Saturday, June 20, 2009

Mir-Hossein Mousavi
Mir-Hossein Mousavi addresses his supporters Photo: Reuters

Barack Obama came to power proclaiming "the audacity of hope". That audacity has been shown by the demonstrators on the streets of Iran this week. But what has President Obama, or the West, done to help them?

On many occasions, the Western world has sympathised with a popular revolt, but left it at that. In Hungary in 1956, Czechoslovakia in 1968 and China in 1989, we watched and listened anxiously – "Help Hungary… Help… Help… Help" were the last words of Radio Budapest before the Soviet Communists took it over – but let oppression resume.

We seem to be in a similar situation today. Modern technology makes the suffering more visible and the cries of desperation louder. We can watch film of attacks by the Basij militia recorded on hundreds of mobile phones and read the poignantly abbreviated "Tweets" of thousands of students. More than in the past, we can see distressed people waving; but still we let them drown.

Of course, our governments cannot be expected to intervene directly. This is not because intervention would confirm the endless propaganda of the Iranian regime that America and Britain are behind every expression of dissent. They say it any way: yesterday, Ayatollah Khamenei said at Friday prayers that Britain was the "most treacherous nation". It is rather that our governments would be wrong to try to lead what is so far beyond their control, or even their understanding.

What, after all, is this Iranian contest? Experts note what they call "direct quotes" this week from the revolution that overthrew the Shah and brought the Ayatollah Khomeini home from Paris 30 years ago. Supporters of Mir-Hossein Mousavi have shouted "Allahu Akhbar!" from the rooftops, just as happened then. Many demonstrators show the bloodied hand, a symbol of the betrayal of true Islam, which goes back to the murder of Iman Husayn, the hero of Shi'ism, in the seventh century.

Is this a battle for ownership of the Islamic Revolution, chiefly fought among the surviving men who brought it about? Or is it a secular, Western-leaning revolt of people who want to be free? Or both? It would be a rash foreign government which put its eggs in the basket of any one faction.

But the drama brings out the great unresolved problem in the West about "soft power". After Iraq and Afghanistan, the prevailing view is that "hard power" – guns, bombs, naked political and military might – does not work. "Soft power" – the culture of dialogue, the exporting of the habits of democracy and the language of human rights – is better.

Certainly, President Bush and his men made a terrible error in thinking that soft power was for wimps. After September 11, they had the best sort of soft power – moral advantage – but failed to maintain it. They eschewed "nation-building", even as they conquered other nations.

It was because of the importance of soft power that the wider world welcomed the election of Barack Obama. The Bush era did not make them reject American leadership: it made them look for leadership of a different kind. The first black President, and his silver tongue, would embark on a new, better conversation with humanity.

In a way, Mr Obama has done so. He is polite, eloquent, dignified. But where is he leading? His two main speeches to Muslim audiences have been essentially works of apology. The US is not at war with Islam, he said in Turkey. In Egypt this month, he blamed colonialism and the Cold War, claimed that "Islam has always been part of America's story", and spoke of Islam having been "revealed" in Arabia, as if he thought its inspiration really was divine. If I were a politically minded anti-western Muslim, I would have detected weakness in these speeches, and pushed harder for my cause. If, on the other hand, I had been one of the millions of people in Muslim countries who, however religious, do not want to be ruled by the clergy or by other zealots, I would have been disappointed.

Behind the President's talk of dialogue was a rather flabby adherence to the status quo. Almost nothing against terrorists like Hamas, strangely gentle words about Iranian nuclear ambitions. The improperly elected extremist Mahmoud Ahmadinejad, who literally keeps a seat at the cabinet table vacant for the return of the Mahdi, would have slept slightly easier. Israel's Benjamin Netanyahu, who is fairly elected and fills his cabinet according to the mere earthly rules of proportional representation, was the one made to sweat. Now that cheated voters are on the streets of Tehran, Mr Obama's offer of a ''grand bargain'' with the dictatorship looks even weaker.

The trouble is that Mr Obama's version of soft power appears more soft than powerful. It reflects a psychological puzzle about Western culture. Never before has our "unconscious" soft power been stronger. Technology, telecoms, the internet, films, music, the rise of the English language – all mean that the West dominates the world almost without thinking. A third of Iranians own mobile phones, and you can be confident that they are the third least friendly to Mr Ahmadinejad. They know how much this soft power matters. A new breed of ''hacktivists'' are launching do-it-yourself cyber attacks on Iranian government websites.

But when we in the West get to "conscious" soft power, we lose our nerve. Why don't we do more to produce "political entrepreneurs" to help people develop popular movements, build websites, learn more about the rule of law? And where are the government-sponsored systems that confidently promote our way of life? Recently, the British ambassadors in Bulgaria and Poland put out public messages promoting gay rights there. But in places where there is a much greater oppression of all people, gay or straight, in the name of Islam, British public policy is far more cautious.

One of our best innovations is the BBC's Persian TV service, but it only began this year. The West hesitates. Yet modern history contains several examples of successful soft power. After the war, the Marshall Plan rebuilt Europe economically and politically, often, in places like Italy, seeing off Communism. In the 1980s, Ronald Reagan, Margaret Thatcher and Pope John Paul II transformed the East/West confrontation from a balance of fear to a Cold War of ideological movement, supporting citizens in oppressed countries who wanted to tear down the walls that held them in. We helped them, and they won.

For 30 years, the Iranian regime, for all its incompetence, has successfully exerted soft and hard power against us. It has been almost the chief opponent of Western values. It sponsors terrorism. Its president denies the Holocaust and works to get the Bomb. But Iran is also a country with a young, increasingly educated, frustrated population – millions of people who would rather have politics like ours than be ruled by clerics with God on their lips and 80 per cent of the national resources in their pockets. We have found far too few "soft" ways to help them. If we did so, we would be assisting what may well be the most important shift now taking place in the world.

There's No False Choice on Iran
The consequence of a weak president.
by Fred Barnes

Rejecting "false choices" is a favorite rhetorical device of President Obama. His speeches are littered with examples. A half-dozen times, he's repudiated "the false choice between our security and our ideals." He's dismissed "the false choice between sound science and moral values." He's not only disposed of "the false choice between securing this nation and wasting billions of taxpayer dollars," he's laid to rest the clash between those who'd "conserve our resources" and those who'd "profit from these natural resources."

But confronted by a popular revolt in Iran, Obama has succumbed to a false choice. Either support the democratic forces in Iran aligned against the rigged presidential election or preserve his chance to negotiate with the Ahmadinejad regime for a nuclear arms deal--one or the other. The president thinks he's stuck with a dilemma. He's not. The two options aren't mutually exclusive. The choice is indeed false.

To escape his predicament, Obama has sought neutrality between a discredited regime and democratic protesters. This actually helps the regime, since President Ahmadinejad and the mullahs don't need Obama's support. The protesters do. In effect, Obama has tilted in favor of the regime. The result is personal shame (for Obama) and policy shame (for the United States).

The president should know better. In dealing with dictators, honey is rarely more effective than vinegar. Obama's respectful overtures to Iran's leaders evoked only angry recriminations against America and no sign of willingness to settle differences on nuclear arms or anything else.

President Bush tried the no-criticism tack with President Putin. Nice words and good personal relations failed to curb the Russian's belligerent tendencies. The same was true with Presidents Nixon and Carter in their relationship with Soviet leaders. Nixon believed he'd achieve more by the soft approach. He got bad treaties. Carter thought chumminess with Leonid Brezhnev would tame Soviet aggression. The invasion of Afghanistan in 1979 proved him wrong.

President Reagan, in contrast, knew a false choice when he saw one and adopted the opposite tack. He challenged the Soviets with strong words and stern policies. The Soviets complained, but they also made unprecedented concessions in arms control and other talks.

Obama, as best I can tell, has never considered the Reagan approach. But the corrupt and tyrannical nature of the Iranian regime is a clue it could be effective. Implacable opposition and harsh denunciations, coupled with a readiness to talk, might cause Ahmadinejad and Ayatollah Khamenei to be more agreeable.

It's worth a try, unless we are to believe, as Obama seems to, that Ahmadinejad and the mullahs could be more hostile than they are now. Not likely. Is it even conceivable they are so sensitive to public criticism, so touchy, that they'd be prompted to spurn serious negotiations they might otherwise have agreed to? No.

The latest round of pandering by Obama hasn't worked. The day after Ahmadinejad's reelection, amid indications of voting fraud, the White House issued a statement. "We were impressed by the vigorous debate" in the election and will be monitoring "irregularities," Robert Gibbs said, as if he were commenting on a Chicago alderman's election.

Two days later, Obama said he is "troubled .  .  . whenever I see violence perpetrated on people who are peacefully dissenting." He neglected to identify the perpetrators of the violence. Obama added he hopes "whatever investigations" of the fraud charges ensue "are done in a way that is not resulting in bloodshed."

The next day, with hordes of demonstrators in the streets of Tehran and other Iranian cities, Obama insisted, "it's not productive, given the history of U.S.-Iranian relations, to be seen as meddling, the U.S. president meddling in Iranian elections." Besides, he said Khamenei "indicates he understands the Iranian people have deep concerns about the election." Less than three days later, he declared the election results legitimate.

Obama has a very broad definition of "meddling." It includes any expression by him of support for the Iranian protesters, many of them pro-American and eager for his backing. His reference to "history" was presumably to the American role in ousting a left-wing government in Iran in 1953--yes, 1953! Obama's implication: the events of 1953 bar him from criticizing the cruel and undemocratic regime today or siding with Iranian freedom marchers. That's quite a stretch. And the Iranians accused him of meddling anyway.

A day later, Obama made an egregious mistake. He suggested there's no difference on policy between Ahmadinejad and his presidential rival, Mir-Husseini Mousavi. Once again, that was helpful to Ahmadinejad. If the two are peas in a pod, what's all the fuss about? No reason to meddle, for sure.

In fact, there are significant differences. Mousavi leads the forces of reform and democracy. Ahmadinejad leads the forces of theocracy and repression. Mousavi wants to improve relations with the United States and says the matter of a nuclear weaponized Iran is "negotiable." Ahmadinejad has "shut the door" on both.

When Navy sharpshooters, with Obama's permission, shot Somali pirates and rescued an American ship captain, the president got well-deserved credit for smooth handling of a minor emergency. He was active and energetic when the stakes were small.

In Iran, the stakes are large, though you wouldn't know it from Obama's passive and ineffective response. He acts as if his choice of what to do in Iran is too difficult, too fraught with danger, for him to decide. It's not. A stronger president would see the choice as false.

Fred Barnes is executive editor of THE WEEKLY STANDARD.

Iran's upheaval

Drawing the line

Iran's supreme leader stands staunchly by Mahmoud Ahmadinejad

“SOME supporters of candidates should know that the Islamic Republic would not cheat and would not betray the votes of the people.” The crowds of people cramming Tehran University cheered and raised their fists in support at Ayatollah Ali Khamenei’s words. “The legal mechanism for elections would not allow any cheating.”

In his speech on Friday June 19th, Iran’s supreme leader implacably denied that the presidential election had been rigged, or that there had been serious errors in the result. Mr Khamenei called for protests, which have wracked Iran all week, to halt, with veiled threats of what would ensue if they did not. He said in no uncertain terms that elections must be decided at the ballot box, not on the streets, and that the (almost entirely peaceful) crowds “will be responsible for bloodshed and chaos” if they went on protesting.

Though he chided Mr Ahmadinejad implicitly for accusing Akbar Hashemi Rafsanjani, an ex-president and a powerbroker in Iran, so openly of corruption, he made clear his support for Mr Ahmadinejad, stressing how closely their points of view coincided. Plenty of the traditional bugbears came out in Mr Khamenei’s speech: Zionist plots, foreign spies, America and especially Britain. He ended by saying that he was ready to give his life for Islam and the revolution. His listeners roared their approval, chanting that they were ready to give their lives for him.

The speech had no hint of conciliation. No doubt Mr Khamenei remembers the shah’s disastrous attempts at appeasement in 1979. Though some had hoped that the hundreds of thousands of protesters who have flooded the streets of Iran over the past week might have forced him to change his mind, he could not have taken a much harder line.

What comes next is uncertain. After Mr Khamenei’s fiery denial of major irregularities, it seems unlikely that the Guardian Council, an appointed committee that will meet on Saturday to discuss allegations of vote-rigging, will contest the results in any meaningful way. Ayatollah Ahmad Jannati, the leader of the council, is a strong supporter of Mr Ahmadinejad and has already backed his victory.

The authorities have banned a march planned for Saturday June 20th. But protesters have been ignoring orders to this effect all week. If Saturday’s protest goes ahead, especially if on the scale of those earlier this week, it will represent a significant challenge to Mr Khamenei. These protests are different to those of 1978 and 1979: people are not calling for a complete overthrow of the entire political system. The protestors have no charismatic leader like 1979’s Ayatollah Khomeini, and Messrs Khamenei and Ahmadinejad have more popular backing than the shah did in his era. But it is clear that the Islamic Republic is facing an unprecedented crisis of authority and legitimacy.

Mr Mousavi’s situation is becoming increasingly difficult. An almost accidental opposition leader, he has shown unexpected mettle in the face of the authorities’ threats. But if he continues to contest the election and side with the protesters, he runs the risk of being labelled a counter-revolutionary. And rumours are still flying about Mr Rafsanjani’s whereabouts. Many believe that he in Qom, the heart of the clerical establishment, trying to convene a meeting of the Assembly of Experts (the body that chooses the supreme leader) to pressure Mr Khamenei. The battle over the election has given him an opportunity to exploit long-standing rivalries with both Mr Khamenei and Mr Ahmadinejad. Some reformists among the clergy have strongly supported Mr Mousavi and denounced the election, but others remain firmly on the side of the supreme leader.

Questions are being raised about the loyalty of the Revolutionary Guards. Though they are generally seen as backing Mr Khamenei and Mr Ahmadinejad, there are divisions within them (Mohsen Rezai, another defeated presidential candidate complaining of the results, is a former guardsman himself, and has considerable support among them.) If ordered to attack the protesters, who include women and children, it is hard to predict what their response will be. Some of the users of Twitter, which protesters have used to share short messages amongst themselves, have urged marchers to carry the Koran, citing its verses about bringing peace.

Do the authorities dare beat them down? Serious bloodshed is looking increasingly likely. The regime has might on its side. It has already killed dozens, say the opposition (and seven, says the leadership). It may go still further to protect the status quo. But it is impossible to predict whether that will crush its opponents or stir them up still further. Iranian politics, ever unpredictable, now holds the entire world’s attention.

Corporate restructuring in Japan

Breaking free

Japanese firms are responding quickly to the recession, but are they doing enough?

IN RECENT months Toyota has replaced its bosses, halted pet projects and temporarily cut production in Japan almost in half. Toshiba took control of affiliates and said it would shut down unprofitable businesses. Sony plans to halve the number of its suppliers to save {Yen}500 billion ($5.2 billion) this year alone. All have cut back their part-time and temporary workers, who had only ever been promised a pay-cheque, not a job for life. The actions of these prominent Japanese companies have encouraged others to follow suit.

During the “lost decade” of 1991-2002 Japanese firms dithered rather than adopting the harsh measures that might have prevented a drawn-out stagnation. But this time around the response has been much faster and deeper. After all, if any country ought to know how to respond to a low- or no-growth environment it is Japan: it has had plenty of practice.

The press has done its part, continually reminding the public of the “once in a century” nature of the crisis and thus providing support for the lay-offs. And banks have played a more constructive role than they did in the 1990s, by refusing to extend credit to some needy firms that cannot meet their obligations—to the dismay of politicians and bureaucrats.

It helps that unlike during the bursting of the country’s bubble economy in 1991, the crisis originated outside Japan and all unpleasant measures could be blamed on the American bankers whom many Japanese held responsible for it. And the sudden collapse of export sales, which happened in tandem with a spike in commodity prices and an appreciation of the yen (which makes Japan’s exports more expensive), meant that corporate Japan had no choice but to act.

All this is quite a turnaround. During the lost decade Japan regarded its problems as a private, domestic matter: it resented outside pressure to sort out errant banks, speculative property developers, overly ambitious conglomerates and so on. Corporate reforms were introduced, albeit slowly and imperfectly. Jobs, sacrosanct in Japan, were eventually shed. The reaction this time is notable because it capitalises on the changes introduced back then and provides an opportunity to push for even more restructuring.

It is sorely needed. The drop-off in demand from the West has clobbered Japan’s export economy. Foreign trade is down one-third. Japan’s economy is expected to contract by 6% this year, making it the worst-hit among rich countries. Industrial overcapacity is thought to be much higher than in America or Europe. Indeed, things are so bad that it is generally assumed that they cannot get any worse, and will instead improve over the next six months as the inventory cycle turns and firms restock. This has helped push the Nikkei 225 share index up by around 40% since March, when it hit a 26-year-low.

Many firms failed to restructure seriously during the lost decade, especially after 2002 when record profits poured in from exports. Companies refused to pare their sprawling operations and spin off non-core units (it is common for firms to own their own hot-spring resorts, for instance). But the recession has strengthened the hand of reformers.

The most widespread form of restructuring is the easiest: cutting staff. Since the lost decade, Japan’s labour force has become more flexible, as the post-war tradition of lifetime employment has waned. “Non-regular” workers, as temps and part-timers are known, have increased from one-fifth to one-third of the workforce. Labour represents around 70% of Japanese business costs: though hard on individuals who are sacked, the rise of non-regular workers has let firms cut costs fast.

It is still difficult and expensive to lay off “regular” workers. Firms typically provide the main pensions of staff they jettison, as well as lump-sum severance packages. This explains why companies such as Toshiba must raise huge sums to cover restructuring costs.

Another sign of change is corporate Japan’s sudden zeal for mergers and acquisitions, despite the uncertain business environment and a scarcity of capital. Last year Japanese firms spent a record amount acquiring businesses abroad, and the buying has not abated. Firms such as Kirin, a beverage-maker, J-Power, an electricity wholesaler, and many others have bought foreign companies this year. Japan’s stagnant domestic economy offers no prospects for growth, and the strong yen, low asset prices and a dearth of rival bidders make it a good time to pounce.

But most transactions were domestic, as companies span off units or took direct control of affiliates. In recent months Hitachi, Toshiba and Fujitsu, among others, have shuffled their businesses in ways that were unthinkable before the downturn. In the first quarter of this year dealmaking in Japan even exceeded that in China, with a total value of $30 billion.

But is the restructuring going far enough? The emphasis has been on cost-cutting, rather than overhauling business models. And most of the big moves have been made by Japan’s big export-focused firms, which were the first to be affected by the downturn. There has been much less reform among Japan’s huge swathe of inefficient, domestically oriented companies.

Moreover, even those firms that are trying to cut costs have tried to spread the pain among their suppliers, which may actually make things worse in the long run. The advantage of commercial camaraderie is that firms can count on at least a little business to keep them alive. But propping up ailing ones ultimately harms their healthier rivals, by depriving them of resources they could more fruitfully deploy, including capital and qualified staff.

An executive at a medium-sized supplier to a big electronics firm explains how. The electronics firm continues to do business with weak suppliers offering inferior technology, depressing prices and profits for stronger ones. This has forced him to cut his research budget. “How can we keep up with the technology cycles if we lack the profits to invest?” he asks.

The Myth of Financial Deregulation

Government action caused the economic crisis, not the free market.

Anthony Randazzo

For the past nine months, Wall Street critics have painted a damning picture of the housing bubble as the product of deregulation and reduced governmental oversight. To read the Obama administration's new financial sector regulation overhaul proposal, the government didn't have anything to do with the current crisis. According to this view, our economy wouldn't be facing a recession with almost 10 percent unemployment if the government had been more involved with the market. This picture is about as historically accurate as the famous portrait Washington Crossing the Delaware.

On Wednesday, President Obama laid out his vision for changing the way Wall Street does business. From creating a council to oversee systemic risk to expanding the powers of the Federal Reserve to requiring hedge fund and private equity pools to register with the SEC for the first time, the proposal is a massive regulatory expansion.

Along with the president's speech, the White House released an 89-page "white paper" with all the nitty gritty details that make government bureaucracy so much fun. For instance, here's a real sentence from the proposal:
Last year, the IASB and FASB reiterated their objective of achieving broad convergence of IFRS and U.S. GAAP by the end of 2010, which is a necessary precondition under the SEC's proposed roadmap to adopt IFRS.

Government clarity at its finest. (See here for a breakdown and explanation of the whole proposal.)

The core problem of the regulatory proposal is its view of the causes of the crisis. Everything is built on a belief that the market failed and that deregulation created a system of excessive risk and irresponsibility. Ironically, it was government action that created incentives for financial firms to be less risk adverse, not a lack of regulation. As Washington prepares to debate regulatory overhaul this summer, it is more important than ever to wrestle the myth of deregulation to the ground.

Given all the talk of deregulation, you would expect to find dozens of deregulating laws put in place over the past few years. Surprisingly, there have only been three major deregulatory actions in the past 30 years. Ultimately, the data points to bad regulation as complicit in the creation of the financial crisis, not deregulation.

The modern era's first major Wall Street deregulation was the Depository Institutions Deregulation and Monetary Control Act of 1980. This law repealed so-called "Regulation Q ceilings" that limited the amount of interest consumers could earn from savings and checking accounts. The law also expanded the types of financial institutions that could get overnight loans from Fed discount windows.

Since letting banks pay interest to their customers encourages saving, this aspect of deregulation certainly can't be blamed. And though it could be argued that more financial institutions borrowing money partially allowed for the housing bubble, that money was being borrowed from the government—hardly deregulation. And that doesn't even begin to address the fact that there have been multiple recessions and bubbles since this law was passed.

The second major deregulation was the Garn-St. Germain Depository Institutions Act of 1982. This authorized banks to compete with money market mutual funds. (Ironically, this bill was co-sponsored by then-Rep. Charles Schumer, a key lawmaker driving the current regulatory overhaul.) Garn-St. Germain has been linked to today's crisis because it loosened restrictions on issuing mortgages, allowing for the eventual development of subprime loans.

However, it wasn't Garn-St. Germain specifically that created a subprime mortgage riddled bubble—it was the surrounding body of poorly designed, bad regulations that created perverse incentives. Garn-St. Germain should have allowed banks more freedom to compete while also clarifying the role of the FDIC. But it failed, along with other regulations, to outline the role of the government in the case of financial institution failure. As a result, the implicit government guarantee for firms "too big to fail" skewed the risk assessment process that aids market efficiency. The promise of rescue was much more damaging than loosened lending standards.

It is worth noting that the impact of Garn-St. Germain has also been blamed for causing the Savings and Loan Crisis by allowing certain financial institutions, thrifts, to gamble with taxpayer insured investments. But in this case there was an implicit government rescue guarantee for massive failure that encouraged high-risk taking.

The third deregulation blamed for causing the financial crisis is the repeal of the famed Glass-Steagall Act in 1999. This law, passed in 1933, had kept deposit-bearing banks and investment banks from competing for over six decades. After this repeal, banks were able to maximize their resources and many grew large enough to be classified too big to fail. However, they really were too entwined to fail, and the problems came with fringe regulations related to the interconnectedness of financial institutions.

Had mark-to-market regulations been more flexible banks would have had more time to raise capital and sell assets. Had Wall Street firms not seen Washington as a lender of last resort that would bail out investments gone awry, they would have managed their risk better. Had capital reserve ratios been higher banks and investment institutions would have had more liquidity when prices dropped (though some firms, like AIG, simply became insolvent and wouldn't have been saved by higher reserves). Or, if qualified special purpose entities—an off-balance sheet accounting method—had required more transparency, banks would have had to keep more risky mortgages on their books, subject to reserve requirements.

Indeed, even if these three deregulations had no caveats explaining away their supposed link to the current financial crisis, they would still hardly constitute a historical trend. In contrast, historical periods of high regulation have proven decidedly unfavorable. Financial sector regulation during the 1970s was much heavier than today, and that did not prevent stagflation, with unemployment reaching nine percent in May 1975 and inflation nearly topping 14 percent.

Similarly, Europe currently boasts some of the world's tightest financial sector regulations, and its banks have suffered just as much, if not more than American banks in this recession. European banks made the same bad bets, the same poor investments, and the same over-leveraged mistakes—despite more regulation and government oversight.

None of this is to say that there shouldn't be regulatory change. The current regulation framework creates plenty of perverse incentives that stem from outdated rules. There is much to be desired in terms of governmental transparency and clarity.

However, the answer is not increased layers of government oversight. Giving regulators increased oversight of hedge funds, forcing the standardization of derivatives, or creating a systemic risk council will cause more harm than any good. Neither will expanding the Fed's powers ex post facto. Richard Fisher, President of the Federal Reserve Bank of Dallas, told the Wall Street Journal last month that regulators had enough authority to prevent a crisis. They simply failed to do so.

A far more prudential regulatory response is to fix broken rules—like the government has done with mark-to-market—and to have regulating agencies do a better job of oversight for 21st Century financial products. In a world of continually innovative investment strategies, flexible regulation from a loose government hand will prove most beneficial to a sustainable economy. The worst thing Washington could do is buy into the false history of phony deregulation and create more oppressive rules and stifling agencies that extend our economic struggles.

Anthony Randazzo is a policy analyst for Reason Foundation. Read his Reason archive here.

Barbara Boxer meet Dr. Evil

The Iranian Revolution Will Be Tweeted

Yes, Twitter is playing an important role in Iran

Michael C. Moynihan

In a 1979 column on the abdication of the Shah, William F. Buckley noted with wonderment that Ayatollah Ruhollah Khomeini's agitprop communiques, divined from his Parisian exile and recorded onto audio cassettes for distribution in Tehran, had roused a restive Iranian population into rebellion. "Electronic communications," Buckley wrote, "which are the century's gift to totalitarian states, played paradoxically into the hands of the insurgents."

A reasonable enough assessment at the time, but one that strikes the modern reader as almost exactly backwards (thanks, in no small part, to capitalism's ability to provide sophisticated technology to the masses). While the current situation in Iran isn't analogous to the revolutionary fervor of 1979, those who have taken to the streets—carrying English-language signs, capturing the government's violent response on camera phones, tapping out urgent text messages—are relaying important information via "electronic communications," which, pace Buckley, are this century's gift to anti-totalitarians.

So it was inevitable that, like the recent political unrest in Moldova, the uprising against President Mahmoud Ahmadinejad would be billed as a nascent "Twitter revolution."

But for every Internet epiphenomenon promoted by the blond automatons of cable news—Twitter revolutions! YouTube debates!—there exists an army of pundits offering a cynical, countervailing view. A week into the Iranian rebellion (it isn't a revolution yet, but it surely qualifies as a rebellion—in that May 1968 way), there appear to be more articles, editorials, and blog posts pooh-poohing the social-media-rebellion idea than those trumpeting it.

In a widely circulated piece from the website True/Slant (later reprinted in The Guardian), journalist Joshua Kucera grumbled that the Twitterers and bloggers in Iran sent out information that, in Kucera's curious formulation, doesn't "appear any longer to be true." He cites a handful of examples: The crowds of protesters weren't in the millions, as initially reported by some Twittering Mousavi apparatchiks, but in the hundreds of thousands. Perhaps, but beyond the fact that crowd estimation is always a tricky business, mainstream media sources reported similar numbers.

Kucera scoffs at rumors that "the losing candidate, Mir Hossein Mousavi, was put under house arrest." In the game of journalistic telephone that arises during chaotic mass protest, the details of certain stories will, of course, shift, depending on the political agenda of those relating then news. But this is not a flaw in Twitter—it's a predictable byproduct of a clique of totalitarians that turn media sources on and off like spigots. Either way, mainstream sources (this time ABC News' Middle East correspondent) told a similar story:

"[Mousavi spokesman Mostafa] Makhmalbaf clarified rumors that Mousavi was under house arrest, saying there was no official detention but that police were keeping watch on his home, exerting enough pressure to keep him indoors. "

Inaccurate stories are inevitable, Kucera argues, "But in the pre-Twitter age, those sorts of rumors petered out quickly if they weren’t true." This is utter nonsense. The examples provided by Kucera have already been debunked, debated, or clarified in the blogosphere and on Twitter itself, thanks in no small part to those who passed on the initial information. By contrast, in the pre-Twitter age—think of the uprisings in East Berlin, Budapest, Gdansk, Prague; the journalism of Herb Matthews, Walter Duranty, and Edgar Snow—rumors and misinformation from totalitarian countries entered the mainstream and took months, if not years, to dislodge.

Writing at Mother Jones, Kevin Drum takes a similar line, offering a few straw men of his own: "But protests have happened before without either Twitter or the internet. And if we westerners had to rely on only a single news source to tell us what what going on, I'd still choose the dwindling band of serious outlets that provide real reporting from dangerous (and expensive) places." If forced to choose between the BBC and Twitter, I would surely choose the former. But this tells the reader nothing about the relative value of 140-character bursts from protesting Iranians, instead making the blindingly obvious point that Twitter isn't the preferred method for receiving nuanced news.

It is doubtless true that, seeking out a hot new media meme, the role of social networks has been significantly inflated by (some) reporters and (many) bloggers. But could we trace the overblown Twitter love to overblown traditional media hate? Take this example, from the increasingly unfunny media critic Jon Stewart, attacking CNN for using "unverified" photos and videos from sites like Flickr and YouTube. After the de rigueur video compare-and-contrast video segment (CNN are liars because they claim to not typically use material from the Internet, yet Rick Sanchez takes questions from viewers via Twitter!), Stewart declares that cable news channels are never to be trusted.

Beyond the reductionist "mainstream media sucks" message here, Stewart is arguing that if CNN can't get a visa extension to report from Tehran it has failed its viewers. If the network airs captivating images from the protests it gathered from online sources, but plays it safe by noting that they cannot be independently verified, it has failed its viewers. (Last week, before the protests, Stewart mocked those who feared Iranian power because, as the elections demonstrated, the country "appears to have one of the more vibrant democracies in the Middle East.")

Much of this smacks of old media protectionism; another chance to underscore the dubious point that only professionals can discern what is accurate and what is disinformation—a skill with which old media gatekeepers are often credited but too rarely demonstrate. Warnings that certain political forces in Iran might use Twitter to spread false information are fair enough (and have already been heeded by attentive Iranians), but there is nothing new about the phenomenon. One need only to look at Christopher Andrews and Vassily Mitrokhin's book The World Was Going Our Way: The KGB and the Battle for the Third World to see the number of false stories that Soviet intelligence slipped into Western newspapers and "retweeted" into the American media. Nor was this exclusively the domain of the KGB. Journalist Claire Sterling, Bob Woodward wrote in Veil: The Secret Wars of the CIA, inadvertently used a few pieces of CIA "black propaganda" first published in the Italian press and recycled back into newspapers in the United States.

It took years, if not decades, to correct this misinformation. The dubious reports from Iran, though of questionable significance in the first place, took, at most, a few days to dispel.

While it is less interesting to focus on the Internet—yes, the Internet in general—as a vital tool for Iranian dissidents, it's necessary to point out that, for non-Iranians both observing and covering the rebellion, Twitter is playing a secondary role to websites like YouTube and Flickr, both of which have provided compelling images and video from the streets of Tehran. And while Twitter is not the reason students are on the streets, it has played a significant role in allowing the opposition to organize and spread its message to supporters in the West. To dismiss it as pure media hype would be foolish.

Michael C. Moynihan is a senior editor of
Reason magazine.

Days of ‘Malaise’

Days of ‘Malaise’

Ah, the Jimmy Carter era: presidential scolding, gas lines, Studio 54 and the ‘killer rabbit’

On July 15, 1979, Jimmy Carter spoke to the nation from the Oval Office about the energy crisis then gripping America. The address has become known as “the malaise speech” even though Mr. Carter never once spoke the “m” word. It is now the subject of Ohio University history professor Kevin Mattson’s excellent “What the Heck Are You Up To, Mr. President?”

Mr. Carter had already tried to raise consciousness about energy with a speech two years earlier, in April 1977. “This difficult effort,” he said then, “will be the moral equivalent of war.” Moral equivalent of war led to the unfortunate acronym MEOW, which seemed especially apt when neither congressional action nor ­public mobilization ensued.

Associated Press

President Jimmy Carter in a televised address on July 15, 1979, about the energy crisis then gripping the nation.

New York's Cleansing Coup

Tax refugee Tom Golisano still cares about his old state.

New York

It didn't seem possible that New York's state legislature, long known for backroom deals that favor entrenched politicians, could do anything to give itself a worse reputation. Then came a surprise coup in the state Senate last week.

Now Albany is locked in gridlock as both Democrats and Republicans claim to have enough votes to block the Senate's business. One judge has already refused to get involved in the dispute, and Democratic Gov. David Paterson looks helpless on the sidelines.

Most New Yorkers feel powerless to affect their legislature, and that goes for most of the members themselves. For decades, every issue of consequence has been controlled by three men in a room -- the Assembly speaker, the Senate majority leader and the governor.

Almost all legislation that handles big issues has been ushered through with no debate and no opportunity for members to modify it. The result is a political machine that keeps the state's government and bureaucracies up and running, but has been unable to respond to public demands for property-tax and other reforms.

Former Democratic state Sen. Daniel Hevesi has put it this way: "Governance in Albany is so broken that I don't believe it functions any longer as a representative democracy."

Even so-called reformers are part of the problem. The state's constitution requires that every 20 years voters be given the chance to vote on whether to convene a constitutional convention to inject fresh ideas into the process. The last time the issue came up, in 1997, most reform groups were either neutral or against the idea of a convention.

Francis Barry, a policy adviser to New York Mayor Mike Bloomberg, explains why in his new book, "The Scandal of Reform": "The most serious problem for good government groups was not that a convention might be run by elected officials but that it might be run by the wrong elected officials: Republicans."

In the end, a new convention was rejected by voters by a wide margin. Dysfunction-as-usual continued.

Enter Tom Golisano, a populist, an upstate billionaire, and a three-time independent candidate for governor. Last year, Mr. Golisano grew upset with the feckless GOP majority in the Senate and poured $5 million into the coffers of Democratic challengers, who won enough seats to end the GOP's 40-year control of that body.

But Mr. Golisano ended up with buyer's remorse when the new Senate Democratic majority refused to pass rules that would have made the budget process more transparent. The final straw came in April, when Democrats pushed through a budget that hiked spending and raised state income taxes to a height not seen in the state since the 1960s (the top marginal income tax rate is now 9%, up from 6.85%).

"It was irresponsible, since the top 1% of earners account for about half of state revenue," Mr. Golisano told me. "We're the ones who can -- and will -- leave."

He should know. He's already gone.

Mr. Golisano recently fled to tax-friendly Florida, a move that saves him $13,800 a day in taxes. But he didn't abandon his political projects in New York. He demanded and got a meeting with state Senate Majority Leader Malcolm Smith, reminding him of his pledges last year to be fiscally responsible. Mr. Golisano claims that Mr. Smith spent much of the meeting checking his BlackBerry.

Frustrated, Mr. Golisano shifted his support to two New York City Democratic senators, Pedro Espada and Hiram Monserrate, who staged last week's coup with the Republicans. The move was quickly denounced as media outlets noted the plotters appeared to be more upset by being shortchanged on pork-barrel projects than the violation of any great principle.

But Mr. Golisano's support came with a price. A new rules package was quickly unveiled that imposes term limits on the state Senate's leadership positions and chairmen, requires staff budgets to be allocated more fairly, and empowers a majority of senators to pull bills out of committee for a vote.

"It's a beginning," he told reporters. "I hope a lot more gets done."

Yet cynicism abounds. From the outset, Democrats refused to accept the outcome of the coup. Instead they walked out of the Senate chamber, turned out the lights, and locked the doors. They also pressured Mr. Monserrate into flipping back to their side, thus leaving the Senate divided with 31 votes on each side.

Not to be outdone, Mr. Espada countered by making the legally dubious claim that because he was elected Senate president last week, and is therefore also the state's acting lieutenant governor, he has the power to cast two votes (one as a senator, and second one as lieutenant governor) to break the impasse.

Messrs. Espada and Monserrate face cloudy futures. The former is under investigation for allegations that he doesn't actually live in the Bronx district he represents. The latter has been indicted on state charges for allegedly assaulting his girlfriend. (He has pleaded not guilty.) If either is forced from office, one of the parties will gain undisputed control of the Senate.

But unless that happens quickly, what's needed is for lawmakers to find a way to get beyond the mudslinging and focus on the state's core problems -- a deep recession, and a government that's raising taxes when employers are hurting in order to finance irresponsible spending on health care and education. (New York spends twice the national average per Medicaid patient and 63% more than the national average on education.)

Republicans have been complicit for so long in New York's budget mess that Dean Skelos, the Republican senate leader, needs to do more than promise reforms down the road. John Faso, the 2006 Republican candidate for governor, says an acid test should be whether Mr. Skelos and other Republicans can push through a cap on property taxes used to fund education spending increases. The cap, popular with homeowners, is reviled by teachers unions and politicians in Albany.

The coup in Albany has been a messy affair. But with the state government long hostage to its own arrogance, any disruption raises a potential for positive change. Mr. Golisano deserves points for providing that disruption, even though he has left the state.

Mr. Fund is a columnist for WSJ.com.

Founding Fathers

Our revolutionary leaders wanted the best from their children.

Barack Obama is a doting father who says that one of the greatest pleasures of his presidency is eating dinner with his daughters on the nights when he is in town.

Some of the nation's Founding Fathers were not so lucky. Doting dads though they were, patriotic service forced them to live apart from their families for years at a time. Benjamin Franklin, John Adams and Thomas Jefferson, the three Founders who spent the most time abroad, missed milestone events. Franklin was a no-show at his daughter's wedding and his wife's funeral. Adams was in Philadelphia when his wife, Abigail, gave birth to a stillborn daughter. While in France, Jefferson received word that his 2-year-old daughter had died of whooping cough. The news came seven months after her funeral.

Trans-Atlantic separations proved too painful to bear. Whenever possible, the Founders took their children with them or sent for the children once they had established a household abroad. John Adams set off on his maiden voyage to England accompanied by his 9-year-old son, John Quincy. On a second crossing he brought along sons John Quincy and Charles. His teenage daughter, Abigail, arrived in France with her mother a few years later. Benjamin Franklin's son, William, and his two grandsons, Temple Franklin and Benny Bache, were part of the Franklin overseas ménage at various times. A new widower, Jefferson took his elder daughter, Patsy, along with him on his diplomatic mission to France and later sent for his younger daughter, Polly.

The children were not always thrilled to go. Charles Adams sobbed inconsolably as he boarded the ship with his father. Eight-year-old Polly begged her father to let her remain at home in Virginia with her beloved aunt: "I am very sorry you sent for me," she bravely wrote. "I don't want to go to France." Still she went, accompanied on the journey by a 14-year-old babysitter named Sally Hemings. Upon arrival in London, the homesick girl spent the next month in the temporary care of Abigail Adams until her father sent a French-speaking manservant to fetch her. Abigail pointedly reminded Jefferson that the experience was traumatic for the child who, once again, was faced with separation from a mother figure and sent off to live with a father she did not know.

Nor was the arrangement a piece of cake for their fathers. In addition to the all-consuming diplomatic responsibilities of winning allies and funders for the Revolution, these lone fathers had to raise Revolutionary Kids. Chief among their responsibilities was securing an elite European education for their young offspring while protecting them from the temptations and dissipations of living abroad. The Founders' children and grandchildren kept company with an aristocratic power elite, savored Continental fads and fashions, and learned to speak fluent French.

It was all too easy, their fathers worried, for the Revolutionary Kids to abandon the republican virtues of industry and frugality and, even worse, to lose their native language. "It is a mortification to me," John Adams wrote to John Quincy, "that you write better in a foreign language than in your mother tongue."

To protect their children from corrupting influences, therefore, the Founding Fathers had to part with them again. Franklin dispatched his 9-year-old grandson, Benny Bache, to school in Switzerland for five years. The Adams sons attended schools in Holland. The Jefferson daughters were placed in a convent in Paris.

Yet no matter how devoted, the Founding Fathers were not inclined, as today's parents are, to lavish their students with praise. "Good job" was not in their vocabulary. "Take care you never spell a word wrong," Jefferson admonished his younger daughter. "Remember too . . . not to go out without your bonnet because it will make you very ugly and then we should not love you so much."

Nor did the Founding Fathers leave it up to their children to "make good choices." Instead, they moralized endlessly on the perils of indolence, time-wasting and thriftlessness. Jefferson reproved Patsy: "If at any moment, my dear, you catch yourself in idleness, start from it as you would from the precipice of a gulph." John Adams lectured John Quincy, hardly a slouch of a student, to "lose no Time. There is not a moral Percept of clearer Obligation or of greater Import."

When Benny Bache asked his grandfather for a gold watch, Franklin responded tartly: "You should remember that I am at a great Expence for your education . . . and you should not tease me for things that can be of little or no Service to you."

Even the profligate Thomas Jefferson embraced the virtue of frugality. When Patsy appealed for extra money, her father refused: "The rule I wish to see you governed by is of never buying anything which you have not money in your pocket to pay for. Be assured that it gives much more pain to the mind to be in debt, than to do without any article whatever which we may seem to want."

Judged by today's psychological standards, these 18th century fathers sound harsh and unfeeling. Yet to see the Founding Fathers as flesh-and-blood dads, to glimpse their struggles to rear their children at a time of grave uncertainty and peril, is to appreciate their service and sacrifice anew. Founding a nation meant more than winning a war. It also called upon the nation's Founders to pass on the passion for freedom, educational excellence and civic virtue to their children and grandchildren.

John Adams said it best in a letter to Abigail: "The education of our children is never out of my Mind . . . Fire them with Ambition to be useful and make them disdain to be destitute of any useful or ornamental knowledge or accomplishment. Fix their Ambition upon great and solid objects."

Ms. Whitehead is director of the John Templeton Center for Thrift and Generosity at the Institute for American Values and co-editor of "Franklin's Thrift: The Lost History of a American Virtue," just published by Templeton Press.

Whose Side Are We On? You Have to Ask?

With Twitter's help, the youth of Iran take on the ayatollahs.

America so often gets Iran wrong. We didn't know when the shah was going to fall, didn't foresee the massive wave that would topple him, didn't know the 1979 revolution would move violently against American citizens, didn't know how to handle the hostage-taking. Last week we didn't know a mass rebellion was coming, and this week we don't know who will emerge the full or partial victor. So modesty and humility seem appropriate stances from which to observe and comment.

[DECLARATIONS] David Gothard

That having been said, it's pretty wonderful to see what we're seeing. It is moving, stirring—they are risking their lives over there in a spontaneous, self-generated movement for greater liberty and justice. Good for them. In a selfish and solipsistic way—more on that in a moment—the uprising, as it moves us, reminds us of who we are: lovers of political freedom who are always and irresistibly on the side of the student standing in front of the tank or the demonstrator chanting "Where is my vote?" in the face of the billy club. Good for us. (If you don't understand who the American people are for, put down this newspaper or get up from your computer, walk into the street and grab the first non-insane-looking person you meet. Say, "Did you see the demonstrations in Iran? It's the ayatollahs versus the reformers. Who do you want to win?" You won't just get "the reformers," you'll get the perplexed-puppy look, a tilt of the head and a wondering stare: You have to ask?)

If the rebels on the street win, however winning is defined, they, being more modern and moderate than the ruling government, will likely have a moderating influence on their government. If the rebels on the street lose, however that is defined, this fact remains: Something has been unleashed, and it won't be going away. A thugocracy has been revealed as lacking the support and respect of a considerable portion of its people, and that portion is not solely the most sophisticated and educated but, far more significantly, the young. Half the people in Iran are under 27. When the young rise against the old, the future rises against the past. In that contest, the future always wins. The question is timing: soon or some years from now? (A heartening Twitter feed Thursday, from Andrew Sullivan's site: "Fact is, we've seen variety of protesters grow: young+old, students+professionals, women in chador+westernized students.")

Stifling and corrupt religious autocracy has seen its international standing diminished, and Mahmoud Ahmadinejad, who is among other things a Holocaust denier, has in effect been rebuked by half his country, and through free speech, that most painful way to lose your reputation, which has broken out on the streets. He can no longer claim to speak for his people. The rising tide of the young and educated seems uninterested in reflexively hating the West and deriving their meaning from that hatred.

To refuse to see all this as progress, or potential progress, is perverse to the point of wicked. To insist the American president, in the first days of the rebellion, insert the American government into the drama was shortsighted and mischievous. The ayatollahs were only too eager to demonize the demonstrators as mindless lackeys of the Great Satan Cowboy Uncle Sam, or whatever they call us this week. John McCain and others went quite crazy insisting President Obama declare whose side America was on, as if the world doesn't know whose side America is on. "In the cause of freedom, America cannot be neutral," said Rep. Mike Pence. Who says it's neutral?

This was Aggressive Political Solipsism at work: Always exploit events to show you love freedom more than the other guy, always make someone else's delicate drama your excuse for a thumping curtain speech.

Mr. Obama was restrained, balanced and helpful in the crucial first days, keeping the government out of it but having his State Department ask a primary conduit of information, Twitter, to delay planned maintenance and keep reports from the streets coming. Then he made a mistake, telling the New York Times in terms of our national security there is little difference between Mr. Ahmadinejad and his foe, Mir Hossein Mousavi, which may or may not in the long run be true but was undercutting of the opposition.

What now? Americans, and the West, should be who they are, friends of freedom. Iranians on the street made sure they got their Twitter reports and videos here. They trust us to spread the word through our technology. A lot of the signs they held were in English. They trust us to be for change and to advance their cause, and they're right to trust us.

Should there at this point, more than a week into the story, be a formal declaration of support from the U.S. government? Certainly it's time for an indignant statement on the abuses, including killings and beatings, perpetrated by the government and against the opposition. It's never wrong to be on the side of civilization. Beyond that, what would be efficacious? It must be asked if a formal statement of support for the rebels would help them. And they'd have a better sense of it than we.

If the American president, for reasons of prudence, does not make a public statement of the government's stand, he could certainly refer, as if it is an obvious fact because it is an obvious fact, to whom the American people are for. And that is the protesters on the street. If he were particularly striking in his comments about how Americans cannot help but love their brothers and sisters who stand for greater freedom and democracy in the world, all the better. The American people, after all, are not their government. Our sentiments are not controlled by the government, and this may be a timely moment to point that out, and remind the young of Iran, who are the future of Iran, that Americans are a future-siding people.

A small point on the technological aspects of the Iranian situation. Some ask if the impact of the new technology is exaggerated. No. Twittering and YouTubing made the story take hold and take off. But did the technology create the rebellion? No, it encouraged what was there. If they Twittered and liveblogged the French Revolution, it still would have been the French Revolution: "this aft 3pm @ the bastille." It all still would have happened, perhaps with marginally greater support. Revolutions are revolutions and rebellions are rebellions; they don't work unless the people are for it. In Iran, Twitter reported and encouraged. But the conviction must be there to be encouraged.

The interesting question is what technology would have done after the Revolution, during the Terror. What would word of the demonic violence, the tumbrels and nonstop guillotines unleashed circa 1790-95 have done to French support for the Revolution, and world support? Would Thomas Jefferson have been able to continue his blithe indifference if reports of France grimly murdering France had been Twittered out each day?

The great question is what modern technology can do not in the short term so much as the long. It is not the friend of entrenched tyranny. Connected to which, it would be nice if the technologies of the future were not given babyish names. Twitter, Google, Facebook, etc., have come to be crucial and historically consequential tools, and yet to refer to them is to talk baby talk. In the future could inventors please keep the weight and dignity of history in mind?

Tear Gas Fired on Streets of Tehran

Police Clash With Protestors in Iran

Witnesses Say Forces Use Tear Gas, Water Cannons to Break Up Rally

Police beat protesters and fired tear gas and water cannons at thousands who rallied in Tehran Saturday in open defiance of Iran's clerical government, sharply escalating the internal conflict.

Eyewitnesses described fierce clashes near Revolution Square in central Tehran after some 3,000 protesters, many wearing black, chanted ``Death to the dictator!'' and ``Death to dictatorship!'' Police fired tear gas, water cannons and guns but it wasn't immediately clear if they were firing live ammunition.

Riot police try to disperse protestors in Iran's capital, as the protestors defy a ban on demonstrations.

English-language state TV confirmed that police had used batons and other non-lethal weapons against what it called unauthorized demonstrations.

The witnesses told the Associated Press that between 50 and 60 protesters were seriously beaten by police and pro-government militia and taken to Imam Khomeini hospital in central Tehran. People could be seen dragging away comrades bloodied by baton strikes.

Some protesters appeared to be fighting back, setting fire to militia members' motorcycles in streets near Freedom Square, witnesses said.

Helicopters hovered over central Tehran. Ambulance sirens echoed through the streets and black smoke rose over the city. Tehran University was cordoned off by police and militia while students inside the university chanted ``death to the dictator,'' witnesses said.

The English-language state channel said a blast at the Tehran shrine of Ayatollah Ruhollah Khomeini had killed one person and wounded two but the report could not be independently confirmed due to government restrictions on independent reporting. The shrine is about 12 miles south of central Tehran.

Hundreds of thousands of supporters of reformist presidential candidate Mir Hossein Mousavi took to the streets for four consecutive days this week demanding the government cancel and rerun June 12 elections that ended with a declaration of overwhelming victory for hardline President Mahmoud Ahmadinejad. Mr. Mousavi says he won and Ahmadinejad stole the election through widespread fraud.

Supreme Leader Ayatollah Ali Khamenei sided firmly with Mr. Ahmadinejad on Friday, saying the vote reflected popular will and ordering opposition leaders to end street protests or be held responsible for any ``bloodshed and chaos'' to come. The statement effectively closed the door to Mr. Mousavi's demand for a new election, ratcheting up the possibility of a violent confrontation.

Police had clashed with protesters around Tehran immediately after the vote, and gunfire from a militia compound left at least seven dead, but the full force of the state remained in check until Saturday.

Tehran Province Police Chief Ahmad Reza Radan said that police forces "will crack down on any gathering or protest rally which are being planned by some people.'' The head of the State Security Council also reiterated the warning to Mr. Mousavi that he would be held responsible if he encouraged street protests.

Eyewitnesses said thousands of police and plainclothes militia members filled the streets to prevent rallies. Fire trucks took up positions in Revolution Square and riot police surrounded Tehran University, the site of recent clashes between protesters and security forces, one witness said.

All witnesses spoke on condition of anonymity because they feared government reprisals for speaking with the press. Iranian authorities have placed strict limits on the ability of foreign media to cover recent events, banning reporting from the street and allowing only phone interviews and information from officials sources such as state TV.

The government has blocked Web sites such as BBC Farsi, Facebook, Twitter and several pro-Mousavi sites that are conduits for Iranians to tell the world about protests and violence. Text messaging has not been working in Iran since last week, and cellphone service in Tehran is frequently down.

Getty Images

An Iranian woman holds a picture of Iran's supreme leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad during a pro-government demonstration.

Mr. Mousavi and the two other candidates who ran against Mr. Ahmadinejad had been invited to meet with Iran's Guardian Council, an unelected body of 12 clerics and Islamic law experts close to Mr. Khamenei that oversees elections. Its spokesman told state TV that Mr. Mousavi and the reformist candidate Mahdi Karroubi did not attend.

The council has said it was prepared to conduct a limited recount of ballots at sites where candidates claim irregularities but Mr. Mousavi's supporters did not withdraw his demands for a new election.

A spokesman for Mr. Mousavi said Friday the opposition leader was not under arrest but was not allowed to speak to journalists or stand at a microphone at rallies.

Both houses of the U.S. Congress approved a resolution on Friday condemning ``the ongoing violence'' by the Iranian government and its suppression of the Internet and cellphones.

In an interview taped Friday with CBS, Mr. Obama said he is very concerned by the "tenor and tone'' of Mr. Khamenei's comments. He also said that how Iran's leaders "approach and deal with people who are, through peaceful means, trying to be heard'' will signal "what Iran is and is not.''

Friday, June 19, 2009

NewsBusted 6/19/09

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