government in order that McChrystal’s request for more troops can be granted. It’s a script totally detached from reality. There’s still no real plan except the military option. Washington apparently doesn’t think public opinion in Afghanistan matters. Afghans here are all appalled by Karzai, but feel entirely left out of the process set up by the Bush gang. Afghans won’t accept the verdict on Karzai no matter which way it comes in. The government insiders here are terrified that the whole thing between Pakistan and India will soon blow wide open. They’re beginning to refocus on the regional collapse now underway but just don’t know what to do about it. …
“The focus on al Qaeda is all wrong. Queeta Shura of Mohammed Omar is now far more powerful with connections of its own in the Middle East. Their religious mission overpowers their political one and is drawing support from everywhere. The situation in the north is growing worse. Russians are very worried that a path is opening up for Taliban in the Northern provinces. Lots of fighting. Punjabi extremists are fighting in Helmand. Very bad sign that Pakistan is out of control.”
From: Institute for Public Accuracy
Book by ELIZABETH GOULD and PAUL FITZGERALD
Invisible History: Afghanistan’s Untold Story ~ Paul Fitzgerald
Right-wing media claim Obama is criticizing Fox for “tough questions” and “reporting the truth”
Several right-wing media figures have claimed that the Obama administration is criticizing Fox News because the network asks “tough questions” and is “reporting the truth.” This assertion is undermined by Fox News’ extensive history of advancing falsehoods, repeatedly passing off GOP materials as news, doctoring quotes, and frequently engaging in outrageous attacks on President Obama, such as Glenn Beck’s claim that he is a “racist” with a “deep-seated hatred for white people, or the white culture — I don’t know what it is.”
Borowitz Report – Northwest Airlines’ New Motto
Northwest’s New Motto: “We’ll Get You Within 150 Miles of There”
Launches New Sleeper ServiceTM
October 24, 2009
MINNEAPOLIS (The Borowitz Report) – Trying to make the best of what could be a public relations disaster, Northwest Airlines today unveiled a new corporate slogan, “We’ll Get You Within 150 Miles of There.”
According to Carol Foyler, a Northwest spokesperson, the new slogan “reflects our dedication to getting our passengers as close as possible to their intended destination.”
Northwest timed the announcement of their new slogan to coincide with the launch of their new Sleeper ServiceTM.
The new sleeper service provides fully reclining seats, pillows and blankets for all travelers seated in the cockpit area.
According to Ms. Foyler, “Our new Sleeper Service TM should reassure all Northwest travelers that our pilots are the best-rested in the industry.”
In a related story, the two Northwest pilots who overshot Minneapolis said they were just trying to do publicity for the movie “Amelia.”
October 27, 2009 at 7:00PM
Barnes and Noble!
Andy reads from the hilarious new anthology, SEX, DRUGS AND GEFILTE FISH.
Lexington Ave. and 86th Street, NYC
October 28, 2009 at 7:30PM
Andy appears in the great new storytelling show, RISK!
425 Lafayette Street, NYC
For tickets go to Joe’s Pub http://tickets.publictheater.org/calendar/view.asp?id=10253 tickets.publictheater.org
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