The Week Ahead: November 26-December 02

Led Zeppelin plays a historic concert, Korean defence ministers meet, European airlines are blacklisted, Indonesia plants 79m trees, Nelson Mandela hosts Aids benefit concert, and Vladimir Putin makes a bid to prolong his hold on power in Russia

November 26

Middle East peace meeting
George W Bush, US president, hosts Ehud Olmert, Israeli prime minister, and Mahmoud Abbas, president of the Palestinian Authority, for talks on the Middle East peace process in Maryland. Delegates from Syria, Saudi Arabia and Russia will attend (to November 27).

UN discusses Sudan
The United Nations Security Council is due to discuss Sudan with Jan Eliasson, the UN secretary general’s special envoy to Darfur.

Report on nuclear Iran
Javier Solana, the European Union’s foreign policy chief, reports to the P5+1 group – the US, UK, France, Germany, Russia and China – on Iran’s nuclear programme. A UN Security Council resolution is expected this month.

Mobile phone advertising
A conference in Budapest, Hungary, is to look at how to exploit commercial opportunities through mobile phone advertising (to November 29).

Check on nuclear fuel
The International Atomic Energy Agency is scheduled to visit Novosibirsk (to November 29) to inspect the sealing of a container of fuel to the Bushehr nuclear power plant in Iran.

Food safety addressed
China is scheduled to host an international conference (to November 27) on food safety in Beijing following global concerns over the safety of its export items.

Red Cross conference
The 30th International Conference of the Red Cross and Red Crescent Movement is due to take place in Geneva (to November 30).

CBI conference
The CBI is scheduled to hold its annual conference, CBI Interactive, in London (to November 27). Keynote addresses will be delivered by Alistair Darling, UK chancellor, and David Cameron, the Conservative party leader.

Led Zeppelin reunion
The surviving members of Led Zeppelin, with original drummer John Bonham replaced by his son Jason, play a full concert together for the first time since 1980. More than 1m people registered for a chance to buy one of the 20,000 tickets for the London concert.

November 27

Pan-Korean meeting
Kim Il Chol, North Korean defence minister, hosts Kim Jang-soo, his South Korean counterpart, for talks on ending hostile legislation and creating a joint fishing area (to November 29).

British Fashion Awards
The British Fashion Awards 2007 are scheduled to take place in London.

Nordic business
Ministers from the Nordic region are to meet in Copenhagen to discuss business and energy matters (to November 28).

AU discusses migration
The African Union is scheduled to meet in Addis Ababa to discuss the “Free Movement of Persons in Africa” (to November 29).

Oil magnate sentenced
Oscar Wyatt, the Texas oil magnate, is scheduled to be sentenced for illegal dealings with Saddam Hussein under the UN’s oil-for-food programme.

Hedge funds event
Zurich is due to host Hedge Funds World 2007 (to November 29), looking at best practice, market developments, transparency and risk issues.

Tigers leader talks
Velupillai Prabhakaran, leader of the Tamil Tigers, makes his annual speech to Sri Lanka’s Tamil population.

Fastest-growing companies
Based on revenues from 2002-06 in Europe, the Middle East and Africa, independent auditor Deloitte gives its list of the fastest growing companies.

November 28

EU-China summit
José Sócrates, prime minister of Portugal, which holds the EU’s presidency, will meet top Chinese officials including Hu Jintao, president, as part of the 10th EU-China summit in Beijing. He will also attend the closing ceremony of an associated business summit.

Kosovo independence
Serbia’s southern province of Kosovo is expected to declare its secession on Albania’s independence day. Years of negotiations has seen Serbia block moves for independence by Kosovo’s Albanian majority.

European airline blacklist
The European Commission is due to adopt an airline blacklist, encouraging airlines to comply strictly with EU safety standards.

N Rock investors meet
The UK Shareholders’ Association will hold a meeting for Northern Rock shareholders, which will discuss steps that should be taken to protect assets in the mortgage lender.

Israel-Lebanon report
The Winograd commission into Israel’s attack on Hizbollah in Lebanon in July 2006 is expected to criticise Israel’s military.

Energy summit
The Middle East and Asia Energy Summit is due to be held in Singapore (to November 29). Organised by the Gulf Research Center and IBC Gulf Conferences, the event is being backed by the Singaporean foreign ministry and will address topics such as trade and oil.

Billboard music awards
The eighth annual Billboard R&B and hip-hop awards are scheduled to take place in Atlanta.

Medicine workshop
The European Commission is due to host a workshop in Brussels on the simplification of medicine regulation between Europe and the US.

Blake’s birthday
The 250th anniversary of the birth of William Blake, the English poet and painter, is to be marked.

Indonesia plants 79m trees
Ahead of a UN climate change meeting in Bali, Indonesia plans to plant 79m trees as part of a global campaign against deforestation.

November 29

Bush holds talks with Saca
Elias Antonio Saca, president of El Salvador, is due to meet George W Bush, US president, to discuss recent regional developments on organised crime, drug smuggling and international terror.

Algeria holds local election
Local elections are due to take place in Algeria. The Islamic Salvation Front has been excluded.

Energy emergency plans
The International Energy Agency is due to report on its response system for energy emergencies and supply disruptions.

Secret service
Rowan Williams, Archbishop of Canterbury, is due to hold a secret communion service for gay clergy and their partners under the Chatham House rule, which means the sources of comments at the meeting will not be revealed. The service will add further controversy to the church which has been split since the 2003 ordination in the US of gay bishop Gene Robinson.

Afghan judge makes speech
Abdul Salam Azimi, chief justice of Afghanistan’s supreme court, is to address the US Institute of Peace on progress in installing the rule of law in Afghanistan.

November 30

EU-India summit
An EU-India summit is due to take place in New Delhi. The EU delegation, headed by José Sócrates, prime minister of Portugal, holder of the EU presidency, and José Manuel Barroso, European Commission president, will meet Manmohan Singh, the Indian prime minister.

Mobile phones on aircraft
Ofcom, the communications regulator, is to announce plans enabling airlines to offer mobile services on UK-registered aircraft. The proposals have been developed jointly with other EU countries and are intended to cover all European airspace.

December 1

Thain takes over at Merrill
John Thain is due to replace Stan O’Neal as chief executive of Merrill Lynch.

Deadline for Musharraf
Pervez Musharraf is due to step down as Pakistan’s army chief by this day. Mr Musharraf says he will stand down once the supreme court rules he can stay on as president.

World Aids Day concert
Nelson Mandela is due to host a World Aids Day charity concert in Johannesburg.

European film awards
The European Film Academy is scheduled to present its 20th annual awards in Berlin. The Last King of Scotland, The Queen and Control are nominated for awards.

Russians leave
The last Russian soldiers are due to leave Georgian soil. Russia currently maintains two military bases in the country, leftovers from the Soviet era.

Miss World
More than 125 delegates are due to compete in the 57th annual Miss World beauty contest in China.

December 2

Putin contests Duma vote
Russia is to hold parliamentary elections. President Vladimir Putin, unable to stand for a third presidential term,will head the United Russia party’s list for the Duma in an attempt to become prime minister when his term as president expires. The Organisation for Security and Co-operation in Europe has cancelled observation plans due to what it calls “unprecedented” restrictions.

Venezuela referendum
The South American country is due to hold a referendum, championed by President Hugo Chávez, to remove term limits on its presidency, a move criticised by former defence minister Raul Baduel.

UAE celebrates independence
The United Arab Emirates are to celebrate their National Day, marking independence from Britain.

Berlusconi leads protest
Silvio Berlusconi, the Italian opposition leader, is scheduled to lead an anti-government demonstration in Rome.

Footballer Of The Year award
France Football, the football magazine, presents the European Footballer Of The Year award. Nominees this year include Iraqi Younis Mahmoud, Manchester United’s Carlos Tevez and Barcelona’s Lionel Messi.

PetroEcuador Shakeup Fails to Stem Protests Cutting Output

Nov. 30 -- Ecuador's state oil company said a management shakeup failed to blunt violent protests in the Amazon that have hurt output, and a state of emergency has had no effect on the disorder.

Production today at PetroProduccion, the company's subsidiary affected by the attacks, remains about 20 percent below the normal 175,000 barrels, causing lost revenue of about $3 million a day, PetroEcuador said in an e-mailed statement. Ecuador produces about 500,000 barrels a day.

Settlers in the Amazon region, home to almost all of Ecuador's oil industry, have been protesting for six straight days, blocking roads and attacking facilities with dynamite as they try to force the government and company to provide improved roads, jobs, and environmental cleanup.

President Rafael Correa yesterday declared a state of emergency over both the company and the affected province of Orellana, removing PetroEcuador President Carlos Pareja along with Interior Minister Gustavo Larrea. He replaced Pareja with Navy officer Fernando Zurita, blaming Pareja for ``mismanagement'' of the crisis and poor efficiency at the company. He appointed Pareja to the job when he took office in January.

``If for any reason the protests should widen or if the problem continues as it has for a number of years, he can use the Navy to assert control over the sector,'' said analyst Eleanor Murphy at Control Risks in London in a telephone interview.

Indigenous Movements

Correa, whose party won about 60 percent of the vote in elections to a constitutional assembly in September, has clashed with regional political leaders in Orellana, where support for an opposition party close to indigenous movements runs strong. The party, Pachakutik, succeeded in having several members elected to the assembly, largely shutting out Correa's Alianza Pais.

Zurita traveled to the area on a fact-finding mission today, PetroEcuador said. Several police officers have been hurt during the protests, the company added.

Ecuador is set to rejoin the Organization of Petroleum Exporting Countries on Dec. 5 after a 15-year absence from the group.

Paulson, Banks in Talks to Stem Surge in Foreclosures (Update6)

Nov. 30 -- U.S. Treasury Secretary Henry Paulson is negotiating an agreement with banks to stem a surge in foreclosures by fixing interest rates on loans to subprime borrowers, according to people familiar with a meeting he led yesterday.

Paulson, who will address a housing conference on Dec. 3, presided over a one-hour gathering at the Treasury Department in Washington with federal regulators, bankers and lobbyists. Citigroup Inc., Wells Fargo & Co. and Washington Mutual Inc. executives attended, said a person present, who spoke on condition of anonymity.

The Bush administration cut its forecast for economic growth yesterday, reflecting a deepening housing recession that's roiled financial markets since August. The Commerce Department reported the same day that the median price of a new house fell 13 percent in October from a year earlier, while fewer homes were sold than economists anticipated.

``One of the roles of Treasury is to say `come on, let's get together and see what we can do,''' said Wayne Abernathy, executive director of financial-institutions policy at the American Bankers Association in Washington and a former Treasury assistant secretary. ``You're likely to come up with something that will work both in the marketplace and honor the sanctity of the contracts involved.''

Stocks Advance

Stocks climbed today on speculation Paulson's efforts may help slow credit losses. They also gained after Federal Reserve Chairman Ben S. Bernanke said ``renewed turbulence'' in financial markets may hurt growth, reinforcing investors' expectations for an interest-rate cut next month. The Standard & Poor's 500 stock index rose 0.8 percent to 1,481.14 at the close in New York.

Paulson was joined yesterday by Federal Deposit Insurance Corp. Chairman Sheila Bair, Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Reich.

Bair has proposed letting borrowers with adjustable-rate subprime mortgages, who are living in their homes and unable to afford resets, get extensions on the starter rate for at least five years. They could also be offered 30-year fixed-rate loans. Reich prefers a three-year freeze.

Also represented at the meeting was the American Securitization Forum, which lobbies for investors, traders, underwriters, accounting firms, ratings companies and other institutions involved in the creation and sale of mortgage- backed securities.

Persuade Investors

U.S. Senator Charles Schumer said the challenge will be to persuade those who buy the securities to back Paulson's effort.

``This is the first time that the Bush administration is working toward a solution that meets the magnitude of the problem,'' Schumer, a New York Democrat, said in a statement.

``But there is a $64,000 question: Will investors go along with this plan?'' he said. ``And if not, can they be compelled to?''

Senate Banking Committee Chairman Christopher Dodd sent a letter to Paulson today urging a ``systematic and proactive'' approach.

``The objective of modifications should be to make homeownership sustainable, rather than deferring foreclosure to a later date,'' wrote Dodd, a Connecticut Democrat who is seeking his party's presidential nomination.

Subprime loans, given to people with poor or incomplete credit histories, typically offer a low introductory rate for the first two or three years. The rate then resets for the duration of the mortgage. About 100,000 subprime loans will reset to higher rates each month over the next two years, according to UBS AG.

`Transparent Process'

``There needs to be agreement and commitment to modify the loans, and there needs to be a transparent process whereby we can monitor the agreement,'' Bair said in an interview in Washington this month.

Jennifer Zuccarelli, a Treasury spokeswoman in Washington, declined to discuss the meeting in detail. ``We are encouraged progress is being made,'' she said.

Paulson said in an interview with Business Week three days ago that ``well before the end of the year, we will have a template and the infrastructure in place to make it easier to handle the wave'' of mortgage resets. Treasury spokeswoman Brookly McLaughlin confirmed the comments today.

Paulson and Alphonso Jackson, secretary of the Department of Housing and Urban Development, are working with ``mortgage lenders and holders and service providers to provide help to Americans so they can stay in their homes,'' White House spokesman Scott Stanzel said today. ``It would be premature to talk about any other announcements.''

Delinquency Rate

Delinquencies on subprime mortgages, which account for less than 15 percent of the $11.5 trillion U.S. home mortgage market, climbed after what Fed officials labeled ``lax'' lending standards spread the past two years. Homeowners were behind on 17 percent of adjustable-rate subprime loans in June, compared with 4.2 percent for prime mortgages of the same type, Mortgage Bankers Association data show.

Financial firms are marking down about $66 billion related to the mortgage market, and Morgan Stanley this week ousted Co- President Zoe Cruz after the firm disclosed $3.7 billion of losses on mortgage-related securities.

The rout will get worse because defaults on home loans are likely to rise, analysts said. The FDIC estimates that 1.54 million nonprime mortgages valued at $331 billion will reset by the end of next year.

`Down Another Level'

Rising defaults ``will take the housing market down another level,'' said Mark Zandi, chief economist at Moody's Economy.com, who will attend the conference featuring Paulson next week. ``In the context of an economy that is not in recession, but pretty close, we will be in a recession right in the teeth of a presidential election.''

An index of credit-default swaps tied to subprime-mortgage bonds rose today in a sign the perceived risk of owning the securities improved. The gauge, compiled by Markit, climbed about 1 point to 78, GFI Group Inc. prices showed.

President George W. Bush's economic advisers yesterday cut their forecast for 2008 economic growth to 2.7 percent from a 3.1 percent rate projected in June. The unemployment rate will rise to 4.9 percent, compared with 4.7 percent previously estimated, according to the Council of Economic Advisers' semi- annual forecast.

SIV Agreement

Paulson may be trying the same approach he took with Citigroup, JPMorgan Chase & Co. and Bank of America Corp. in September to address structured investment vehicles, units set up by banks to finance purchases of assets such as corporate bonds and mortgage securities, Abernathy said. Treasury encouraged the banks to set up a fund that will buy assets from the SIVs, without committing any government money.

Abernathy, who was responsible for financial institutions at Treasury in Bush's first term, didn't attend the gathering yesterday.

Regulators still lack reliable estimates on the extent of the subprime mortgage crisis. Three months after they asked banks to modify loans for borrowers at risk of default, agencies have little comprehensive data on what lenders and loan servicers have done, officials say.

Treasury has urged the Mortgage Bankers Association to gather precise data on loan modifications.

``There is obviously a need to have more comprehensive data out there on what servicers are doing for borrowers,'' said John Mechem, a Bankers Association spokesman in Washington.

Moral Hazard

Mortgage-industry lobbyists have argued that an across-the- board solution is difficult to apply. Rewriting contracts also risks moral hazard -- encouraging borrowers to take on more debt in the expectation of being bailed out if needed later.

``It is really an indiscriminate procedure that would violate the terms of the contract that provide for loan-by-loan decision making,'' George Miller, executive director of the American Securitization Forum, said in an interview this month. A broad approach would ``significantly disrupt the reasonable expectation of investors'' in the $7.1 trillion market for bonds backed by mortgages.

CIERRE DEL MERCADO EN ASIA

Crude Oil Falls Below $90 on Concern Economic Growth Will Slow

Nov. 30 -- Crude oil fell below $90 a barrel in the biggest weekly loss in two and a half years on concern slowing economic growth will cut energy demand, and as Saudi Oil Minister Ali al-Naimi said supplies in the market are ``ample.''

Consumer spending in the U.S., the world's biggest oil user, rose less than forecast in October and incomes increased at the slowest pace in six months, the Commerce Department said in Washington today. Al-Naimi, speaking in Doha, said oil prices don't reflect actual production and consumption trends.

``The market is simply becoming more concerned about a possible recession that could reduce petroleum demand,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``We have been seeing evidence for some time of a weakening economy and weakening oil demand.''

Crude oil for January delivery fell $2.30, or 2.5 percent, to settle at $88.71 a barrel at 2:45 p.m. on the New York Mercantile Exchange. Futures touched $88.45 a barrel, the lowest since Oct. 25. Oil has dropped 9.7 percent this week, the biggest weekly loss since April 2005. Prices climbed to a record $99.29 a barrel on Nov. 21.

Average U.S. consumption of oil products, such as gasoline and diesel, over the four weeks ended last week was 0.5 percent lower than a year ago, according to U.S. Energy Department data.

The U.S. dollar recorded its largest weekly gain against the euro since August, pressuring oil prices which rose earlier in the month on the currency's weakness. The dollar strengthened after Federal Reserve Chairman Ben S. Bernanke yesterday signaled he may lower interest rates to bolster growth. The yen had its biggest weekly drop in almost three years.

Oil surged above $95 a barrel yesterday after an Enbridge Inc. crude oil pipeline in Minnesota exploded on Nov. 28. Enbridge said operations will return to normal within three days.

Lower Prices

The pipeline blast seems to be ``just a near-term support,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``As the details and extent of the damage and timeline for recovery came to light, it ended up pushing prices lower.''

The Enbridge pipeline blast killed two workers and cut shipments that average 1.5 million barrels a day. The pipelines transport oil to U.S. refiners, including BP Plc's plant in Whiting, Indiana, and facilities along the Gulf Coast. The U.S. imported 10.3 million barrels a day last week.

Brent crude oil for January settlement fell $1.96, or 2.2 percent, to $88.26 a barrel, the lowest since Oct. 30, on the ICE Futures Europe exchange in London.

Thirteen of 27 analysts surveyed by Bloomberg News, or 48 percent, said oil will drop through Dec. 7. Nine, or 33 percent, said prices will rise and five forecast little change. Last week, 43 percent of respondents said oil would fall.

January Options

Bets that January crude oil will fall below $85 a barrel were the most actively traded options contracts on the Nymex today. The put contracts, which represent the right to sell oil at that price, rose 55 cents to $1.13, or $1,130 per contract, according to data compiled by Bloomberg as of 4 p.m. New York time. One options contract is for 1,000 barrels of oil.

OPEC raised shipments 2 percent to 24.53 million barrels a day in the four weeks to Dec. 15, according to consulting company Oil Movements.

Saudi Arabia, OPEC's biggest producer, is adding 500,000 barrels of spare capacity in December to ensure that consumers are adequately supplied. The country is producing 9 million barrels a day, al-Naimi has said.

``They will probably give us a token production increase and, by that time, it will be well discounted,'' Ritterbusch said.

Republicans Face South Carolina Immigration `Frenzy' (Update1)

Nov. 30 -- South Carolina has embraced foreign investment, with companies from BMW to Michelin transforming a state once dominated by the textile industry. Another aspect of the global economy hasn't gone down as well: immigration.

While an influx of money from overseas has made free trade palatable even as thousands of mill jobs have vanished, voters are growing increasingly hostile to undocumented foreign workers, polls and analysts say. As a result, illegal immigration is a top economic issue in the state's Jan. 19 Republican primary, a key test for the candidates since it's the first in the South.

``Trade is all right as long as everybody goes by the same rules,'' said David Robinson, 65, who recently retired from a job at a Michelin tire factory in Spartanburg and whose son works in a Hitachi Ltd. plant nearby. Illegal immigration, on the other hand, ``is a big problem, and that's one you can get a handle on,'' he said.

South Carolina has been ``whipped into a frenzy'' over immigration, according to Greenville Mayor Knox White, and that's posing a challenge to Republican candidates such as Rudy Giuliani, Mitt Romney, John McCain and Fred Thompson. All have spoken recently about clamping down on illegal immigration, yet earlier backed policies including the establishment of ``sanctuary cities'' for undocumented residents and providing a path to citizenship.

Second to Iraq

It's striking that immigration is the paramount domestic issue in South Carolina, since the state has no more than 75,000 undocumented residents, estimates the Pew Hispanic Center, a Washington-based research group. All immigrants, legal and illegal, make up just 3 percent of the population of 4.3 million, compared with 12 percent of the U.S. as a whole.

Yet in a Clemson University Palmetto Poll in September, South Carolina Republicans ranked illegal immigration second only to the war in Iraq as the nation's biggest problem.

Immigration isn't as burning an issue for Democratic voters: In the Palmetto Poll, they ranked it as the nation's fifth-biggest problem, behind such issues as health insurance and education. Still, New York Senator Hillary Clinton's recent stumble over the question of whether illegal immigrants should be allowed to get driver's licenses suggests it might also pose a danger to candidates in that party.

Record Immigration

Some 10.3 million immigrants arrived in the U.S. between 2000 and 2007, the highest for a seven-year period in U.S. history, according to a new report by the Center for Immigration Studies in Washington. More than half of those arrivals are illegal aliens, estimates the Center.

What makes South Carolina, and the Southeast, different from the rest of the nation on immigration is that the phenomenon is new to the region, said Jeffrey Passel, a senior research associate at Pew. The number of illegal immigrants in the state grew 1,000 percent between 1990 and 2004, according to the Washington-based Urban Institute, which lists South Carolina as a ``new growth'' state for unauthorized immigrants. As of 2004, 41 percent of its immigrants were illegal.

``These are states that, a generation ago, had no immigrants, basically, so it's as much the rapidity of the change as the numerical presence,'' said Passel. That suggests the issue is more cultural than economic, political analysts say.

`Visceral' Not Economic

``It's more of a visceral than an economic issue,'' said Joseph Stewart, the chairman of Clemson's political science department, who researches racial and ethnic politics. ``It's the outsider-versus-insider reaction.''

Talking to factory workers such as Robinson and other residents makes clear that the issue transcends economics. They usually don't compete for work with illegal migrants, who tend to take the lowest-paying jobs in industries from agriculture to animal slaughtering.

Pharmacist Reid Ringer, 49, a lifelong resident of Saluda, said immigrants are destroying his community.

``We're becoming a Third World country,'' said Ringer as he took a visitor on a tour of a dozen squalid trailer parks that have sprung up in the town of 3,000 to house Hispanic immigrants. Chickens and goats roamed among the dwellings. Plumbing and garbage collection were absent, and Central American gang graffiti was evident on some buildings, while Mexican tiendas and panaderias dot the hamlet's downtown.

`Bottom Feeding'

``It's the bottom-feeding that emerges from illegal immigration, the slum lords, the declining education standards, the burden on emergency rooms, the increased crime rates,'' said Ringer. ``It wasn't like this 15 years ago.''

Victor, an illegal immigrant encountered outside a trailer, is among many who came for jobs at a local poultry-processing plant. He said he was from Mexico and worked at the plant until he got injured.

Immigrants like Victor have had little to do with the decimation of South Carolina's textile industry, which has lost 16 percent of its employment since August 2006 and is the biggest contributor to the state's job losses in recent years. Low-labor-cost countries, which churn out cheap goods, are the culprits there.

The blow has been cushioned -- and protectionist sentiments marginalized -- as South Carolina has become a magnet for foreign investment, lured by the state's base of manufacturing workers and its low tax and unionization levels.

`Connecting the Dots'

Tiremaker Michelin & Cie. of France, which has invested $2.1 billion in the state since 1975 and employs almost 8,000 workers, said in August it would spend an additional $350 million over four years, generating additional jobs.

BMW North America, a unit of Bayerische Motoren Werke AG of Munich, the world's largest luxury carmaker, said last month it would boost annual production of its X5 sport-utility vehicle and other cars in Spartanburg by 100,000 units by 2012. Germany's BASF AG and Japan's Fujifilm Holdings Corp. also have major facilities in the state.

``People around here are beginning to connect the dots that this area is increasingly tied to trade and exports,'' said Greenville's Mayor White, an immigration lawyer, adding that there's been little job displacement due to undocumented workers.

Even so, one group, the Americans Have Had Enough Coalition, plans to make immigration the defining issue in the Republican primary. In October it began running radio ads accusing Republican Senator Lindsey Graham, who like Arizona Senator McCain backed a bill proposing a path to citizenship for illegal immigrants, of ``being on the wrong side of the fence'' on the issue.

`Make an Example'

The coalition said it will also target McCain, ``if that's what it takes to expose the truth about his immigration positions,'' said executive director Roan Garcia-Quintana.

``We want to make an example of John McCain so he'll come in third or fourth in South Carolina,'' said Garcia-Quintana, a refugee from Cuba and now a U.S. citizen. He also has his doubts about Giuliani, a former New York mayor, and former Arkansas Governor Mike Huckabee.

Immigration was the focus of the first question in a debate this week in Florida among the Republican candidates, opening the way for them to criticize each other's records while vying to sound the toughest on the issue.

``I want to assure you that I'll enforce the borders first,'' said McCain.

Romney came under the sharpest attack, with Giuliani accusing the former Massachusetts governor of operating a ``sanctuary mansion'' because illegal aliens worked at his home.

South Carolina Republican State Senator Jim Ritchie, who has been holding town hall meetings around the state on immigration, said voters view the issue as a test of character for the candidates.

``People in this state are looking for a president who is willing to take bold action in Washington on immigration, to put political capital out there to compel Congress to act,'' he said.

Moody's Says Citigroup SIV Debt Ratings Under Threat (Update3)

Nov. 30 -- Moody's Investors Service said $64.9 billion of debt sold by Citigroup Inc.'s structured investment vehicles was cut or placed on review for a downgrade as part of a review of $130 billion of SIV debt.

The ratings company surveyed 20 SIVs since Nov. 7 and expanded its review after noticing ``significant additional deterioration'' in asset values, according to a statement today. Links Finance Corp., a SIV sponsored by Bank of Montreal with $19.1 billion of debt, may have its ratings cut, Moody's said.

SIVs, which sell short-term debt to buy longer-term, higher- yielding assets, were shut out of the short-term market as losses on subprime mortgage securities prompted investors to retreat from all but the safest of securities. Unable to finance themselves, three SIVs have defaulted and others are being bailed out by their sponsors. The world's 30 SIVs have more than $300 billion of assets.

``In recent weeks, Moody's has observed material declines in market value across most asset classes in SIV portfolios,'' the ratings company said in the statement.

Moody's cut $14 billion in debt in all, mostly capital notes that rank below commercial paper and medium-term notes and are usually the first to absorb losses, Henry Tabe, managing director in charge of structured finance, said in a telephone interview. The ratings company placed $105 billion of debt on review for a downgrade and confirmed the ratings on $11 billion, Tabe said.

`Continued Deterioration'

SIV assets on average are 38 percent financial institution debt, 16 percent asset-backed securities and 12 percent collateralized debt obligations, Moody's said.

The downgrades are ``a reflection of the continued deterioration in market value of SIV portfolios combined with the sector's inability to refinance maturing liabilities,'' Moody's said. Net asset values have slumped to 55 percent from 102 percent in June, Moody's said, including the NAVs of the three defaulted SIVs.

Citigroup, the largest U.S. bank by assets, provided $7.6 billion of emergency financing to the seven SIVs it runs earlier this month after they were unable to repay maturing debt.

Citigroup, based in New York, created the first SIV in 1988 and is the largest manager.

The SIVs' struggle for survival, and the threat of having their assets dumped on the market, prompted Treasury Secretary Henry Paulson to broker talks with Citigroup, JPMorgan Chase & Co. and Bank of America Corp. to form an $80 billion fund to help bail them out.

Centauri, Beta

HSBC Holdings Plc of London this week said it will take on $45 billion of assets from the two SIVs it manages after they were unable to finance themselves. SIVs set up by Dusseldorf- based lender IKB Deutsche Industriebank AG and London-based Cheyne Capital Management Ltd. defaulted last month after investors stopped buying their asset-backed commercial paper.

Citigroup said in a Nov. 5 regulatory filing that it ``will not take actions that will require the company to consolidate the SIVs.'' The strategy ``remains unchanged from the disclosures in the third quarter'' filing, spokesman Jon Diat said today in an e-mail statement. ``We continue to focus on liquidity and reducing leverage,'' Diat said. Citigroup's SIV assets have dropped to $66 billion from $83 billion on Sept. 30, Diat said.

Centauri Corp., the largest SIV run by Citigroup with $16.9 billion of debt, had its P1 commercial paper rating placed on review for downgrade as well as its AAA medium-term note program, Moody's said. Centauri's net asset value dropped to 60 percent from 85 percent since Sept. 5, Moody's said.

Beta Finance Corp., the second-largest Citigroup SIV with $16 billion of debt, had its senior debt ratings placed on review for downgrade after its net asset value declined to 60 percent from 87 percent, Moody's said.

Sedna, Dorada

Four other Citigroup SIVs, Sedna Finance Corp., with $10.7 billion of debt, Five Finance Corp., with $10.3 billion, Dorada Corp. with $8.5 billion, and Zela Finance Corp., with $2.5 billion, had their P1 commercial paper rating and AAA medium-term note programs placed on review, Moody's said.

Sedna's net asset value dropped to 56 percent, Five's declined to 63 percent, Dorada dropped to 62 percent and Zela's fell to 61 percent. A seventh Citigroup SIV, Vetra Finance Corp., wasn't part of the review.

Dorada's capital note program was reduced to Caa3 from Baa1.

Orion, Links

Orion Finance Corp., a SIV managed by Eiger Capital with $835 million of debt, had its P1 commercial paper ratings downgraded to Not Prime, and its AAA medium-term note program to Baa3. Orion's net asset value dropped to 54 percent from 61 percent since Sept. 5, Moody's said.

Links Finance's net asset value declined to 78 percent from 94 percent since a Sept. 5 review, Moody's said. The SIV's AAA ratings may be cut after a review that will be completed within a week, Moody's said. Links' standard capital notes were cut 11 levels to the fourth-lowest ranking.

Toronto-based Bank of Montreal spokesman Ralph Marranca didn't immediately return a call seeking comment.

Separately, Moody's downgraded $470 million in notes issued by Duke Funding High Grade II-S/EGAM I Ltd. and Duke Funding High Grade II-S /EGAM I LLC, managed by Greenwich, Connecticut-based Ellington Global Asset Management LLC. Duke's capital net asset value declined to 21 percent on Nov. 23 from 69 percent Oct. 26. Moody's cut $170 million of Duke's notes from Aaa to Caa2 the fourth-lowest junk rating. Duke is known as an SIV-lite, which are designed as temporary vehicles.

Asian Stock Index Has Biggest Weekly Increase in Three Months

Dec. 1 -- Asian stocks rose this week, trimming the regional benchmark's biggest monthly decline in 1 1/2 years, as investors bet the U.S. Federal Reserve will lower borrowing costs to bolster growth in the world's largest economy.

Mitsubishi UFJ Financial Group Inc. and Commonwealth Bank of Australia led gains by banks. BHP Billiton Ltd., the world's biggest mining company, tracked metals prices higher.

``A rate cut is being viewed as more likely,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets. ``That will provide short-term relief to the market because there have been concerns about the risks that might result if credit costs remain high.''

The MSCI Asia Pacific Index added 4.9 percent to 161.92 this week, snapping a three-week, 8.4 percent slump. The 1,055- member benchmark dropped 5.5 percent in November, its worst month since May 2006.

Japan's Nikkei 225 Stock Average rose 5.3 percent. The Hang Seng Index jumped 7.9 percent, the region's biggest advance, as speculation Hong Kong's borrowing costs will be lowered boosted shares of Sun Hung Kai Properties Ltd. and other developers.

China's Shanghai Composite Index lost 3.2 percent, capping its steepest monthly drop in at least 12 years, on concern the government will impose further measures to rein in asset prices.

`Taking Out Insurance'

Mitsubishi UFJ, Japan's biggest publicly traded bank, surged 17 percent to 1,089 yen. Mizuho Financial Group Inc., the second largest, jumped 14 percent to 595,000 yen. Japanese banks had 1.3 trillion yen ($12 billion) in investments tied to U.S. subprime mortgages as of Sept. 30, Japan's chief financial regulator said Nov. 22.

Commonwealth Bank, Australia's largest home lender, climbed 4.3 percent to A$59.65. DBS Group Holdings Ltd., Singapore's biggest bank, added 5.8 percent to S$20.10.

``The Fed's taking out insurance on the economy and trying to pump margin into the balance sheets of banks and businesses,'' said Donald Williams, who helps manage the equivalent of $1.3 billion at Platypus Asset Management in Sydney.

The Standard & Poor's 500 Index rose 0.8 percent yesterday, taking its weekly gain to 2.8 percent, after Fed Chairman Ben S. Bernanke said on Nov. 29 policy makers must decide whether the risks between growth and inflation have shifted.

Rate Cut Bet

The previous day, Vice Chairman Donald Kohn said decision makers must be ``flexible and pragmatic'' in response to a credit market ``deterioration.'' Federal funds futures show traders expect a reduction in the benchmark U.S. rate on Dec. 11.

Sun Hung Kai, Hong Kong's biggest developer by market value, surged 15 percent to HK$161.20, the most since the five days ended Aug. 24. Cheung Kong (Holdings) Ltd., controlled by China's richest man, Li Ka-Shing, jumped 10 percent to HK$146.30.

Hong Kong's interest rates typically move in step with those in the U.S. because the city's currency is linked to the dollar. Lower rates make mortgages cheaper, spurring demand for real estate.

BHP rose 6.7 percent to A$42.98, snapping a five-week, 15 percent drop. It sold cobalt, a metal used in rechargeable batteries, for a record price this week. Rio Tinto Group, fighting a takeover bid from BHP, rose 13 percent to A$145.19.

A measure of six metals on the London Metal Exchange rose 4 percent, its first weekly advance since the five days ended Oct. 12.

`Ahead of Itself'

In China, the two-year-old CSI 300 Index slid 2.5 percent this week, leading to its biggest monthly decrease on record. The Shanghai Composite dropped 3.2 percent, capping its worst month since Bloomberg started keeping records on the measure in February 1995.

PetroChina Co., the world's biggest company, slumped 8.9 percent to 31.52 yuan. Citic Securities Co., China's largest brokerage, dropped 5.2 percent to 83.89 yuan.

China has raised interest rates five times this year. It should further increase rates and consider selling state-owned shares in companies to control the build up of a ``bubble'' in the country's stock market, Zhu Mingchun, the legislature's finance research director, said yesterday.

``Continued talk of further monetary tightening is weighing on the market,'' said Shane Oliver, who helps manage the equivalent of $103 billion at AMP Capital Investors in Sydney. ``The correction may not have run its course. The market has risen dramatically and got ahead of itself and is due for a pullback.''

The First Amendment vs. Financial Jihad

Jamie Glazov, of FrontPageMagazine.com interviewed Dr. Rachel Ehrenfeld, Director of the American Center for Democracy, and a member of the Terror Financial Blog team:

Ehrenfeld "has a 25-year track-record of following terrorist financing, especially Islamic radical groups and states. In the late 1980’ she identified how Saudi Arabia, the Gulf States and Iran bankrolled terrorism, and how they developed Islamic banking to advance the Islamic agenda.

Ehrenfed, a Ph.D. in criminology from the Hebrew University of Jerusalem, has published hundreds of articles and 3 books on these issues. Her last book Funding Evil; How Terrorism is Financed – and How to Stop It, documents who funds terrorism, as well as the expansion of radical Islam.

"Funding Evil" accused Khalid bin Mahfouz, a Saudi billionaire from Jeddah, of funding terrorism. Mahfouz, who is notorious for using British libel laws to silence those who expose him, sued Dr. Ehrenfeld in a British court and she was ordered to destroy all copies of her book in England. She is now counter-suing Mahfouz in the United States.

A new short-form documentary film, The Libel Tourist, has just recently been released, documenting Dr. Ehrenfeld’s experience.

To watch The Libel Tourist, click here.
FP: Dr. Ehrenfeld, welcome to Frontpage Interview.

Ehrenfeld: Thank you, Jamie. It is a pleasure.

FP: So let’s start at the beginning. Who sued you and for what reason?

Ehrenfeld: Khalid bin Mahfouz, a Saudi billionaire, former owner of the National Commercial Bank of Saudi Arabia, the royal family banker, and founder and owner of the Muwafaq Foundation, which funded al- Qaeda and Hamas, sued me for libel in London, soon after my book Funding Evil; How Terrorism is Financed – and How to Stop It, was published in the U.S. In 2003. He claims that he never knowingly funded terrorism. I never said he “knowingly” did.

FP: Why did this individual sue you in the U.K?

Ehrenfeld: Unlike the U.S. where free speech is protected constitutionally, the libel laws in the UK. are pro-plaintiff.

FP: Can you talk a bit more on this issue of libel laws? Expand for us on how free speech is protected constitutionally in the U.S. in this context and also how the libel laws in the UK. are pro-plaintiff.

Ehrenfeld: Unlike American laws, where free speech is protected by the First Amendment, and truth is the complete defense, England’s libel laws favor the individual’s rights over the public. They put the burden of proof on the defendant rather than the plaintiff. Moreover, there are harsh restrictions on the evidence that writers can present in their defense. U.S. libel laws put the burden of proof on the public figure who claims he has been defamed; the Plaintiff has to prove that the writer was wrong and that he published the false information recklessly and maliciously.

Moreover, the British threshold for establishing “jurisdiction,” is very low, thus accepting bin Mahfouz’s claim against me, based on 23 copies of my book Funding Evil, which were sold in the U.K. However, the book, which was just published only in the U.S., was most likely purchased by his representatives over the Internet -- in order to claim jurisdiction.

British laws earned the U.K. the label—“libel capital of the Western world.” Bin Mahfouz, and other terror financiers, known as “libel tourists,” use the British laws to veil in secrecy their funding of al Qaeda, other Islamic terror organizations and global propagation of radical Islam. Bin Mahfouz’s legal “victories” in London - he never won on merit- had the desired affect he and other Saudi terror financiers sought: silencing of the media even in the U.S. where the First Amendment protects writers and publishers. But most American book and newspaper publishers are not willing to risk expensive lawsuits in London. In fact, most refuse to publish even the most comprehensively documented reports on alleged wealthy Middle Eastern funding terrorism. And most refrain from writing about this case.

FP: Who else did this Saudi sue? What differentiates you from the other parties?

Ehrenfeld: Bin Mahfouz threatened and or sued more than 36 publishers and authors, including many Americans who exposed unpleasant details about him. All apologized and retracted. Many paid the huge legal fees to his legal team in the U.K., as well as penalties and “contributions” to charities of his choice. Some (23), but not all are listed on his website. None of the other American writers or publishers challenged the jurisdiction of the British court, and European and British writers and publishers, did not have much choice.

I alone refused to acknowledge the British court, and declined to comply with its demands and default judgment – and furthermore countersued him in the U.S.

FP: How come you were not like all the others? How come they all apologized, retracted, paid legal fees etc., and you declined to comply etc.?

Ehrenfeld: Your question is better directed at them. I can not speculate on their decisions. Undoubtedly though, monitory and financial considerations were a premier concern; with British libel laws stuck against them, all who have property in the U.K. had a lot to lose. But since there is so much officially documented information about bin Mahfouz’s alleged financing of al- Qaeda, one could have expected that the media would challenge him and stop his campaign to silence his critics. Indeed, the Wall St. Journal fought successfully a multi-million dollar libel lawsuit brought against the paper by the Saudi Arabian businessman Mohammed Jameel. The House of Lords ruled in favor of the Journal reporting that Jameel have been investigated by the Saudis at the request of US authorities, to ensure that neither he nor his company funded terrorist groups. Lord Hoffman said that preventing publications of articles, which are “in the public interest, is too risky and would discourage investigative reporting.”

FP: What are the consequences of the U.K. lawsuits on the American media?

Ehrenfeld: The consequences are very grave. Bin Mahfouz single handedly stopped all American newspapers and publishers, not to mention individual reporters, from covering him specifically, and most Saudi terror financiers, in general. Apparently, through him, the Saudis have successfully imposed a wholesale chilling effect on U.S. instigative reporting on Saudi terror financing.

FP: What can we do about these consequences of the U.K. lawsuits?

Ehrenfeld: We can counter-sue in the U.S., as I have done. And although my case is still pending (we are awaiting the decision of the New York State Court of Appeals on jurisdiction), on June 8, the Second Circuit Court of Appeals unanimously declared my case is “ripe” for hearing in a U.S. court, noting that the case has implications for all U.S. authors and publishers, whose First Amendment rights are threatened by foreign libel rulings.

The ruling thus established that all U.S. writers and publishers sued for libel in other countries, can ask U.S. courts to rule the foreign decisions unenforceable here - provided they have jurisdiction over the person who sued for libel overseas. This important legal decision weakened bin Mahfouz’ ability to threaten or sue U.S. authors and publishers. Shortly afterwards, bin Mahfouz threatened to sue Cambridge University Press (CUP), the publisher of Alms of Jihad: Charity and Terrorism in the Islamic World, but refrained from including the book’s two American writers, J. Millard Burr and Robert O. Collins.

Winning my case against bin Mahfouz will not change the British ruling against me. But judging by the impact my case has had already one can hope that U.K. , and the House of Lords ruling in favor of the Wall St. Journal in the Jameel case, U.K. writers and publishers would be encouraged to demand changing their libel laws, to allow the freedom of responsible publications without the fear of intimidating, expensive lawsuits.

If foreigners wish to sue Americans for exposing threats to our national security, they are welcome do so in the U.S., under the First Amendment laws. But Congress should terminate this form of Financial Jihad – silencing the media by intimidation – and costly foreign libel suits on matters governed by U.S. jurisdiction.

To better protect our freedom of speech, Congress could reinforce the First Amendment with a new statute prohibiting enforcement of foreign libel judgments in the U.S., whenever American authors and publishers report responsibly on terror -related and other national security threats.

We are at war with enormously wealthy and determined enemies. We should prevent their use of their tremendous wealth to deprive American writers of their constitutional rights to expose actions that threaten our safety and freedoms.

FP: So you are now fighting back, counter-suing Mahfouz in New York. Tell us exactly what inspired you to counter-sue.

Ehrenfeld: As an American citizen I see no reason to abide by English law, since we declared our independence from Britain in 1776. I felt that this matter should be resolved by U.S. Courts within U.S. jurisdiction.

FP: Has any other American counter-sued him in the U.S.?

Ehrenfeld: None.

FP: There are impressive Amice Briefs in your case by major American publishers. Has anyone offered financial support? After all, you are fighting to protect everybody’s freedom of speech.

Ehrenfeld: I have received no financial support from any publisher.

FP: Why do you think your case has not reached the mainstream media?

Ehrenfeld: There is no logical explanation. Except that maybe they are afraid of offending the Saudis, in which case, it would further evidence my point.

FP: What are the personal implications of this case on you?

Ehrenfeld: Apparently, Saudi influence on the media, politics and business interests is so pervasive that only the most courageous and honorable, professionals, colleagues and friends have stood by me. Others keep a silent distance--and some even try to harm me.

FP: What is the significance of this case in relation to national security?

Ehrenfeld: One of the most important foundations of American Democracy is freedom of the press. Bin Mahfouz's libel suits are an important part of an enormous campaign to severely curtail press and media willingness and ability to freely investigate and report the great financial powers diligently working to destroy our nation and indeed the entire Western civilization.

FP: Dr. Ehrenfeld, thank you for joining us. And thank you for your valiant and courageous fight for freedom.

Enhrenfeld: Thank you, Jamie. I appreciate the opportunity Frontpage Magazine has given me to be heard.

LatAm Finance Lags Asia

The financial depth of Brazil, here represented by Sao Paulo, is on par with the Philippines, the authors point out. (Photo: Embratur) Font Size ..... Small Normal Big Very Big

Latin America's financial sector lags behind Asia and the region needs further reforms to improve its finances.

BY DIANA FARRELL
AND SUSAN LUND

Most countries in Latin America have made serious strides toward reforming their economies in the last 15 years, opening their markets to trade and foreign investment, reducing government budget deficits, adopting more flexible currency regimes and reducing inflation. Yet despite these reforms, the financial systems in Latin America remain small relative to the size of the economies. And this reality, we believe, weakens the region’s prospects for sustainable growth.

Altogether, the financial assets of Latin America amounted to just $4.3 trillion at the end of 2006, compared with more than $8 trillion in China. These assets equal 154 percent of gross domestic product for Latin America, compared with 307 percent in China and 250 percent in emerging Asia. Moreover, Latin America is largely cut off from the growing volume of capital flowing around the world.

Of course, Latin America is diverse, and there are bright spots in the financial landscape. Chile has a modern pension system and a sound equity market. Brazil has high-performing banks, while the capitalization of Mexico’s equity market has more than tripled since 2002. But the overall picture is problematic. Although large companies can raise funds in the United States and Europe, small and midsized firms have more restricted access to capital and pay more for it when they can get it. In a recent McKinsey survey (available at www.mckinseyquarterly.com), just 40 percent of business executives in Latin America say they have good access to external financing, compared with 60 percent of executives in other emerging markets.

The situation may brighten. Since 2002, the region’s stock of financial assets has grown at 18 percent annually (adjusted for exchange rate changes), up from just 5 percent in 1995 to 2002. Many countries have significantly reduced inflation and have adopted more flexible exchange rate regimes; both steps are essential to maintaining macroeconomic stability. Foreign investors are taking notice, with inflows into the region’s stock markets and private equity investments both up in 2005.

Is Latin America, then, on the verge of a (long-awaited) breakthrough? Much depends on whether policy makers can continue to reduce public debt while imposing further reforms on financial and legal systems.

MISSING MONEY

One common way to assay the development of a financial system is by measuring its depth – the value of financial assets as a percentage of GDP. For the most part, deeper financial markets bolster growth because they are more liquid and thus better able to withstand shocks, they improve borrowers’ access to capital, and they offer more efficient pricing as well as improved opportunities for hedging risk.

Latin America’s lack of financial depth is seen across both countries and asset classes. The comparison to emerging Asian nations – Thailand, Malaysia, Indonesia, the Philippines and South Korea – is particularly striking, since the regions have similar living standards and education levels. GDP per capita is $8,100 in emerging Asia (measured in terms of purchasing power), compared to $8,800 in Latin America. And both regions average the same amount of schooling.

Chile, with the region’s most developed financial sector, has less financial depth than China – despite having per capita income that is more than twice as high – and is far below the better-developed markets in South Korea and Malaysia. Brazil’s financial depth is on par with the Philippines. Given the size of its economy, Mexico’s financial depth is startling low – only 118 percent of GDP. Venezuela’s financial depth amounts to less than 89 percent of GDP, on par with Romania and Ukraine. (…)

SUSTAINING THE MOMENTUM

To keep sound financial deepening on track, policymakers will have to build on the macroeconomic reforms already in place. The first imperative is to continue reducing the size of government debt. While government debt contributes to financial deepening, it does not do so in a productive way. Most countries have made progress in replacing foreign currency debt with domestic debt, thereby reducing the sort of asset-liability mismatch that creates significant risk of financial crises. But more needs to be done to reduce public spending and the drain on the region’s savings. In addition, countries should foster investor confidence and signal a commitment to keeping inflation under control. One important step in the right direction is to reinforce central bank independence. While Chile and Mexico have made notable progress on this front, other countries lag behind.

Other financial system reforms are also needed, according to McKinsey’s survey of business executives in Latin America. Financing constraints are a top-five issue behind slow growth for these executives; only regulation, economic recession and an increasingly competitive market environment are seen as more important. Among the financial reforms that Latin American executives would like to see, stock market reform is the highest priority, followed by further improvements in pension systems and streamlined corporate bond markets. Reducing the cost of issuing equities and bonds on domestic markets is critical.

Finally, most Latin American economies would benefit from strengthening creditors’ protection in court and expediting bankruptcy proceedings. Although Latin America has liberalized its financial systems over the last 15 years, investor protection and legal contract enforcement are still poor compared with the United States and with high-performing emerging markets. For example, according to the World Bank’s Doing Business survey, it takes an average of 587 days to enforce a debt contract in Latin America and costs more than 20 percent of the value of the debt, compared with 230 days in Korea at a cost of less than 6 percent of the debt. Not surprisingly, the McKinsey survey shows that 39 percent of business leaders view ineffective bankruptcy laws or inefficient courts as a barrier to further financial system development.

The Latin American economies, in short, have come a long way from the bureaucratic rigidity of their post-colonial economies. But, alas, the region has a long way to go.

Celebrate the Repeal of Prohibition, YouTube Style

Richard Morrison | 11/30/2007 @ 5:42 pm

Al Qaeda's Emerging Defeat

By Austin Bay

The postwar relationship between Iraq and the United States is now a broader public topic. This week, the White House and the Iraqi government announced that state-to-state discussions are taking place with the goal of reaching detailed agreements that will govern Iraq and America's long-term political, economic and military ties. Iraqis have asked for "an enduring relationship with America."

I use the term "broader public topic" because this matter has been a subject of constant discussion since April 2003, with little of that discussion hush-hush.

When I reported in May 2004 for duty in Iraq, the first document dropped on my desk was a draft of U.N. Security Council Resolution 1546. After reading it with great interest, I discussed it with one of the very smart young majors in the Multi-National Corps-Iraq plans section. The very smart young major was already in the polymathic process of analyzing requirements and aligning "capabilities with tasks" (who will do what) in order to support the resolutions stipulation that Iraq hold "direct democratic elections ... in no case later than 31 January, 2005."

Resolution 1546 was officially passed on June 8, 2004. If you're a wire-service editor, eight months is an eon — but if you're trying to politically reinvent Mesopotamia, it's a millisecond. The January 2005 Iraqi election succeeded, giving terrorists and tyrants a disturbing "purple finger" — the very public ink stains marking the fingers of Iraqi voters.

That election was an incremental success, but one of many. This week's publicized call for a more "normalized" U.S.-Iraq relationship is another indication that the incremental successes are accumulating. Every increment can become a decrement, but war is a dynamic process — and from a historical perspective the dynamic direction in Iraq has favored the United States — in other words, the big trend suggests an emerging success.

I know, that runs counter to Senate Majority Leader Harry Reid's April 2007 declaration that the United States "lost" in Iraq, but it was Mr. Reid's choice to make himself a sad historical footnote.

This emerging success required lots of money and unfortunately involved lots of blood. I had another document on my Baghdad desk, Abu Musab Zarqawi's February 2004 letter to al Qaeda's leaders, in which he lamented al Qaeda's looming defeat.

He also described his counterstrategy: a Shia-Sunni sectarian war. That's war's hideous dynamic, effort met by effort — with death, pain and suffering in each terrible collision. Zarqawi's murderers did their best to incite a sectarian debacle. Oh, they got headlines, they enlisted a motley array of criminal allies, they set Iraq's democratic timetable back 12 to 24 months — but they failed.

The evidence that al Qaeda has suffered a major strategic information defeat in Iraq continues to mount. StrategyPage.com noted on Oct. 27, 2005, that "the Moslem media is less and less willing to be an apologist for al Qaeda, at least when it comes to killing Moslem civilians" and that the Iraqi media in particular "really has it in for al Qaeda." On Oct. 1, 2006, StrategyPage.com argued that "dead Iraqis were killing al Qaeda. ... Westerners, unless they observe Arab media closely, and have contacts inside the Arab world, will not have noted this sharp drop in al Qaeda's fortunes."

Within the last three months, the "trend" (made of incremental successes) has become "fact."

Is this victory in Iraq? No. But it suggests we've won a major battle with potentially global significance. What the Pentagon calls "the governmental (political participation and structure building), information (Intel, media and political perception) and economic (economic development, infrastructure creation) lines of operation" will ultimately secure victory in Iraq, and these operations will take another six to eight years of effort.

As for the "security line of operation" (military), the U.S.-Iraqi "postwar relationships" discussion indicates both are preparing for "strategic overwatch," where U.S. "quick reaction" forces are positioned to help Iraq deter external (e.g., Iranian) threats. Strategic overwatch may be a couple of years away, say mid-to-late 2009. Achieving that would constitute a limited victory.

Could these positive trends reverse? Yes. Al Qaeda and Saddamist enemies will continue to test the will of Free Iraq and the United States. Harry Reid and his faction could quit and declare defeat. But I doubt that they will — I very much doubt they will.

In responding to my column of Nov. 13, Tom Ricks at The Washington Post asked me to note his Oct. 15, 2007, article on al Qaeda's information warfare defeat. And a fine report it is.

Have Academic Radicals Lost Their Minds?

By David Horowitz

On the evidence it would seem so. At the very least they have lost their collective ability to conduct an intellectual argument. In my most ideological days on the left I never lost sight of what it meant to assemble evidence and answer an opponent. But the recent attack on my work[1] (or what is alleged to be my work) by Robert Shaffer, a contributor to the Newsletter of the Organization of American Historians, is yet another indication that today’s academic “progressives” haven’t a clue as to what constitutes an intellectual argument, at least not when their prejudices and prerogatives are challenged.

It has been two years since I published The Professors, a collective profile of 101 faculty members who confused their academic mission with political advocacy. I argued that roughly ten percent of university liberal arts faculties were made up of professors who regarded political opinions as “integral” to their scholarship. I quoted such academic luminaries as Eric Foner and Joan Wallach Scott testifying that that was precisely their approach to their professional work (and proud of it). Foner even wrote the preface to a book, Taking Back the Academy: History of Activism, History as Activism, which consisted of papers read at a conference hosted by Columbia and dedicated to the point of view that historical scholarship was a form of “activism.” The basic thesis of The Professors was that such an attitude was at odds with the professional standards that academics had pledged to uphold, and violated the academic freedom provisions of the American Association of University Professors, which were based on the assumption that these standards – scientific standards – were to be observed.

In the two years since the publication of The Professors there have been numerous attacks on the book and the author, many of them reckless, many extreme.[2] The current president of the AAUP, Cary Nelson, for example, wrote a review warning others not to read the book, or mention it in public. Yet among all these attacks not a single one – not one – confronted or attempted to refute the book’s argument as summarized above. This argument was laid out in detail in a 17,000 word essay which constituted the introduction and last two chapters of the text, which none of its critics seem to have read. Not one of the attacks on The Professors so far has even mentioned the book’s argument. In that regard Professor Nelson’s advice has been heeded.

Robert Shaffer’s is just the latest in a series of mindless academic attempts to dismiss a book that will not go away. His attack begins with a reference to Alan Greenspan’s recent memoir, in which Greenspan offers his opinion that the Iraq war is largely about oil. It is from this un-anchored remark by a single individual unconnected to foreign policy that Shaffer launches his assault on my text: “In his 2006 book, The Professors: The 101 Most Dangerous Academics in America, Horowitz unleashes a raft of criticisms against a wide range of scholars, but one of his recurring themes is that an attempt to ascribe economic motives to U.S. actions in Iraq, or to suggest an interpretation of history based on greed or the needs of capitalism, is simply out of bounds for a scholar.”

Invoking Greenspan to refute this theme might be a reasonable if tangential line of argument if Shaffer’s description of my text were true. As it happens it is demonstrably false. Nowhere do I say (or have I said) that an interpretation of history based on greed or on the “needs of capitalism” is out bounds for a scholar. In fact, in a passage from The Professors which I have cited many times in the face of similar attacks (and to no avail), I explicitly wrote that the book was not about “bias” and did not argue that a leftwing perspective was “out of bounds.” What I wrote was as follows: “This book is not intended as a text about leftwing bias in the university and does not propose that a leftwing perspective on academic faculties is a problem in itself. Every individual, whether conservative or liberal, has a perspective and therefore a bias. Professors have every right to interpret the subjects they teach according to their individual points of view. That is the essence of academic freedom.”

Shaffer claims that in writing about Middle Eastern Studies professor Joel Beinin and historian Howard Zinn I condemned their viewpoints. “Horowitz finds unacceptable Joel Beinin, a former president of the Middle East Studies Association, in part for insisting that the U.S. went to war in Iraq ‘to make and unmake regimes and guarantee access to oil.’ More broadly, Horowitz excoriates Howard Zinn for his widely circulated book, A People's History of the United States, in which ‘greed is the explanation for every major historical event.’” In fact, my text is entirely descriptive and makes no such judgments. These descriptions could be faulted if Beinin and Zinn did not make such arguments. But they do. The point of the profiles is not to identify opinions that should be banned, but to describe a type of professor-activist whose political advocacy is integral to their scholarship. Beinin and Zinn are two obvious examples. The advocacy singled out could be conservative and the problem would be the same. It is not Beinin’s view of the Iraq War or Zinn’s of the American experiment that it is the problem. It is their view towards scholarship and academic teaching. If the classroom becomes a political platform it ceases to be a classroom in the sense understood by the academic founders of the modern research university.

These ideas are simply over Robert Shaffer’s head: “Aside from attacking professors for specific arguments in their research, public statements, and, in some cases, their classes, Horowitz asserts that left-wing professors have taken over the universities and use their positions to indoctrinate students and to prevent moderate or conservative scholars from being hired.” Well, to reiterate, I do not in my book or in my academic campaigns attack professors for specific arguments. If they are indoctrinating students in ideological agendas, that is another matter entirely. Indoctrination in my view takes place when a professor teaches opinion as fact. Unfortunately, this is a widespread practice in today’s academy.

To go on: “Horowitz further argues that these leftwing ideas are not based on legitimate scholarly research, so such professors do not deserve ‘academic freedom.’” Well, no, I do not make such an argument. To begin with, I don’t argue that leftwing ideas in general are not based on scholarly research. I have praised such leftwing scholars as Orlando Patterson, Richard Hofstadter, Henry Louis Gates, Randall Kennedy, Simon Schama and Joseph Ellis to name a few. What I have argued is that professors of social work, for example, who teach curricula on the Vietnam War are violating professional standards and students’ academic freedom. I have argued that Women’s Studies programs that assume that gender is “socially constructed” are courses in indoctrination which also violate the fundamental precepts of academic freedom. This is a very different argument from the one Shaffer refers to, and which he is evidently unable or unwilling to understand.

These distortions of what I have said and advocated are marshaled to justify Shaffer’s warning that I am a threat to the academy itself. According to him (and every other leftwing critic of my work) I am seeking to enlist state legislatures in a campaign against the academy (and academic freedom). These claims are as false as every other that Shaffer makes. The sole evidence he manages to muster to support his charge is this: “For example, in my state of Pennsylvania, a legislator who provided a dust jacket blurb for Horowitz’s book was the driving force behind a committee which held hearings around the state for almost a year, searching for professors who abused their classrooms for political purposes.”

It is true that Representative Gib Armstrong wrote a blurb for The Professors. But it is a malicious falsehood that the Pennsylvania hearings were “searching for professors who abused their classrooms for political purposes.” Here is the statement made by the chairman of the Pennsylvania committee on the opening day of the hearings defining what they were and were not to be about: “[t]his Committee’s focus will be on the [academic] institutions and their policies, not on professors, not on students.” And that was what the committee discussed and researched: whether there were policies in place that protected students’ academic freedom, and whether they were enforced. The answer to both questions – though ultimately subverted by the Democrats on the committee – was no. No protections for the academic freedom rights of students existed when the committee began its efforts.

Shaffer repeats dozens of false attacks on me that I have already answered including the completely unfounded accusation that The Professors “is a book filled with inconsistencies, falsehoods, unverifiable claims, and innuendo.” There are replies to the specific charges made against the book, including the complaints of Eric Foner, on my website under “Replies to Critics of The Professors.”

It is tedious arguing with someone who willfully misunderstands the plain meaning of texts and ignores the discussion which has already taken place (and is readily available to anyone interested). Shaffer claims that I “provide no basis whatsoever” for the hypothesis that 10% of the Harvard faculty are political ideologues, which just shows what a cursory read he gave to those pages in my book. The 10% figure is the portion of the Harvard faculty that voted to censure Larry Summers for uttering an opinion that they deemed politically incorrect. I cannot imagine a more anti-intellectual, unscholarly stance for professors to take. This was a perfect example of the triumph of the political over the academic, which is what my book is about it. That vote was the basis for my suggestion that probably 10% of liberal professors are ideologues who put politics before scholarship.

Shaffer closes by citing the recent AAUP report “Freedom in the Classroom” as an antidote to me. Bad choice. The AAUP report explicitly endorses indoctrination in the classroom by asserting that whatever an academic discipline says is true can be taught as though it were true even if, like socially constructed gender, it is contested by other (in this case scientific) disciplines.[3] The AAUP report is a disgrace and should be disowned by anyone who cares about the integrity of university. I analyzed the report in a column in the Chronicle of Higher Education, and in a longer version called “The End of the University As We Know It,”which appeared on my website. (An earlier version appeared in the Chronicle of Higher Education.) On the other hand, it is not surprising that -- as his footnotes show -- he is familiar with an impressive range of books I wrote as a leftist.

It is not very challenging intellectual work to shoot down arguments that are based on invention, but that has been my task since I began the effort to get liberal arts institutions to honor their standards and live up to their pretensions nearly five years ago. Will it ever be different? Will someday an academic radical – say Michael Berube or Robert Shaffer – actually read the work they are criticizing and write an intelligent response? Should that day come, my website at Frontpagemag.com will be open to receive them, and I’m sure the History News Network’s will as well.