Jan 29

“The Federal Reserve’s policy of taking unorthodox steps to boost the supply of credit is essentially “printing money,” Greenlight said.”

Don’t miss:
- Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds
- Ron Paul on Glenn Beck: Destruction of the dollar


Jan. 28 (Bloomberg) — Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.

Since Einhorn was 10 years old, his grandfather has warned him that investing in bullion and gold-mining stocks was the only “sensible” thing to do given the threat of inflation and the risks of so-called fiat currencies, New York-based Greenlight said in a Jan. 20 letter to clients. The firm had never before considered buying bullion or mining-company shares.

“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”

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Jan 29


Demonstrators in Nice, France, on Thursday. (Lionel Cironneau/The Associated Press)

PARIS: A nationwide protest against Nicolas Sarkozy’s economic policies drew more than one million demonstrators into the streets of France on Thursday, in the biggest popular challenge to the president since he took office in 2007.

Related article: Huge crowds join French strikes (BBC News)

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Jan 29


US President Barack Obama arrives to speak on his economic stimulus proposal from the East Room of the White House in Washington, DC. The divided US House of Representatives on Wednesday approved an 819-billion-dollar stimulus package touted by Obama as a vital remedy to revive the ailing US economy. (AFP/Saul Loeb)

President Obama promised during his campaign that lobbyists “won’t find a job in my White House.”

Here are former lobbyists Obama has tapped for top jobs:

Eric Holder, attorney general nominee, was registered to lobby until 2004 on behalf of clients including Global Crossing, a bankrupt telecommunications firm.

Tom Vilsack, secretary of agriculture nominee, was registered to lobby as recently as last year on behalf of the National Education Association.

William Lynn, deputy defense secretary nominee, was registered to lobby as recently as last year for defense contractor Raytheon, where he was a top executive.

William Corr, deputy health and human services secretary nominee, was registered to lobby until last year for the Campaign for Tobacco-Free Kids, a non-profit that pushes to limit tobacco use.

David Hayes, deputy interior secretary nominee, was registered to lobby until 2006 for clients, including the regional utility San Diego Gas & Electric.

Mark Patterson, chief of staff to Treasury Secretary Timothy Geithner, was registered to lobby as recently as last year for financial giant Goldman Sachs.

Ron Klain, chief of staff to Vice President Joe Biden, was registered to lobby until 2005 for clients, including the Coalition for Asbestos Resolution, U.S. Airways, Airborne Express and drug-maker ImClone.

Mona Sutphen, deputy White House chief of staff, was registered to lobby for clients, including Angliss International in 2003.

Melody Barnes, domestic policy council director, lobbied in 2003 and 2004 for liberal advocacy groups, including the American Civil Liberties Union, the Leadership Conference on Civil Rights, the American Constitution Society and the Center for Reproductive Rights.

Cecilia Munoz, White House director of intergovernmental affairs, was a lobbyist as recently as last year for the National Council of La Raza, a Hispanic advocacy group.

Patrick Gaspard, White House political affairs director, was a lobbyist for the Service Employees International Union.

Michael Strautmanis, chief of staff to the president’s assistant for intergovernmental relations, lobbied for the American Association of Justice from 2001 until 2005.

Full article here: Obama finds room for lobbyists (Politico)

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Jan 28


Watch the Gaza aid appeal by the Disasters Emergency Committee rejected by the BBC and Sky

The head of the UN”s nuclear watchdog has cancelled planned interviews with the BBC in protest at the corporation’s decision not to air an emergency appeal for Gaza on behalf of the Disasters Emergency Committee.

In a statement to the Guardian, Mohamed ElBaradei, a Nobel peace prize winner, unleashed a stinging denunciation of the BBC, deepening the damage already caused by the controversy.

[ BBC accused of fakery over Barack Obama inauguration speech (Telegraph) ]

The statement, from his office at the International Atomic Energy Agency (IAEA), said the BBC decision not to air the aid appeal for victims of the conflict “violates the rules of basic human decency which are there to help vulnerable people, irrespective of who is right or wrong”.

It said the IAEA director had cancelled interviews with BBC World Service television and radio, which had been scheduled to take place at the World Economic Forum in Davos on Saturday.

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Jan 28

As many as 40 million Chinese who moved from the country to the city to find work are expected to lose their jobs this week as the New Year celebrations come to a close.


Chinese visitors celebrate the first day of the Lunar New Year festival at a park carnival in Beijing Photo: AFP

Instead of returning to work after the public holiday, many will remain in their remote rural homes, having been told not to come back.

Others will make the long journey to China’s economic heartlands only to find their source of income has evaporated.

The gloomy prediction came from an official at the Central Communist Party School, who estimated that between 20 and 30 per cent of the 130 million provincial Chinese who moved to the city for employment would find themselves obsolete.

To make matters worse, they will find no guarantee of work at home as sophisticated farming methods reduce the need for labourers and agricultural hands.

In Shanghai, the New Year was ushered in with an unparalleled pyrotechnic display as the population let off steam.

Firework sales rose by a third from last year, and it took more than 30,000 street sweepers to clear the 1,200 tonnes of debris from the streets.

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Jan 28

Insect invasion is worst in the African country in 30 years

Liberia has declared a state of emergency over a plague of caterpillars that has destroyed plants and crops and contaminated water supplies, threatening an already fragile food situation.

Tens of millions of marching caterpillars have invaded at least 80 towns and villages in central and northern Liberia, preventing some farmers from reaching their fields and causing others to flee their homes. The inch-long pests – the caterpillar life stage of the noctuid moth – have spread to neighbouring Guinea and are threatening Sierra Leone, which has set up monitoring teams along its border.

Liberia’s president, Ellen Johnson-Sirleaf, said in a televised speech on Monday night that the country’s worst plague of caterpillars in three decades had “the potential to set back our progress in the production of food and export crops”.

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Jan 28

A dozen senior bankers whose influence has shaped the financial world gave themselves pay awards valued at more than £1bn before the credit crunch spectacularly exposed the fragility of the profits they appeared to have secured for shareholders.

Although seemingly profitable during the boom, these same banks have since revealed losses, write-downs and emergency capital injections totalling more than £300bn.

In Britain, they include Barclays executives John Varley and Bob Diamond, who between them took more than £50m of awards in the past four years.

But the biggest winners were on Wall Street where Stan O’Neal – who was pushed out of Merrill Lynch in 2007 after shock losses from sub-prime mortgage investments made him one of the first high-profile casualties of the crisis – received pay, bonuses, stock and options totalling $279m (£196m) for less than nine years’ service. This is the highest amount for any Wall St executive in the Guardian’s study.

The figures are based on annual proxy statement filings in the case of US bank executives. These include a projection by the banks of the likely future value of stock and option awards. If such awards have not been cashed in they will have depreciated in value along with relevant bank share prices. Data for UK bank directors only values share-based awards that have been cashed in and therefore makes comparisons difficult.

The US bankers include Dick Fuld who presided over the collapse of Lehman Brothers – the world’s biggest ever corporate failure, which sent shockwaves throughout the global banking system last September. Fuld received annual awards totalling $191m from 1999 to 2007. The tally includes stock and options valued at the time at $111m.

Jimmy Cayne, the long-serving boss of Bear Stearns, also makes the list. Cayne received pay awards valued at $233m before Bear Stearns became the first big Wall Street investment bank to effectively fail, when it was forced to seek an emergency Federal Reserve loan in March last year.

Former US treasury secretary Hank Paulson, charged by George Bush with marshalling the $700bn taxpayer bailout efforts, had been another central Wall St figure – chairman and chief executive of Goldman Sachs – until joining the US government three years ago. Paulson’s taxpayer-funded troubled assets relief programme is in the process of handing out tens of billions of dollars each to firms including Goldmans, Morgan Stanley and Citigroup. Paulson’s pay awards from Goldmans totalled $170m over eight years.

His successor Lloyd Blankfein took home $231m over eight years. Fellow Goldman executive and later Merrill Lynch boss John Thain received $94.9m over six years, while Citigroup boss Sandy Weill and his successor Chuck Prince received $173m and $110m respectively over seven years.

Britain’s top five banks made two-year pre-tax profits of £76bn for 2006 and 2007 after credit and housing boom years combined with ever more exotic financial instruments to push their earning power to unprecedented heights.

Wednesday 28 January 2009
Simon Bowers

Source: The Guardian

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Jan 28

Investors wishing to remove their money may have to wait six months

Standard Life became the latest insurer to close the doors of its commercial property funds to immediate withdrawals yesterday, forcing more than 200,000 investors to wait as long as six months to get their hands on their money.

The Scottish insurer implemented the emergency measures yesterday morning after liquidity in six of its life and pension property funds fell to very low levels. As a result, investors who want to remove their money from Standard Life’s property funds – which have assets totalling just under £2.7bn – will be placed in a queue, and told they may have to wait as long as six months for the transaction to be processed.

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Jan 28

- House passes Stimulus without GOP help (San Francisco Chronicle):
President Obama won his first legislative victory as the House passed a $819 billion economic stimulus package Wednesday night, but his bid to woo Republicans failed to convince even a single GOP member to join Democrats to back the bill. Eleven Democrats joined the entire 177-member House GOP caucus in voting “no”…

- UBS Cuts Bonus Pool for 2008 by More Than 80% to SF2 Billion ($1.75 billion)
(After having received $59.2 billion from the government the banksters are still paying themselves bonuses.)

- Men who made £1bn as banks were bailed out (Guardian)

- IMF predicts lowest global growth in 60 years (Financial Times)

- Obama Picks Geithner And Lynn Aren’t ‘Change’ (CBS News):
The Obama administration made an exception to its ban on hiring lobbyists in nominating William Lynn, who lobbied for Raytheon, one of the military’s top contractors.

It seems exceptions are now the rule:
- Geithner’s New Chief of Staff is Former Bank Lobbyist (Wall Street Journal):
WASHINGTON — The new chief of staff to Treasury Secretary Timothy Geithner was a top lobbyist for Goldman Sachs Group Inc. until last year, and will have to recuse himself from some government duties under new White House ethics rules.

- Fed Keeps Rate as Low as Zero, Says Prepared to Buy Treasuries (Bloomberg):
Jan. 28 (Bloomberg) — The Federal Reserve left the benchmark interest rate as low as zero and said it’s prepared to purchase longer-term Treasury securities to resuscitate lending and the economy. (…to create inflation, destroy the dollar and create the greatest depression.)

- Tax Refunds Now on Hold in California (ABC News):
ABC News has learned that tax refunds are now on hold in California for the first time in state history, according to the state controller’s office.

- Bleeding banks prompt talk of new big US bailout (Reuters):
WASHINGTON, Jan 27 (Reuters) – Major U.S. banks are still hemorrhaging red ink, despite massive taxpayer aid, and President Barack Obama is under pressure to take a high-stakes political gamble — asking for another bailout.

- Warning over collapse in capital flows (Telegraph)

- Wells Fargo takes $294m Madoff hit (Financial Times)

- US houses sink at fastest rate on record (Times Online)

- Soros closes sterling shorts (Financial Times)

- Lilly May Spend $2 Billion More on Zyprexa Lawsuits (Bloomberg)

- Santander offers €1.38 bn to compensate clients hit by Madoff (Times Online)

- Pakistan predicts growth of up to 4% (Financial Times)

- ALEX BRUMMER: British taxpayers are bailing out an Indian car giant in a deal that may pleaso no one (Daily Mail)

- Japan joins world bail-out race (Financial Times)

- Car industry to fight Barack Obama’s green proposals (Telegraph):
Car industry groups are gearing up for a long fight and the likelihood of legal action against proposals by President Barack Obama to allow California and other states to set their own regulations on greenhouse gas emission from vehicles.

- Interfax: Russia suspends Kaliningrad missile plan (IHT)

- Russian stability threatened by anger over economy (Telegraph)

- Russia defence spending soars (Telegraph)

- Ahmadinejad says Obama must apologise to the Iranian people for Bush (Times Online)

- Canada set to unveil stimulus package (Financial Times)

- First Reports of MRSA Isolation in US Swine and Hog Farmers (MedPage)

- Israeli warplane bombs Gaza’s smuggling tunnels (Telegraph)

- Chief Rabbinate of Israel cuts ties with Vatican over Holocaust bishop (Times Online)

- Israeli strikes leave Blair project with major repairs (Independent)

- Co-op bans eight pesticides after worldwide beehive collapse (Guardian)

- Gates: Cash Cows of War Running Dry (Wired News)

- Study Finds High-Fructose Corn Syrup Contains Mercury (Washington Post)

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Jan 28

The world economy will shrink this year for the first time since the Second World War, warns the gloomiest forecast yet delivered by a major international institutional.

The Institute of International Finance, the global organisation of major banks, predicted an almost unprecedented collapse in world economic growth and capital flows.

It became the first major global institution to forecast a full-scale global contraction in 2009, predicting that the economy would shrink by 1.1pc.

IIF chief economist Philip Suttle said: “This is the worst period since the interwar years. The global growth backdrop is very difficult. We foresee a contraction in 2009 in the global economy of over 1pc.”

He also expects rich economies to contract by 2.1pc – the worst peacetime output since the 1930s.

Private flows of capital into the emerging world are set nearly to dry up in the next year, the IIF predicted, dropping from $928.6bn in 2007 down to $465.8bn in 2008 and then to $165.3bn the following year.

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Jan 28

The first Boeing Co. 787 airplane is assembled at the company’s manufacturing plant in Everett, Washington on May 19, 2008. Photographer: Kevin P. Casey/Bloomberg News

Jan. 28 (Bloomberg) — Boeing Co. said it plans to cut 10,000 jobs, or about 6 percent of its workforce, after a strike and program delays led to a fourth-quarter loss and a global recession began to erode demand for aircraft.

The job reductions, disclosed on a conference call today, include 4,500 that were previously announced in the commercial- plane half of Boeing’s business. Earlier the Chicago-based company reported a net loss of $56 million, or 8 cents a share, after a year-ago profit.

Boeing faces a potential increase in canceled or deferred orders this year as airlines cope with a drop in travel demand and tight credit. Almost a third of the world’s carriers are likely to defer deliveries this year, up from 8 percent three months ago, a survey released last week by UBS Investment Research showed.

The planemaker also must carry development costs on the delayed 787 Dreamliner, which is now due to reach the first customer in early 2010, about two years later than planned. An eight-week machinists strike that ended Nov. 2 added to the delays and stripped $1.8 billion from full-year earnings.

The company delivered 50 aircraft in the quarter, 70 fewer than planned, hurting revenue by $4.3 billion and setting it further behind rival Airbus SAS, the only larger commercial-plane maker. Boeing is also the second-largest defense contractor.

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Jan 27


The Israeli army has been urged to sack Rabbi Avi Ronzki over the booklet

The Israeli army’s chief rabbinate gave soldiers preparing to enter the Gaza Strip a booklet implying that all Palestinians are their mortal enemies and advising them that cruelty is sometimes a “good attribute”.

The booklet, entitled Go Fight My Fight: A Daily Study Table for the Soldier and Commander in a Time of War, was published especially for Operation Cast Lead, the devastating three-week campaign launched with the stated aim of ending rocket fire against southern Israel. The publication draws on the teachings of Rabbi Shlomo Aviner, head of the Jewish fundamentalist Ateret Cohanim seminary in Jerusalem.

(“My Fight” can be literally translated into German as “Mein Kampf” (Adolf Hitler).


Related article: UN council urged to look at Israel’s conduct in Gaza (Reuters):
Richard Falk, a special U.N. investigator sent to the Middle East by the Geneva-based U.N. Human Rights Council, has said there was evidence that Israel committed war crimes in the Gaza Strip and there should be an independent inquiry.

Falk, who is Jewish, has compared the situation in Gaza to that of the Warsaw Ghetto during the World War Two, where the Nazis systematically starved and murdered Jews. Israel denies committing any war crimes during its assault on Gaza.


In one section, Rabbi Aviner compares Palestinians to the Philistines, a people depicted in the Bible as a war-like menace and existential threat to Israel.

In another, the army rabbinate appears to be encouraging soldiers to disregard the international laws of war aimed at protecting civilians, according to Breaking the Silence, the group of Israeli ex-soldiers who disclosed its existence. The booklet cites the renowned medieval Jewish sage Maimonides as saying that “one must not be enticed by the folly of the Gentiles who have mercy for the cruel”.

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Jan 27

There’s still a lot of blue sky in Boeing’s plans for directed-energy weapons like the Laser Avenger. (Credit: Boeing)

Updated 2:40 p.m. with details on how the laser damaged the UAV and on the Laser Avenger’s targeting system.

Boeing is seeing a glimmer of progress in its work toward fielding laser weapons.

The defense industry giant on Monday said tests of its Laser Avenger system in December marked “the first time a combat vehicle has used a laser to shoot down a UAV,” or unmanned aerial vehicle. In the testing, the Humvee-mounted Laser Avenger located and tracked three small UAVs in flight over the White Sands Missile Range in New Mexico and knocked one of the drone aircraft out of the sky.

Boeing didn’t go into much detail about the shoot-down. In response to a query by CNET News, it did say this much about the strike by the the kilowatt-class laser: “A hole was burned in a critical flight control element of the UAV, rendering the aircraft unflyable.”

While decades of Hollywood imagery may conjure up a vision of a target disintegrating in a sparkle of light, the actual workings of the laser beam are probably more prosaic. For instance, the beam from Boeing’s much, much larger Airborne Laser, which is intended to disable long-range missiles in flight, uses heat to create a weak spot on the skin of the missile, causing it to rupture in flight. Boeing hopes to conduct the first aerial shoot-down test with the much-delayed 747-based Airborne Laser later this year.

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Jan 27

Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars.

In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

Related article: Credit Crisis Hits Poorer Nations Harder As They Barter for Food (Washington Independent)

The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

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Jan 27

ACTORS and directors have warned the BBC they will not work for the corporation again if it does not broadcast the Gaza charity appeal.

In a letter written to Mark Thompson, the BBC’s director-general, the actors Tam Dean Burn and Pauline Goldsmith, and the directors Peter Mullan and Alison Peebles, said they were “appalled” by the refusal to show the Disasters Emergency Committee (DEC) appeal.

Their ultimatum came as the satellite broadcaster Sky also decided yesterday it would not screen the DEC film. Like the BBC, it said it wanted to protect the impartiality of its news reports.

Related article: Tony Benn to BBC: If you won’t broadcast the Gaza appeal then I will myself

Gaza is in the grip of a humanitarian crisis, with its 1.5 million population urgently needing food, water, medicine and shelter, after Israel’s three-week assault.

The BBC said yesterday it had received about 15,000 complaints about its decision not to screen the appeal for the DEC, which represents several charities.

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Jan 27

- President Obama leads US drive to topple Robert Mugabe in Zimbabwe (Times Online)

- Halliburton to pay record $559m to settle bribery case (Times Online)

- Citigroup going through with $50 mln plane order-source (Reuters):
NEW YORK, Jan 26 (Reuters) – Citigroup Inc (C.N), which has received $45 billion of capital from the U.S. government, is going through with plans to buy a $50 million jet but a U.S. senator called the deal absurd and wants the Obama administration to block it.

- OBAMA & CONGRESS BLAST CITI OVER JET (New York Post)

- Week of mass strikes set to paralyse France in protest against against Sarkozy’s reforms (Guardian):
Nicolas Sarkozy this week faces the first mass-protests over his handling of the financial crisis as unions prepare to paralyse France in a general strike uniting train-drivers, air traffic controllers, journalists, bank staff and even ski-lift operators. “Black Thursday” is the first general strike since the French president’s election in 2007. All the leading unions have joined forces to protest that the government’s stimulus plans should focus less on companies and more on workers’ job-protection and purchasing power.

- AP IMPACT: US bets execs can save banks, this time (AP):
WASHINGTON (AP) — It’s one of the ironies of the U.S. financial bailout: The banking executives now managing billions in taxpayer money are the same ones who oversaw the industry’s near collapse.

A Russian billionaire who apparently fell out with the Kremlin over his tax bill has become the latest oligarch to flee Russia and start a new life of exile in Britain.

- Mobile phone oligarch flees Russia for new life in Britain (Guardian):
A Russian billionaire who apparently fell out with the Kremlin over his tax bill has become the latest oligarch to flee Russia and start a new life of exile in Britain.

- Nomura posts $3.8bn fourth quarter loss (Financial Times)

- Tata’s Corus to Cut 3500 Jobs in UK, Netherlands (Bloomberg):
Jan. 26 (Bloomberg) — Corus, Europe’s second-largest steelmaker, will cut 3,500 jobs as it reduces production following a collapse in demand from builders and carmakers.

- Corning slashes 3500 jobs (CNN Money):
NEW YORK (CNNMoney.com) — High-tech glass and ceramics maker Corning Inc. announced Tuesday it will cut 3,500 jobs, or 13% of the company’s workforce, by the end of 2009.

- IBM cutting over 2800 jobs, labor group says (MarketWatch)

- South Carolina unemployment rate rises to 9.5 percent in Dec. (Forbes)

- NY financier Cosmo held on Ponzi scheme charge (Reuters)

- UN crime chief says drug money flowed into banks (Reuters)

- UN Official Wants to Prosecute Bush, Rumsfeld for Torture (The New American)

- Police report crime spikes related to economy (USA Today)

- Google plans to make PCs history (Guardian):
Google is to launch a service that would enable users to access their personal computer from any internet connection, according to industry reports. But campaigners warn that it would give the online behemoth unprecedented control over individuals’ personal data.

- 93-year-old froze to death, owed big utility bill (AP):
BAY CITY, Mich. – A 93-year-old man froze to death inside his home just days after the municipal power company restricted his use of electricity because of unpaid bills, officials said. Marvin E. Schur died “a slow, painful death,” said Kanu Virani, Oakland County’s deputy chief medical examiner, who performed the autopsy.

- Forecasters see historic drop in retail sales (MSNBC)

- Pelosi says birth control will help the US economy (Telegraph)

- IMF chief turns up heat on China over yuan (Times Online):
The head of the International Monetary Fund turned up the heat on China over its exchange rate policies yesterday, arguing that it was clear that the Chinese yuan was “significantly undervalued”.

- Global recession costs 80,000 jobs a day (Guardian)

- Israeli soldier and Palestinian killed (Guardian)

- Tony Benn:Liberty is crucial to democracy (Guardian):
This is not an issue of left or right – we must all ensure that government doesn’t rule over people but serves them

- Turritopsis nutricula: the world’s only ‘immortal’ creature (Times Online)

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Jan 27


The headquarters of mortgage lender Fannie Mae is shown in Washington September 8, 2008. REUTERS

NEW YORK (Reuters) – Fannie Mae and Freddie Mac could tap the government for up to $51 billion in coming weeks, exceeding some Wall Street estimates, so they can continue to operate as the largest providers of funding for U.S. residential mortgages.

The storm of rising delinquencies and falling securities values that led to the government’s seizure of the companies in September accelerated in the last quarter, requiring Fannie Mae and Freddie Mac to seek more of the stop-gap measures organized by the U.S. Treasury and their regulator. Analysts predicted more capital needs from Treasury through 2009.

Fresh losses in the most recent quarter will probably be the harshest on Freddie Mac, which holds a larger portfolio of risky mortgage securities, including subprime bonds. The McLean, Virginia-based company said on Friday it may have to seek $30 billion to $35 billion in capital from the Treasury in the form of senior preferred stock.

Washington-based Fannie Mae said late on Monday that the Federal Housing Finance Agency, the regulator, may request $11 billion to $16 billion, based on estimates for fourth-quarter results.

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Jan 27

ISRAELI soldiers fighting in the Gaza Strip offensive this month were ordered to kill themselves rather than be captured, and if necessary to kill any Israeli soldier they saw being taken into captivity, the Yediot Achronot newspaper has reported.

“No matter what happens, no one will be kidnapped,” the paper quotes one company commander telling his troops before the fighting began. “We will not have a Gilad Shalit 2.”

Corporal Shalit, the Israeli soldier taken prisoner three years ago, is being held by Hamas, which is demanding the release of more than 1000 Palestinian prisoners, including hundreds convicted of terrorism, in exchange for his release.

The newspaper quotes similar orders given in different Israeli field units, which reportedly reflect a new army policy.

In the past, there were standing orders, known as “Hannibal mode”, for firing at a vehicle taking Israeli troops into captivity to disable it and permit a rescue team to reach it, even at risk to the captive soldiers inside the vehicle. The new orders tighten those instructions, reportedly by permitting the vehicle to be blown up.

A soldier in a commando unit that operated behind Hamas lines said his unit was equipped with “special weapons”. “We were instructed to use them also against any vehicle carrying a kidnapped soldier,” he said.

And an Israeli company commander told the newspaper he had instructed his men to resist being taken prisoner “even if this costs you your life”.

Israel’s Channel Ten television station broadcast a recording of a battalion commander instructing his men just before they invaded the Gaza Strip, in which he says one of Hamas’s main goals was to capture soldiers to exchange for imprisoned terrorists. “No soldier from the battalion will be kidnapped, even if that means he blows up on his own grenade together with whoever wants to take him,” the commander says.

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Jan 27

Source: San Jose Mercury News

Posted: 01/26/2009 08:00:00 PM PST

Deadline is real: 5 days to fix California’s budget

Five days are left to cut a deal on the state budget. If not, on Sunday, California, the world’s eighth-largest economy, will become the world’s biggest deadbeat.

Related article: California prepares to stop paying bills (WorldNetDaily)

Having raided every state fund and borrowed the max, the state will start issuing IOUs. College students won’t get Cal Grants. Counties will borrow from reserves to cover social services. State contractors won’t get paid, and taxpayers won’t get refunds. The state already has shut down billions of dollars worth of construction projects. By April, as bills mount up, California, for all practical purposes, will stop functioning as a state.

It’s shameful that things have come this far, but there’s still time to stop things from getting worse – if enough Republicans, at least three in the Assembly and three in the Senate, agree to balance severe cuts to state services with new or higher taxes. Doing so, however, will risk retribution from the rabid right of their party.

All is not totally bleak. House Democrats’ version of President Barack Obama’s $825 billion stimulus includes $10 billion in immediate relief to California, in Medicaid payments for the poor and education aid. That would lop off a quarter of California’s $40 billion deficit. It pays to have friends, like House Speaker Nancy Pelosi, in high places.

But $10 billion won’t necessarily translate into fewer cuts or taxes. Gov. Arnold Schwarzenegger’s proposed budget included $10 billion in phantom solutions: an improbable $5 billion in borrowing against future lottery proceeds and $5 billion in money shifting that’s probably unconstitutional.

So $30 billion in hard choices remains regardless – and less than a week to make them.


Source: Bloomberg

Schwarzenegger Says Deal Is Close as Cash Runs Short


Governor Arnold Schwarzenegger of California attends the inauguration ceremony of U.S. President Barack Obama at the Capitol in Washington on Jan. 20, 2009. Photographer: Ken Cedeno/Bloomberg News

Jan. 26 (Bloomberg) — California Governor Arnold Schwarzenegger said legislative leaders are closing in on an agreement to eliminate the $42 billion budget shortfall threatening to leave the state out of cash as soon as next week.

“We are getting closer and closer,” he said during a press conference. “We’re getting there, but it will still take a few more days to get there.”

Schwarzenegger, a Republican, told reporters in Sacramento the state won’t have enough money to pay for all of its bills “within the next week or 10 days.” With that in mind, Schwarzenegger said he and lawmakers were working.

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Jan 27

Home prices in big US cities fell at a record 18.2 per cent in the year to November as the stricken housing market showed no signs of bottoming out.

The drop followed an 18 per cent year-on-year decline in the prior month, itself a record, as prices fell more steeply in a wider array of cities including Boston and New York, according to the closely watched Case-Shiller index released on Tuesday.

At the same time, US consumer confidence fell to a new low in January, falling to 37.7 from 38.6 the prior month.

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Jan 27


John Alfred Paulson, president of Paulson and Co., speaks during a hearing of the House Committee on Oversight and Government Reform on Capitol Hill November 13, 2008. Photographer: Brendan Smialowski/Bloomberg News

Jan. 27 (Bloomberg) — Paulson & Co., the hedge fund run by billionaire John Paulson, made at least 295 million pounds ($420 million) since September by short selling Royal Bank of Scotland Group Plc.

Paulson held a short position of 0.87 percent in Edinburgh- based RBS on Sept. 19, according to regulatory filings. The shares traded at 213.5 pence at the time, and Paulson’s disclosure indicates he borrowed and sold almost 144 million RBS shares with plans to buy them back at a lower price. He reduced his short position to less than 0.25 percent, or about 98.6 million shares, as of Jan. 23, according to a filing yesterday.

Related article: Paulson reaps £270m ‘shorting’ RBS (Financial Times)

“They took positions in U.K. banks and their bearishness has been handsomely rewarded,” said Leigh Goodwin, a London-based analyst at Fox-Pitt Kelton Ltd. who has an “in-line” rating on RBS. “They timed their exit well.”

Paulson would have made 295 million pounds, assuming it still had a 0.25 percent short position on Jan. 23, when RBS closed at 12.1 pence. RBS, which said this month it will take as much as 20 billion pounds of writedowns in 2008 and post the biggest loss in U.K. history, is down 94 percent since Sept. 19. Paulson & Co. said its funds made more than $3 billion for the firm in 2007 by judging that the U.S. housing market and subprime mortgages would collapse.

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Jan 26

Two years ago, Iceland was top of the UN living index. Now it is in the frontline of the global economic crisis after the failure of its banks, reports Sophie Morris in Reykjavik


Reykjavik: Iceland must confront the fact that it has been blighted by a man-made disaster

Source: Meltdown: Iceland on the brink (Independent)


When Iceland’s ruling coalition broke apart Monday, it became the first government to fall as a result of the world financial crisis. It may not be the last.

Iceland’s case is unique because the tiny country’s entire banking system collapsed in October, decimating the value of the life savings of most residents on the island. Still, other countries in Europe are experiencing political unrest because of the global economic downturn.

Related articles:
- Iceland sends jumpers to help the UK (BBC News)

- How Iceland went from world’s biggest hedge fund to pariah in in global markets (Guardian)
- Iceland’s government topples amid financial mess (AP)
- Waking up to reality in Iceland (BBC News)

In Latvia last week, a riot ensued after 10,000 protesters marched on parliament. Demonstrations also turned violent in recent weeks in Bulgaria, Lithuania and Greece.

“I think we are still headed sharply downhill in the world economy and the U.S. economy, and I don’t pretend to know how far,” said Ralph Bryant, a former director of the Federal Reserve Board’s Division of International Finance and a senior fellow at the Brookings Institution. “Every country in Europe is troubled by these things.”

“Very little has been done,” he said. “I don’t say nothing has been done, but it’s moving very, very slowly.”

Frustration turns to violence

Iceland’s government fell after the U.S.-educated prime minister, Geir Haarde, couldn’t reach a deal on sharing power with another party in his coalition.

That came after Haarde last week called for elections in May, ahead of those scheduled for 2011, after weeks of protests by Icelanders upset about soaring unemployment and rising prices. Haarde announced Friday that he has cancer and would not seek another term.

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Jan 26

“Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co. in New York, says foreign investors might also get spooked if they conclude that the Fed is monetizing the government’s debt — in effect, printing money — by buying Treasuries.”

“Bernanke himself, in his 2003 speech, said monetization of the debt risked faster inflation — something bond investors, foreign or domestic, wouldn’t like.”

Because the U.S. government can’t raise taxes much higher it has to finance its debt and all those ‘not working’ bailouts and stimulus packages by issuing an enormous amount of Treasuries. This is nothing more than a promise of a tax hike in the future, because that debt has to be paid back one day plus interest.

Countries like China, Japan and Saudi Arabia have to believe in the solvency of the U.S. to buy those Treasuries, but since the U.S. Treasury will issue record amounts of treasuries in the coming years the trust that the U.S. might be able to pay its debt back wanes.

Since those countries are now also in serious trouble themselves their appetite for U.S. Treasuries will decline dramatically.

If the Fed is now buying those Treasuries by ‘printing money’ – which increases the money supply = the definition for inflation – then it will create massive inflation.

Inflation is really nothing more than a hidden tax:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
- Alan Greenspan

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
- John Maynard Keynes

That is why the governments of the world love Keynesianism – Obamanomics stimulus packages – so much.

The Fed calls this monetary policy ‘quantitative easing’ (= creating money out of thin air).

It should be called stealing or high treason instead.

The Fed and the government will create hyperinflation and destroy the dollar.

The Greatest Depression is coming.

- Gerald Celente: The Collapse of 2009; The Greatest Depression
- Peter Schiff: The World Won’t Buy Unlimited U.S. Debt
- Jim Rogers: Obama administration run by people who caused the latest financial problems
- Paul Craig Roberts On The U.S. Leadership: “They Are Criminals” – The Potential Here Is Far Worse Than The Great Depression
- Ron Paul on Glenn Beck: Destruction of the dollar
- Peter Schiff: We are the United States of Madoff
- Peter Schiff: We are on the verge of another major crisis
- Peter Schiff: US Dollar is on the verge of collapse; This is hyperinflation; This is Zimbabwe


Source: Bloomberg


Ben S. Bernanke, chairman of the U.S. Federal Reserve, gestures to a staff member following an open board of meeting on credit-card practices in Washington on Dec. 18, 2008. Photographer: Brendan Smialowski/Bloomberg News

Jan. 26 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another.

Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.

The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices — and long-term interest rates — as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington.

The Treasury market has “some bubble characteristics,” Bill Gross, the manager of Newport Beach, California-based Pacific Investment Management Co.’s $132 billion Total Return Fund, said in December on Bloomberg Television. He echoed that sentiment last week.

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Jan 26


Globally shaken: Some $5 trillion has been wiped off pensions around the biggest markets in the world

The worldwide pension crisis took a severe turn for the worse in 2008 as new research reveals that the value of global retirement funds collapsed by 19% or $5trillion (£3.8trillion) over the year.

According to consultancy, Watson Wyatt, in 2008, global institutional pension funds, in the 11 major markets plummeted from $25trillion to around $20trillion.

Roger Urwin, at Watson Wyatt, said: ‘The pensions system is being tested on every level. The ramifications of this global economic crisis will be played out for many years to come.

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Jan 26

The time has come to issue one of my sternest warnings to date: Bank of America and Citigroup could fail despite the most radical government rescues of all time.

Right now, after recent close calls with instant death, these two megabanks are on life support, receiving massive transfusions of government capital. But they’re still hemorrhaging, and no one in Washington has found a cure.

Already, they have received capital injections of $90 billion ($45 billion each).

Already, this bailout is larger than the total combined capital of PNC Bank, Suntrust Bank and State Street Bank – all among America’s ten largest.

Yet, ironically, that $90 billion is still a drop in the ocean compared to their massive exposure to risky assets.

The shocking facts revealed in the banks’ own balance sheets and in the OCC’s Quarterly Report demonstrate the enormity of problem:

Massive Risks at America’s Megabanks
(bill. of dollars)
B of A Citi B of A + Citi JPM
9/30/2008
Total assets
1,831 2,050 3,881 2,251
All derivatives 38,186 39,979 78,165 91,339
Credit default swaps 3,291 2,467 5,758 9,250
Exposure to defaults by trading partners 177.6% 259.5% 400.2%

Fact #1. Too big to save. Bank of America Corp. and Citigroup, Inc. have combined assets of $3.9 trillion, or 43 times the size of the Treasury bailout funds they’ve received to date.

Fact #2. Bigger losses ahead. Even before any further declines in the economy, an unusually large portion of their assets are already in grave jeopardy – commercial real estate loans going sour, credit cards loans tanking, auto loans sinking, and residential mortgages turning to dust. Now, as the economy continues to tumble, avoiding much larger losses will be almost impossible.

Fact #3. Big derivatives players. Bank of America and Citigroup are the nation’s second and third largest high-rollers in the derivatives market, with a combined total of $78 trillion in these bets outstanding. That’s over ten times the derivatives that Lehman Brothers had on its books when it failed last year.

Fact #4. They’ve bet far too much on each other’s failure. Bank of America and Citigroup are also the second and third largest participants in the most dangerous derivatives of all – credit default swaps. These are the big bets that financial institutions make on the failure of other major companies.

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Jan 26

“In the wake of Mr Thain’s dismissal last week, sales and trading chief Tom Montag, his top deputy, received a promotion. Mr Montag’s department was responsible for at least half of Merrill’s $15bn loss in the fourth quarter.”

“People familiar with the matter point out that a clause in Mr Montag’s contract specifies that, if his authority was diminished in certain ways, he would be allowed to leave the bank with a hefty severance package.”

Banksters!


Bank of America played a role in Merrill Lynch’s controversial decision to pay $4bn in bonuses in December just as mounting losses were threatening to derail BofA’s takeover of the Wall Street firm, according to people close to the situation.

BofA has said that the payment of $4bn in compensation in a fourth quarter in which Merrill racked up $15bn in losses was sanctioned by John Thain, Merrill’s chief executive.

Ken Lewis, BofA’s embattled chief executive, ousted Mr Thain on Thursday after news of the bonus payments appeared in the Financial Times. BofA told the FT last week that Mr Thain had made the decision to pay bonuses in December instead of January and it had been “informed” of the move. The bank said Merrill was an independent company until the deal closed on January 1.

However, a person familiar with Mr Thain’s actions said the ousted chief had at least two conversations with BofA’s chief administrative officer, J. Steele Alphin, one of the bank’s most senior executives, before a December 8 board meeting at which Merrill’s bonus payments were approved.

This person said Mr Alphin recommended, and Mr Thain accepted, a proposal to change Merrill’s incentive compensation mix – 60 per cent cash and 40 per cent stock – to conform with BofA’s system of 70 per cent cash and 30 per cent stock. The stock portion of the payouts was made January 2, the day after the deal closed, in BofA stock.

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Jan 26

Jan 26 (Reuters) – Lending at many of the largest U.S. banks fell in recent months, the Wall Street Journal said, citing an analysis of banks that recently announced their quarterly results.

Ten of the 13 big beneficiaries of the U.S. Treasury Department’s Troubled Asset Relief Program (TARP), saw their outstanding loan balances decline by a total of about $46 billion, or 1.4 percent, between the third and fourth quarters of 2008, according to the paper.

Those 13 banks have collected the lion’s share of the roughly $200 billion the government has doled out since TARP was launched last October to stabilize financial institutions, the paper said.

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Jan 26


An employee uses a hammer to store pre-cast bars of gold in a box at a plant of bar manufacturer Argor-Heraeus SA in the southern Swiss town of Mendrisio. REUTERS/Arnd Wiegmann/Files

NEW YORK/LONDON (Reuters) – Gold climbed above $900 an ounce on Monday to the highest level in more than three months as interest in bullion as a haven from risk and a weaker dollar against the euro spurred buying.

Spot gold was at $906.90 an ounce at 1:52 p.m., up 0.9 percent from the last trade $898.10 on Friday. Earlier, it peaked at $915.30, its firmest level since October 10.

U.S. gold futures for February delivery settled up $13.00, or 1.5 percent, at $908.80 an ounce on the COMEX division of the New York Mercantile Exchange.

Gold priced in euros reached an all-time high of 701.55 an ounce, and in sterling of 661.55 pounds, as fears over the global economic slowdown and volatility in other asset prices spurred buying.

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Jan 26

- After less than a week in office, Barack Obama’s approval rating plunges 15 points (Daily Mail):
Barack Obama might have been in office for less than a week, but the euphoria is beginning to wane.
The new President’s approval ratings have fallen from a stratospheric 83 per cent to a more modest – although still impressive – 68 per cent.

- US may ditch twice-yearly talks China (Telegraph):
Strained relations between the US and China are likely to increase in the coming months as a number of senior officials in President Barack Obama’s administration are believed to be keen to axe bi-annual economic meetings between the two superpowers.

- Obama administration warns public to expect rise in US casualties (Guardian):
The Obama administration is to double the number of US troops in Afghanistan to 60,000 and when asked in a television interview if the US public should expect more American casualties, Biden said: “I hate to say it, but yes, I think there will be. There will be an uptick.”

- Geithner to Press Mortgage, Bank Relief in Growing Rescue Plan (Bloomberg):
Jan. 26 (Bloomberg) — President Barack Obama’s financial rescue plan will be unveiled soon and is likely to be larger and more ambitious than originally planned as the economy and banking system worsen.

- Report: U.S. Soldiers Did ‘Dirty Work’ for Chinese Interrogators (ABC News):
U.S. military personnel at Guantanamo Bay allegedly softened up detainees at the request of Chinese intelligence officials who had come to the island facility to interrogate the men — or they allowed the Chinese to dole out the treatment themselves, according to claims in a new government report.

- Obama to put Bush car pollution policies into reverse (Guardian)

- Barack Obama to tighten Wall Street regulations (Telegraph)

- RAF ‘ordered to shoot down UFOs’ (Telegraph)

- A chill wind blows through Davos as global crisis bites (Telegraph)

- Evo Morales hails ‘new Bolivia’ as constitution is approved (Guardian)

- Dutch bank sheds chief executive and 7000 other jobs (Guardian):
The bank, one of Europe’s biggest, took immediate action by shedding its chief executive, Michael Tilmant, after what it said was the worst quarter for equity and credit markets for a quarter of a century. It is due to post an underlying loss of €3.3bn, including €2bn in structured products, for the final three months of 2008. ING, which employs 130,000 globally,

- Barclays bullish despite £8bn credit crunch hit (Guardian)

- Corporate cuts spread as 6000 face axe (Telegraph):
Corporate Britain is preparing itself for one of the bloodiest weeks of the economic downturn so far with up to 6,000 redundancies set to be announced across the manufacturing, retail and services sectors.

- Companies in US to Slash More Jobs, Business Economists Say (Bloomberg)

- Wall Street investment banks have a way of snookering commercial rivals (Telegraph)

- Report: Toyota’s output seen down 25 percent (AP)

- Toyota Denies Report Global Output May Fall 20% on Recession (Bloomberg)

- Caterpillar Moves to Cut 20000 Jobs (New York Times)

- Bad news: we’re back to 1931. Good news: it’s not 1933 yet (Telegraph):
Barack Obama inherits an economy already contracting at an annual rate of 6pc, much like the mid-Depression year of 1931 (-6.4pc). This may beat Germany (-7pc) Japan (-12pc) and Korea (-22pc) over the fourth quarter. But that merely underlines the dangers ahead as the collapse of global trade chokes the mini-boom in US exports, setting off another stage of the crisis.

- Tens of thousands face hunger amid Liberian insect plague: official (AFP)

- Deaths as thousands riot in Madagascar (Telegraph)

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Jan 26

“It is unacceptable that staff of international aid agencies with expertise in emergency response are still not given full access into Gaza, and that the crossings are not fully operational for humanitarian and commercial flows of goods and people,” said Charles Clayton, head of the Association of International Development Agencies.


Samir Sawafiri pointed at several dozen hungry chickens scavenging for food between the crushed bodies of nearly 65,000 other birds strewn across a destroyed farm in Zeitoun in Gaza City.

“They are all that is left and I have nowhere to put them,” he said. The poultry farms around Zeitoun used to be the Gaza Strip’s main provider of eggs, according to Oxfam. Little but twisted metal and crumbling concrete now remains of the poor suburb on the eastern outskirts of Gaza, one of the areas hit hardest during the war.

“I evacuated on January 9,” Mr Sawafiri said. “Three days later, on January 12, tanks came with bulldozers and levelled the fields. They wanted to spoil the economy – that is the only answer. There is no justification for what they did.” Israel says that Zeitoun is a known Hamas stronghold, and that militants used its fields to launch Qassam rockets into Israel.

International aid groups say that while Israel’s continuing restrictions on the flow of goods and relief workers into the devastated enclave is hampering emergency efforts, the destruction of Gaza’s agriculture means that harvests are likely to fail and the Strip will depend more on handouts.

Related articles:
- The newspeak of Israeli propagandists (Guardian)

- Hamas insists it will not free Israeli soldier as part of Gaza truce (Telegraph)
- Hamas offers $52m handouts to help hardest-hit Gazans (Guardian)

In its efforts to choke Hamas, Israel has also frozen the flow of cash into Gaza, meaning that people have no money to buy basics. There are strict curbs on iron and concrete imports to prevent the militants rebuilding bunkers and rocket arsenals. But that also means that the 100,000 people who the UN says are homeless are once again refugees, as were their grandparents, who flooded Gaza after the 1948 Israeli war of independence.

Aid groups say only 100 or so trucks are being allowed in every day, while even before the fighting at least five times that number was needed.


In addition, there is pilfering. “There is quite a bit missing,” one UN worker said. “On some trucks it is 15 to 20 per cent of the goods. We don’t know who is taking it – the Palestinians or maybe Egypt, or Israel.” Another aid worker said that gunmen had been involved in some of the aid diversion. “We are well aware that hijackings do take place,” he said.


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