by Frank James

Investors who apparently lost billions of dollars in Wall Street broker Bernard Madoff's alleged $50 billion Ponzi scheme weren't the only big losers.

The Securities and Exchange Commission was staggered by the revelation, as it was once again exposed as an inadequate enforcement agency, unable to spot problems with Madoff others had observed and, ultimately, ineffective at protecting investors.

As The Wall Street Journal reported in a Dec. 13 2008 story, Madoff didn't fool everyone.

Harry Markopolos, who years ago worked for a rival firm, researched Mr. Madoff's stock-options strategy and was convinced the results likely weren't real.

Mr. Markopolos pursued his accusations over the past nine years, dealing with both the New York and Boston bureaus of the SEC, according to documents he sent to the SEC reviewed by The Wall Street Journal.

by Frank James updated

The White House just announced it's considering using the Treasury Department's TARP program, the $700 billion rescue fund heretofore used to inject money into the financial industry, to bailout the Detroit 3 in the wake of the Senate's failure to pass legislation.

For Immediate Release

Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary - including use of the TARP program -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.

by Frank James

This is something you don't see everyday, a U.S. secretary of state playing piano for Queen Elizabeth II at Buckingham Palace. It appears Secretary of State Condoleeza Rice decided to end her final trip to Britain as the U.S.'s top envoy with a crescendo.

I'm pretty certain we won't be seeing the next secretary of state, Sen. Hillary Clinton, concertizing for the Queen though, maybe, if her husband brings his saxophone...

Does anyone know why the Queen carries a pocketbook when she's in her own home?

President George W. Bush with First Lady Laura Bush on World AIDS Day at the White House, Monday, December 1, 2008. (AP Photo/Evan Vucci)

by Frank James

The conventional wisdom is that President Bush doesn't have a lot of unequivocal successes to point to as part of his presidential legacy. And, indeed, lately he hasn't had a lot to crow about.

But his effort in combating AIDS/HIV is viewed as a major achievement. First passed in 2003 and reauthorized In July, the President's Emergency Plan for AIDS Relief or Pepfar authorizes up to $48 billion on medicines and other medical care for people with HIV/AIDS in 15 targeted nations. As of today, more than 10 million people have been helped.

As the New York Times reported in January:

With a year left in office, Mr. Bush confronts an America bitterly split over the war in Iraq. His domestic achievements, the tax cuts and education reform, are not fully embraced by Democrats, and his second-term legislative agenda -- revamping Social Security and immigration policy -- lies in ruins.

"It's a good thing that he wanted to spend the money," said Mr. Kerry, an early proponent of legislation similar to the plan Mr. Bush adopted. "I think it represents a tremendous accomplishment for the country."

Bush, joined by First Lady Laura Bush, marked World AIDS Day today with a brief statement he made in front of the White House's North Portico which was bedecked with a large red ribbon to mark the observance of global AIDS efforts:

By Andrew Zajac

Most of the attention paid to the Justice Department these days focuses on its future in a new administration, presumably under the leadership of Eric Holder, President-elect Obama's pick for Attorney General to replace caretaker AG Michael Mukasey.

Holder will have his plate full restoring morale in the 110,000-employee agency plagued by scandal, including the unprecedented firings of nine U.S. attorneys and politicized hiring for civil service posts.

He also may inherit an unpleasant reminder of the partisan handiwork he'll be trying to undo.

by Frank James

President Bush traveled today to Ft. Campbell, Kentucky, home of the 101st Airborne.

It was a chance for Bush to visit with one of the few groups of Americans where his popularity remains relatively high, the U.S. military. And it was another chance for him to make the argument that invading Iraq and ousting Saddam Hussein was the right decision despite all we now know which we didn't in 2003.

Most of the nation has heard his arguments before. Much of the nation has stopped listening to him at all.

But he was making his case as much to posterity as to the audience of soldiers sitting around him.

Here's a transcript:

PRESIDENT BUSH: Thank you. Please be seated. Unless of course, you don't have a seat. (Laughter.)

In recent weeks, this post has been the scene of heartwarming family reunions. Many of you recently finished deployments to Iraq. You have performed with courage and distinction on the front lines of the war on terror. You have returned on success. On behalf of a grateful nation, I'm proud to welcome home the Bastogne Brigade, the Strike Brigade, the Rakkasans Brigade. (Cheers.) Job well done.

by Frank James

Here's one way for a president-elect to get around some of the limits placed on him by the Constitution which makes a president-in-waiting wait until late January to officially take office: choose as your Treasury secretary a guy already elbow-deep in the financial rescues that have become a frequent part of the global economic crisis.

By choosing Timothy Geithner, president of the New York Federal reserve Bank, to be his Treasury Secretary, Obama has someone who's been at the table for the Bear Stearns, Lehman, AIG and now Citigroup emergencies. According to the Associated Press:

The Citigroup rescue came after a weekend of marathon discussions led by Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. Timothy Geithner, president of the Federal Reserve Bank of New York, who is being tapped by President-elect Barack Obama as his Treasury chief also participated.

by Frank James

There's this CNN video flying around the Internet from the G20 meeting last weekend that shows President Bush walking on the stage for the "class photo" and no one shaking his hand.

Rick Sanchez, the CNN anchor, said it looked like Bush was snubbed because he's unpopular and a lot of people on the web have adopted that interpretation.

It's an example of people seeing what they want to see.

Here's an alternate explanation. The G20 has a weird protocol where the leader of the host nation doesn't shake hands while walking on stage for the final photo op with other leaders.

Each of these events is choreographed to the nth degree including where all the leaders stand. Looking at the video, it would also be possible to come to the view that many of the world leaders were feeling weighed down that day since they walked along the stage with their heads bowed.

But what they're actually doing is looking for their marks which are taped to the carpet on the floor.

Just another example of why what you see is not always what you think you see.

by Frank James (updated at 12:36 pm with Mukasey statement)

Good news this morning on Attorney General Michael Mukasey. He's reportedly alert and communicating after having what at first sounded like a stroke Thursday evening while giving a speech to a conservative lawyers group at a Washington hotel.

The Justice Department's Pete Carr, acting public affairs director, issued the following statement.

"At the conclusion of his remarks before the Federalist Society Annual Dinner in Washington, D.C., Attorney General Michael B. Mukasey collapsed.

"We will update the public when we have additional information."

by Frank James

Treasury Secretary Henry Paulson Jr. is likely to feel pretty beat up by the time the just-convened House Financial Services Committee meeting ends today.

Some lawmakers are upset that the Paulson changed the thrust of the $700 billion bailout program from what he told Congress he wanted the money for. Instead of buying toxic assets from financial institutions, last week Paulson said that idea was dead and that he favored injecting money into financial institutions directly.

Many lawmakers are also frustrated with Paulson because they feel the Treasury Department isn't doing enough to end the nation's home-foreclosure epidemic.

So it's no coincidence that Paulson is mounting something of a public-relations campaign. The Washington Post has the first part of a story based on an interview with Paulson whose essential theme is that he came to Washington believing that free-markets were self-correcting only to come to believe in the importance of regulators.

The message he appears to be sending the Democratic-controlled Congress is "I'm on your side."

An excerpt:

When he arrived in Washington as one of Wall Street's most successful bankers, he was skeptical of government meddling. But as a regulator facing the worst financial crisis in nearly a century, he engineered a series of massive federal intrusions into the markets while persuading reluctant bank executives and influential politicians to fall in behind him.

Treasury Secretary Henry Paulson speaks during a news conference at the Treasury Department in Washington, Nov. 12, 2008. (AP Photo/Susan Walsh)

by Frank James

It took Treasury Secretary Henry Paulson awhile to acknowledge what many experts said from the beginning, that it was a bad idea to use taxpayer money to purchase toxic assets from financial institutions. That the better idea was to inject capital into banks directly while receiving an ownership stake in return. But that's what he essentially did today.

His comments came in a press conference he had this morning to update the nation on the $700 billion Troubled Assets Relief Program, known as TARP, one of the best acronyms Washington has invented in a long time.

Paulson said:

Over these past weeks we have continued -- continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role relative to other potential uses of TARP resources in helping to strengthen our financial system and support lending.

by Frank James

We actually may have more than one president at a time, despite what President-elect Obama and his aides have persistently said since Election Day.

That's the only way to interpret some reporting that indicates Obama's transition is fully engaged in drafting a rescue plan for the Big Three automakers.

As The Wall Street Journal reports, Obama and his aides, like congressional Democrats, are working on ways to use taxpayer money to prop up U.S. auto manufacturers.

Mr. Obama, after some initial hesitation to become publicly involved, is pressing the Bush administration to immediately free up funding through the Treasury, the Energy Department and the Federal Reserve. It is also studying other options, including installing new board members at car companies that receive assistance to ensure compliance with the strings attached to a bailout, including the adoption of a more advanced, fuel-efficient product line.

by Frank James

A lot of experts have argued that the financial crisis and the larger economic woes the nation is encountering will only be reversed when the unending cascade of home foreclosures is finally stopped.

So the Treasury Department, along with the federal agency that now oversees Fannie Mae and Freddie Mac, have announced a new program to speed up loan modifications for strapped homeowners facing foreclosure whose loans are either in the housing giants' portfolios or guaranteed by Fannie or Freddie.

James Lockhart, director of the Federal Home Finance Agency which took control of Fannie and Freddie a few months ago, said this at the announcement:

Today we are announcing a major program designed to greatly reduce preventable foreclosures with a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford. It is an achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all work together.

by Frank James

In digging out of their part of the global financial hole, the British may have an advantage over the U.S. in that they have a prime minister who, prior to his current job, was the Chancellor of the Exchequer, the equivalent of our Treasury secretary.

Gordon Brown is so confident of his understanding in areas of economics and financial markets that he actually is having press conferences like one he had yesterday, to discuss his nation's partial nationalization of British banks.

Compare that with what we've seen this morning in the Washington. President Bush stepped out of the White House to read a short speech about his administration's plan to inject capital in exchange for ownership stakes in U.S. banks, then popped back in the White House, prarie dog like, without taking questions.

Over at the Treasury building, Treasury Secretary Henry Paulson Jr., Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairwoman Sheila Bair, emerged from a door in the Cash Room, read their statements, then marched back through the door, also without taking questions.

We assume they did this in part because they didn't want to say anything during an unscripted question and answer session which might spook the financial markets.

But we also assume they didn't want to take questions because it, frankly, could've been a little embarrassing for them. They are conservative Republicans whose philosophy has been that free markets are self-correcting and Big Government can only get in the way. They might've been asked to explain why they've all of a sudden become Franklin Roosevelt-style New Dealers, at least when it comes to the financial markets.

Another potential embarrassment was that the very plan that they were unveiling, they were opposed to a few weeks ago. They might've had to answer why didn't they see the light sooner, possibly sparing the financial markets several tumultuous days in which investors lost trillions of dollars.

by Frank James

It took the Bush Administration longer than many experts believe it should have taken to get there, but today's big news is that the administration has finally arrived at the point many economists weeks ago urged it to get to: direct injections of cash into the banking system and in turn taking ownership stakes in some of the nation's largest banks.

The administration had to twist some bankers' arms to arrive at this point, since there were top banking executives who didn't want the federal government taking ownership in their institutions.

But banks aren't exactly in the strongest negotiating position right now. Nine of the nation's largest banks were told they didn't have a choice.

Here's an excerpt from the story from the Chicago Tribune:

WASHINGTON -- Initiating what amounts to the partial nationalization of the U.S. banking system, the Bush administration Tuesday will announce plans to sink $250 billion into nine large U.S. banking companies and possibly some smaller ones, a congressional source said.

Financial stocks led the way, but the broader S&P 500 and the technology-laden Nasdaq both jumped more than 11.5 percent, powered by a late-afternoon buying binge.

We'll be hearing more about the Bush Administration's plans today with President Bush, Treasury Secretary Henry Paulson Jr. and Federal Reserve Chairman Ben Bernanke taking to the cameras and microphones to explain what they're doing.

by Mark Silva

For the record, the federal budget defict reached a new record in the 2008 budget year, which ended last week: $438 billion.

For the new year, the president's Office of Management and Budget already has projected another new record of more than $480 billion. And that projection is likely to be shelved soon, in the midst of a $700-billion bailout of the financial system authorized by Congress.

But for the year past, the government has surpassed its past record of $422 billion, according to the Congressional Budget Office. The reason: Spending. The war and more.

The estimated 2008 budget deficit of $438 billion well surpasses the deficit of $276 billion last year. It had been declining after reaching its peak of $422 billion under President Bush.

"Relative to the size of the economy, that deficit was equal to 3.1 percent of Gross Domestic Product, up from 1.2 percent in 2007, CBO Director Peter Orszag reports.

(The average deficit over the preceding five years, 2002-2006, was 2.6 percent of GDP.)

The big expenses that helped drive the deficit highher: $62 billion in tax rebates (from the economic stimulus legislation) that were recorded as offsets to revenues. In contrast, receipts of social insurance (payroll) taxes rose by about $31 billion (or 3.5 percent), and other receipts increased by about $9 billion (or 5.4 percent).

"Spending rose by about 8 percent,'' Orszag notes. "Contributing significantly to the growth in spending were outlays for tax rebates (those rebates that were recorded on the spending side of the budget because they exceeded the recipients' income tax liability), for deposit insurance, and for national defense.

Also for the record, Bush promised to cut the budget deficit in half by the end of his final term. Bush also inherited a budget surplus from President Clinton, but is preparing to hand his successor a runaway new record in the deficit.

by Frank James

Treasury Secretary Henry Paulson Jr., whose bald pate has become a fixture on our TV screens in recent weeks, has tapped his similarly bald protege Neel Kashkari as bailout czar.

Kashkari, like Paulson, is a former Goldman Sachs investment banker, as well. And it's impressive that so much trust is being placed in the 35 year old assistant Treasury secretary for international affairs.

Here's an excerpt from the Wall Street Journal's story on Kashkari:

Mr. Kashkari, 35 years old, a Treasury assistant secretary for international affairs and a former Goldman Sachs Group Inc. banker, is expected to be named interim head of Treasury's new Office of Financial Stability as early as Monday. The position confers substantial power on Mr. Kashkari, who will oversee Treasury's effort to buy bad loans and other distressed securities clogging the books of financial institutions and making them reluctant to lend...

Mr. Kashkari was part of the Treasury team that negotiated the asset-repurchase program with Congress, putting in marathon sessions along with Robert Hoyt, Treasury's general counsel, and Kevin Fromer, the head of legislative affairs. He was also one of the originators of the plan. Last year, he and Phillip Swagel, assistant secretary for economic policy, crafted a proposal called "break the glass" -- referring to the emergency nature of using such a tool -- which envisioned Treasury buying bad loans and other assets.

by Frank James

After nearly every disaster involving Americans, there's the usual investigation to figure out why the plane crashed or the ship sank and to affix blame. The difference between most calamities and the present financial-markets meltdown is that the investigation of the latter can actually occur while the disaster is still unfolding.

Stephen Labaton's New York Times story is part of the examination of how the financial markets were laid so low. After reading the piece, I predict many people will join Sen. John McCain in calling for Securities and Exchange Commission Chair Christopher Cox's firing. Treasury Secretary Henry Paulson Jr. will look a whole lot worse, too.

In a nutshell, in 2004 before Cox took over the SEC, in a public meeting that was largely ignored at the time, the commission responded to heavy lobbying by Wall Street's large investment banks by changing a critical rule that required Wall Street's big five investment banks to maintain large enough cash cushions in their brokerage units to withstand periods of market turmoil.

By jettisoning that requirement, the investment bank giants, including Goldman Sachs, run at that time by Paulson, were able to use the freed-up cash to buy many of the risky assets that are at the heart of the present crisis.

Bad enough, right? It gets worse.

In exchange for this liberalized cash-reserve requirement, the SEC was supposed to pay closer attention to the debt levels at the investment banks.

This is where Cox comes in. When he became SEC chairman in 2005, he not only didn't appear to care much about this enforcement responsibility, he actually reduced the number of SEC cops on the beat. Also, the investment banks were supposed to self-regulate. We all know how that went.

by James Oliphant

ABOARD THE AMTRAK ACELA--Okay, I always wanted to type one of those datelines.

Of course, I'm not on a battleship in Sea of Japan or anything like that. Your correspondent is aboard the Acela, rushing from Wilmington, Del. to Washington.

Sen. Joseph Biden is taking a break from prepping for Thursday night's debate with Sarah Palin to work his day job a little. He's heading for Capitol Hill to vote for "the rescue plan.'' (Didn't you get the memo? No one calls it a bailout anymore.)

Tuesday, Biden warned there would "real trouble" if Congress failed to pass a bill this week. Talking to diners at a restaurant in Wilmington, Biden said. "What people are going to do if they don't get this done, people are going to lose their jobs, their pensions."

"That why we've got to have this package," he told another voter. "This is not a $700 billion check we're writing out. We'll get this money back."

But nothing will come easy. Sen. Richard Shelby (R-Ala.), a fierce critic of the proposal, just announced his opposition to the bailou--er, the "Emergency Economic Stabilization Act of 2008.

The vote will come after sundown Wednesday in observance of the Jewish holiday Rosh Hashanah.

Biden spent the day preparing for the debate and held no public events.

by Frank James

The conventional wisdom in Washington is that one reason the Bush Administration's proposal to buy toxic assets from financial institutions failed in the House earlier this week is because of bad marketing. The administration allowed the plan to be described as a "bailout" and that word by itself outraged many Americans.

So the language has been changed. The proposal is now being described as an economic, financial or national "rescue plan."

Here's President Bush this afternoon:

I appreciate Senator Harry Reid's leadership in the United States Senate when it comes to the financial rescue plan. I also appreciate Mitch McConnell's leadership as well. The Senate will be voting on a very important measure tonight. It's -- the rescue plan bill has been improved by raising, by other things, raising, temporarily raising the cap of FDIC insurance.

Sen. Mitch McConnell, the Senate Minority Leader said:

I'm optimistic that we're going to have a significant bipartisan victory on the rescue plan here in the Senate tonight.

Speaking to the media outside the Senate chamber, Sen. Harry Reid, the Senate Majority Leader used the word bailout but tried to give it a different twist:

This is not a bailout for Wall Street. It's bailout for a country.

But later in the chamber, Reid was on message:

Senators Bennett, Corker and Gregg on the Republican side, as well as Senators Dodd, Baucus, Conrad, Durbin, Jack Reed and Schumer have done an exceptional bipartisan job to move the rescue legislation forward here in the Senate, and their work continues.

(Photo: SAUL LOEB/AFP/Getty Images)

by Frank James

As the fingerpointing continues following the House's failure to pass the $700 billion bailout, a lot of blame is going to Treasury Secretary Henry Paulson Jr. for first trying to run roughshod over Congress and the sensibilities of taxpayers until he realized that approach was doomed to failure.

Paulson is being singled out for crafting an initial proposal that was so offensive to many Americans and members of Congress in how it sought vast new and unreviewable powers for the Treasury Secretary.

With the controversial three-page proposal he dropped on Congress last week, he wound up creating a wave of outrage so huge it couldn't be overcome by the time yesterday's vote occured.

The very same hard-charging qualities that led him to be such major success and riches on Wall Street as investment bank Goldman Sachs' chairman and chief executive, it's thought, caused him to be insensitive to how consensus is formed in Washington and how major legislation must be marketed to the American people.

Interviewed on CNBC this morning, Steve Forbes, chairman and CEO of Forbes Inc., said "Paulson, with House Republicans, has been about as effective as an angry drill sergeant talking to raw recruits."

Meanwhile, Paulson is also being blamed for the worsening condition of the credit markets, especially in the short-term lending area called commercial-paper, resulting from the decision to allow Lehman Brothers to go belly up.

Here's an excerpt from yesterday's Wall Street Journal:

by Frank James

The Justice Department's Inspector General released a magnum opus of a report on the Bush Administration's controversial firings of nine U.S. attorneys.

Few people have had the chance to read the entire 356-page report. But if you read it from the back, you get the conclusions which sum up the findings.

The Justice Department investigators place much of the blame for the firings on Kyle Sampson, former Attorney General Alberto Gonzales's chief of staff, who conducted the firings pretty much on his own and apparently for no good reasons, according to the report.

But they don't let Gonzales and company off the hook. They blame Gonzales and his then Deputy Attorney General Paul McNulty for failing to oversee the process and then not telling the full truth about it.

The investigators do call for a special counsel to probe the firing of former U.S. Attorney David Iglesias saying that the circumstances of his firing, with allegations that he was fired for not pursuing voter fraud and public corruption charges against Democrats, requires an examination into whether criminal charges are required.

Attorney General Michael Mukasey announced that he was following the recommendation and naming the U.S. Attorney for Connecticut, Nora R. Dannehy, to run the investigation.

Mukasey said:

"Today's report is an important step toward acknowledging what happened, and holding the responsible officials to proper account. I hope the report provides a measure of relief to those U.S. Attorneys whose reputations were unfairly tainted by the removals and their aftermath. They did not deserve the treatment they received.

"The Report leaves some important questions unanswered and recommends that I appoint an attorney to assess the facts uncovered, to conduct further investigation as needed, and ultimately to determine whether any prosecutable offense was committed with regard to the removal of a U.S. Attorney or the testimony of any witness related to the U.S. Attorney removals. In the normal course, a report recommending further investigation would not be released until after the investigation and any resulting prosecution had been completed, for fear that disclosing publicly relevant facts and witness statements would hinder the investigation or prosecution. In this instance, the Offices of Inspector General and Professional Responsibility have made the judgment that the circumstances warrant a departure from this usual practice.

by Frank James

Used to be talking down the economy was something government officials weren't supposed to do, especially senior U.S. officials.

Conservatives often bashed liberals who they frequently perceived as trying to talk the economy into recession for political reasons. And on occasion liberals even attacked conservatives for allegedly cynically talking down the economy for the same reasons.

Now its open season on the economy. Everyone seems to be talking it down, particularly those top government officials who are usually so guarded in their public comments they won't even discuss in detail U.S. policy towards the value of the dollar for fear of affecting markets.

From President Bush, to Treasury Secretary Henry Paulson Jr. to Federal Reserve Chair Ben Bernanke, the message is the economy will essentially go down the tubes if Congress don't pass the $700 billion bailout "national rescue plan" quick, fast and in a hurry.

Republican vice presidential nominee Sarah Palin even raised the stakes yesterday when she warned the nation could slide into a "depression" if the Bush Administration package weren't passed. Think about that for a moment--a would-be vice president during a hotly contested presidential race raising the specter of the D word.

Question: Are top federal officials (and those who would like to join that group) exacerbating the problem with their doom and gloom warnings?

As many have said in recent weeks, trust or faith, as in "full faith and credit" is a big part of what makes the U.S. economy possible. So much of what makes the economy work, consumer spending, is psychological. The president understands this. That's why in the weekend after the 9/11 attacks, he told Americans to continue shopping.

It could be argued that in his push to stampede Congress into passing its proposal quickly, Bush and other officials are eroding much of any trust that may be left in the U.S. economy.

It's hard to have keep one's faith in the economy up and not think about going into survivalist mode with larder stocked and shotgun loaded when you've got the president of the U.S. on prime time TV saying:

As a result, our entire economy is in danger... More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

This is clearly not a time for happy talk about the economy. But whatever happened to those fears about not talking down the economy? So much for we have nothing to fear but fear itself.

by Frank James

It's a safe bet that the legislative proposal by Treasury Secretary Henry Paulson Jr. to buy up bad Wall Street assets is going to undergo some fundamental revision.

Troubling to many critics is the breathtaking extraconstitutionality of the proposal which would give the Treasury secretary unusual powers that couldn't be countermanded by Congress or the courts.

That appears on its face to violate the Constitution's assertion of a balance of powers where no one branch is unchecked by the others.

On the Diane Rheem Show on public radio this morning, Alan Blinder, former Federal Reserve vice chair and normally a mild-mannered, live-and-let-live Princeton University economics professor, said Paulson should be fired for his proposal.

Here's Blinder from the program:

"I'm speaking now as one of the earliest advocates of creating an institution like this, many, many months ago. And it's a crying shame to see the way the Treasury has written this. I think the secretary of the Treasury should be dismissed, frankly. ... Asking for the authority to buy anything, with no review, with no court review, with no limits practically as to quantity or scope, with almost no congressional oversight. We have something more precious at stake than our precious financial system and that's our precious Constitution. And frankly, if I were a member of Congress, having advocated for this for nine or ten months, I would vote against this unless it's changed, dramatically..."

The administration should know its proposal is in deep trouble when both Paul Krugman and William Kristol agree the plan goes too far.

by Frank James

The not-so-invisible-hand of Washington reached out on Sunday and snatched the last two remaining big Wall Street investment banking firms into the world of increased federal regulation with the announcement that Morgan Stanley and Goldman Sachs have decided to become commercial banks.

This is how the Federal Reserve announced it last night:

The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.

To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.

Now they'll be able to go out and get deposits from people like you and me which will help to stabilize their capital base.

Those deposits will be federally insured by the Federal Deposit Insurance Corp. which will give the companies the kind of insulation from capital flight they've lacked until now.

We'll be keeping our eyes open for those new Morgan Stanley and Goldman Sachs bank branches.

by Frank James

The Bush Administration wants to get $700 billion, no strings attached, to buy up the bad assets of Wall Street financial institutions. Congress wants to attach strings.

That's pretty much where things stand as the week begins. The clash of the Washington titans, that is, Treasury Secretary Henry Paulson Jr. and the Democrats who control the Congress is about to begin in earnest.

On the Sunday talk shows, Paulson said the Bush Administration's rescue proposal is needed NOW, so Congress shouldn't bog things down by trying to expand the plan by adding direct relief for regular taxpayers.

Here's an exchange he had with Chris Wallace on Fox News Sunday:

MR. WALLACE: All right. Your immediate challenge now is to get this through Congress. And Democrats are saying, wait a minute. If you're going to bail out Wall Street, you've got to bail out Main Street.

We've had a lot of efforts, and I would sure -- I would be very, very surprised and disappointed if, at a time when the government owns a lot of these securities, we won't have more leverage to do that. And that should be a big focus.

by Frank James

When Treasury Secretary Henry Paulson was appointed by President Bush as his third and presumably last Treasury Secretary in 2006, a lot of observers assumed Paulson was coming in to be a mere caretaker.

That was a bad call.

Shakespeare has a line about some men being born great, some men achieving greatness and others having greatness thrust upon them. Paulson jumps out of that last category. When Wall Street was healthy, it made him very rich. Now that it's ailing, it's made him famous.

Because of his energetic and sweeping response to the Wall Street meltdown, Paulson has turned out to be one of the most powerful and activist Treasury secretaries in recent U.S. history.

If there were an Alexander Hamilton Award for using federal power vigorously in times of economic crisis, he would get it by acclamation. Only time will tell if the way he has seized and used the levers at his disposal was the right thing at the right time.

In times of crisis, however, humans like a take-charge guy and Paulson is certainly that. He is the antithesis of Michael "Heckuva Job" Brown.

Almost overnight, he has become one of the most nation's, better yet, the globe's most powerful people. With the bald pate and the penetrating eyes, he looks a bit like Julius Caeser and some would say is acting the part.

Newsweek portrays him as "King Henry" in its latest cover story:

Wielding much of this power over financial life and death is this tall, calm man. Paulson came to Washington from Wall Street in 2006 expecting to deal with issues like Social Security reform and trade agreements. But the economy had other ideas. At a time when President Bush seems to have largely checked out, the teetotaling 62-year-old has emerged as the nation's most powerful leader--the investment banker in chief. As he did on the Street, Paulson continues to advise CEOs on the best course of action, to arrange financing and to get the best terms possible for his clients. Only now his clients are American taxpayers, the president and the global financial system.

With the help of his counterparts at the Federal Reserve and the Securities and Exchange Commission, Ben Bernanke and Christopher Cox, Paulson has succeeded in fundamentally altering the relationship between Wall Street and Washington--almost to the point where D.C. is now the world's financial capital. "There's no doubt that he's in charge," says Roy Smith, a former partner with Paulson at Goldman and a professor at New York University. An indifferent orator--Paulson hunches his 6-foot-2 frame over lecterns and has a halting speaking style--the Eagle Scout has emerged as the pre-eminent market whisperer and cajoler of the American financial system. And yet Paulson has rankled some in Washington by conducting business like a Wall Street Master of the Universe: the marathon late nights and weekend meetings with a small group of people, followed by an unveiling of the result as a fait accompli.

by Bay Fang

Secretary of State Condoleezza Rice, answering widespread criticism that she had not stood up to Russia enough in the past month, talked tough to Moscow on Thursday, saying its invasion of Georgia had achieved no strategic objective, and that Russia's leaders were taking the country "on a one-way path to self-imposed isolation and international irrelevance."

Her speech, hosted by the German Marshall Fund, was meant both to warn Russia against further provocations, and to rally European allies to work with the US to oppose Russian aggression. She spoke directly to these allies in the speech, saying, "We cannot afford to validate the prejudices that some Russian leaders seem to have: that if you pressure free nations enough - if you bully, and threaten, and lash out - we will cave in, and forget, and eventually concede."

While rejecting the idea that the US and Russia were entering a new Cold War, Rice spelled out the consequences of Russian actions, saying that its bid to join the World Trade Organization and the Organization for Economic Cooperation and Development was in jeopardy, and its agreement with the US on civil nuclear cooperation had been put on hold. In answer to a question, she added that in the wake of the crisis over Georgia, more decisions were being made by the G-7 nations instead of the G-8, thus excluding Russia.

Rice, a former Soviet scholar, has been widely criticized for not personally taking a forceful enough stance against Moscow after Russia's invasion of Georgia last month.

by Frank James

CNBC reported this afternoon that Treasury Secretary Henry Paulson is shopping an idea around Capitol Hill whereby the feds would create a virtual landfill for the toxic assets now owned by financial institutions.

Such a move would allow institutions to dump those assets of dubious value -- mortgage-backed securities and the like -- onto taxpayers. The institutions would clear their books which should allow them to start lending again and free up the credit markets.

Anybody who didn't like the Bear Stearns, Fannie Mae, Freddie Mac and AIG bailouts will really hate this one. Arguably, this would be the ultimate in creating moral hazard. And once again the argument could be made that it's another example of profits being privatized while losses are socialized.

But there may be little alternative

Treasury Secretary Henry Paulson is working on a plan that would set up a government facility to take on bad debts from financial institutions, preventing a worsening of the global credit crisis, Wall Street sources have told CNBC.

In turn, that could allow the housing market to recover because it would restore banks willingness to lend.

by Laura Olson

Additional international support will be necessary to establish a lasting peace along the Georgian-Russian border, former Speaker of the Georgian Parliament Nino Burjanadze said Thursday.

Burjanadze spoke on the conflict at the Carnegie Endowment for International Peace as U.S. Vice President Dick Cheney began his visit to Georgia's capital.

Her talk comes after an announcement Wednesday of $1 billion in U.S. aid to help Georgia rebuild its infrastructure.

by Frank James

The Homeland Security Department is giving us a sense of Secretary Michael Chertoff's itinerary today. Suffice it to say that he is going to be showing the DHS flag a lot in Louisiana in the next few hours.

He'll be making at least three stops, in Houma, New Orleans and Baton Rouge to look at Hurricane Gustav preparations.

Compare this to what he did three years ago before Hurricane Katrina. The closest he got to New Orleans before that storm was Atlanta.

Then FEMA director Michael "Brownie" Brown also faulted Chertoff after the fact for ordering him to stay in Baton Rouge instead of letting him go into New Orleans to see first-hand the destruction.

Obviously, Chertoff isn't making the same mistake twice. He's going beforehand to the city directly in the path of imminent storm. Here's a press release from the Homeland Security Department.

STATEMENT BY HOMELAND SECURITY PRESS SECRETARY LAURA KEEHNER

We continue to remind Gulf Coast residents about the importance of taking precautionary measures to prepare for an emergency situation or evacuation as Gustav approaches our shores. The department's Ready Campaign encourages citizens to get an emergency supply kit, make an emergency plan, and stay informed of instructions from local authorities. Please visit www.ready.gov for resources and information on personal and business emergency preparedness.

(Our comment boards are currently broken so please send any comments by e-mail to theswamp@tribune.com and we'll get them up as soon as we can.)

People wait at New Orleans Amtrak station on Aug. 30, 2008 to be evacuated out of the possible path of Hurricane Gustav. Photo: Matthew Hinton/AFP/Getty Images.

by Frank James

BLOOMINGTON, Minn. -- How competent will the federal government prove to be in preparing for and responding to Hurricane Gustav while the party that controls the Executive Branch hold its national convention?

That question, and the Bush Administration's disastrous response to Hurricane Katrina in 2005, hangs over the Republican Party as it prepares to convene in nearby St. Paul on Monday.

The obvious question is, how will Bush Administration respond this time? Based on what officials at the Federal Emergency Management Agency are saying, it will be night and day.

Here's what Adm.. Harvey Johnson (ret) FEMA's deputy administrator and chief operating office, said at a briefing in Washington, D.C. yesterday:

A huge difference between 2008 hurricane season and 2005 hurricane season. We just finished about a two-hour video teleconference, which is about an hour too long. (A good sigh this. It makes Johnson sound like a man of action.)

Contraflows will come into place across almost all states in the Gulf Coast on Sunday morning, about 4:00 or 5:00. All states talking to each other, planning together, sharing resources and working together as a team.

by Frank James

Russians will no doubt view it as a Polish poke in the eye; top Russian officials have said as much.

But in the wake of Russia's invasion of the Republic of Georgia, the Republic of Poland has officially sided with the U.S. on a key issue that had previously found it uneasily poised between the Bush Administration and the Russian government led by Prime Minister Vladimir Putin and signed a pact to allow U.S. missile interceptors on Polish soil. Secretary of State Condoleezza Rice was in Warsaw today to sign the agreement at a very well-publicized ceremony.

Polish officials had been slow-walking discussions with the U.S. over the missiles for months. Even though the U.S. has insisted that it wanted the interceptors in Poland to counter the potential threat of Iranian ballistic missiles, the Russians have adamantly opposed the U.S. missiles, saying they viewed them as a threat because the missiles could weaken Russia's deterrent force of nuclear missiles.

Despite official Polish denials, the fact that the deal was finally reached with great alacrity after Russia's Georgia invasion has been interpreted by U.S. foreign affairs analysts as a direct result of Russia's aggression against a former Soviet satellite state.

In this instance, the Russians apparently are being reacquainted with the law of unintended consequences. Their actions in Georgia hastened the very consequences they found so undesirable, American interceptors in Poland.

by Bay Fang

Secretary of State Condoleezza Rice, back from her vacation, is finally injecting herself visibly into the conflict over Georgia and South Ossetia. On the president's orders, she will be leaving at midnight tonight for Paris, the South of France, and Tbilisi.

The hastily arranged trip will not include the press corps with whom she normally travels. Apparently, she is stuck with a smaller plane for her diplomatic mission, since Vice President Cheney took the larger plane to go to a fundraiser.

The former Soviet scholar also will not be going to Moscow itself, preferring to let the French take the lead in ongoing mediation efforts between the Russians and the Georgians. In a press briefing just before leaving she did add, a tad defensively, that she spoke with Russian Foreign Minister Sergei Lavrov this morning, and that the administration has many channels of communication open with the Russian leadership.

House Energy and Commerce Committee Chairman John Dingell. Photo by Alex Wong/Getty Images)

by Frank James

There's been no let up in the criticism by environmentalists of the Bush Administration's changes, announced yesterday, to the Endangered Species Act that would essentially leave it to various federal agencies to determine the impact of their projects on endangered species without involving the federal officials most responsible for protecting such animals.

It's one thing to have environmentalists upset. It's another to have Rep. John Dingell (D-Mich.) the act's founding father as it were and definitely not the kind of person big-business types would call a tree-hugger, issuing the following sort of statement today:

Dingell Outraged Over Proposed ESA Changes

"I wrote the Endangered Species Act and seeing it signed into law was among my proudest moments as a Member of Congress. The changes sought by the Bush Administration would seriously weaken the law, eliminating the requirement that scientists be the ones making decisions regarding science, instead giving political hacks and unsympathetic bureaucrats another opportunity to attack the scientific community. It is remarkable that this bill, signed into law by Richard M. Nixon and accepted for decades as a pillar of American conservation would be destroyed by George W. Bush in the final months of his Administration. It is most peculiar that a statute which has done so much good should be now jeopardized by the stroke of a hostile Presidential pen."

Damaged building near the Indian Embassy in Kabul, Afghanistan, Monday, July 7, 2008. (AP Photos/Rahmat Gul)

by Frank James

Have U.S. intelligence agencies caught their Pakistani counterparts red-handed, aiding in last month's bombing by Afghan militants of the India's embassy in Kabul?

That's what the New York Times is reporting in a story by Mark Mazzetti and Eric Schmitt.

WASHINGTON -- American intelligence agencies have concluded that members of Pakistan's powerful spy service helped plan the deadly July 7 bombing of India's embassy in Kabul, Afghanistan, according to United States government officials.

The conclusion was based on intercepted communications between Pakistani intelligence officers and militants who carried out the attack, the officials said, providing the clearest evidence to date that Pakistani intelligence officers are actively undermining American efforts to combat militants in the region.

As shocking as the revelation is, it won't surprise anyone who's been following news from Pakistan for years. Pakistan's Inter-Services Intelligence agency has long been known to be playing both sides of the divide between terrorism and the nation's fighting it.

The ISI has long supported the Taliban in Afghanistan and has used Islamic extremists in its fight against archrival India over the disputed Kashmir region.

If the report is accurate, what the report does is once again underscore how difficult has been and will continue to be for the U.S. to fight terror in the region with Pakistan as an ally.

by James Oliphant

A Washington, D.C. federal judge ruled Thursday that members of the administration do not enjoy absolute immunity from the reach of congressional subpoenas.

This is an answer to a legal conundrum that has been developing for a long time, as the Democratic Congress has pushed for answers from the White House over the U.S attorney scandal, detainee interrogation methods and more.

But U.S. District Court Judge John Bates gave the matter some clarity today, saying that former White House counsel Harriet Miers and Bush chief of staff Joshua Bolten could not refuse to testify in response to congressional requests.

The White House had argued that staffers like Miers and Bolten were immune from congressional process. But Bates, in a 93-page ruling, said there was no legal foundation for that claim.

The White House position "is without any support in case law," Bates wrote, adding that the contention that "Miers is absolutely immune from compelled congressional process" is "unprecedented."

But the ruling was only a partial victory for Congress.

While ruling that Bolten and Miers had to testify, Bates said they were free to invoke executive privilege during that testimony for matters in which the privilege could apply. Meaning that it is likely if the two do appear, the matter will end up right back in front of Bates.

The administration is also expected to appeal to the federal appeals court in Washington, which will likely drag the case out past the end of this session of Congress. That would render the subpoenas moot.

Bates was appointed to the bench by President Bush in 2001. He is also a member of the secret Foreign Intelligence Surveillance Court.

by Frank James

Bad news on the budget-deficit front. The Bush Administration shared with the nation today its forecast for the federal budget deficit: A record-setting $482 billion for fiscal year 2009.

But there was good news too. Jim Nussle, director of the Office of Management and Budget, noted today that the deficit of nearly half a trillion dollars, while a new record in sheer dollars, would be a mere 3.3 percent of the Gross Domestic Product. That's a lot smaller than the share of the GDP of the 1983 deficit, which was 6.0 percent of GDP.

Nussle said:

"The primary reasons that there will be larger deficits in 2008 and 2009 are because of the bipartisan growth package or stimulus checks that -- as well as slower economic growth."

But lest you think Nussle ended on a downer like that, he didn't. Like a Hollywood movie maker, he wanted to give the audience something more upbeat to leave with:

The president's budget blueprint remains on track to achieve balance with surpluses of $58 billion in 2012 and $29 billion in 2013.

The important point to remember is that near-term deficits are both temporary and manageable if and only if we keep spending in check, the tax burden low and the economy growing.

When asked by a reporter how that was possible, Nussle admitted it wouldn't be easy, but, hey, he still felt plenty optimistic so long as the Democrats didn't ruin everything with spending and tax increases:

I mean, I acknowledge in my statement that this is going to be a challenge particularly given the atmosphere on Capitol Hill to spend more. Most of the bills, most of the proposals on the Hill have been to spend more, have been to obligate more.

Most of those pressures are upward pressures on the deficit, not downward pressures. And each one of those, every dollar that is added to that bottom line makes it more difficult and takes away the cushion that we have in 2012 and '13. We do have some cushion but not enough to squander that with excessive spending programs.

by Frank James, with correction

There was a lot of surprise in Washington and beyond when the news broke that U.S. State Department official William Burns will be meeting in Geneva, Switzerland with Iranian officials over the weekend as part of an international group attempting to persuade Iran to give up its nuclear-weapons development efforts.

What raised so many eyebrows was what appeared to be seeming reversal in the Bush Administration's position that it wouldn't engage in direct talks unless the Iranians ceased and desisted in their nuclear enrichment efforts.

It's no reversal, said the White House which insisted that just because a senior State Department official will be in a room with Iranian officials where a lot of talking will be taking place, that's not the same as negotiations.

Here's a lengthy exchange White House Press Secretary Dana Perino had with reporters this afternoon:

Q But you're saying this isn't negotiated? Is this negotiating with the Iranians?

Q Well, how can you say nothing has changed if you're sending over Bill Burns to even sit there? I mean, that certainly gives the Iranians --

by Frank James

Once again, the federal government is riding to the rescue of the U.S. financial system with the statement of Treasury Secretary Henry Paulson Sunday that the government would make taxpayer funds available to mortgage giants Fannie Mae and Freddie Mac to meet their capital requirements.

It's an effort to dampen the panic among global investors over the possibility that the two goverment-sponsored entities or GSEs which own or support millions of U.S. mortgages, could essentially implode, resulting in the government having to takeover the two companies.

In his statement, Paulson said:

First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.

Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.

The steps Treasury is taking is reminiscent of what the Federal Reserve did after a panic driven by rumors caused the investment bank Bear Stearns to experience what was essentially a bank run, leading to its takeover by JPMorgan Chase.

Something to watch today will be investor-reaction to Treasury's announced plan as well as the response to an auction of $3 billion in debt by Freddie Mac. If the response to the auction is weak, it's likely investor panic would flare up once again.

by Frank James

In a move that shouldn't surprise anyone, the Bush Administration decided it wanted no part of regulating the greenhouse gases most scientific experts believe contribute to global warming.

The EPA decision took the form of a 588-page document issued by the Environmental Protection Agency in which the EPA declined to take the vital step of declaring greenhouse gases unhealthy to the public.

If the EPA had done so, the agency would have been required by law to regulate greenhouse gases. Last year, the Supreme Court said the EPA had the authority to make such regulations if it determined that such gases were harmful to Americans' health.

Even though Bush has publicly accepted the premise that humans are contributing to global warming, his administration has opposed such regulations on the grounds that the U.S. economy could potentially be bogged down if the EPA were required to sign off on thousands or more projects and activities across the nation that influenced greenhouse gases.

The Bush administration's view on new EPA rules also mirrors its objections to the Kyoto Protocol; that the global warming problem is by definition a world-wide problem and it doesn't make a whole lot of sense for the U.S. to burden its economy with rules and costs to fight global warming if developing nations like China and India weren't similarly constrained.

So Bush's EPA essentially punted, leaving it to a future president and Congresses to determine how the EPA should proceed. In lieu of making regulations, the EPA issued a document that, among other things, merely sums up the objections it heard from across the administration to possible regulations.

by Bay Fang

Iran's reported test-firing of missiles two days in a row, just as it is showing more interest in dialogue about its nuclear enrichment program, highlighted the mixed messages that pose a dilemma for the U.S. as it weighs how to approach a country moving ever closer to becoming a nuclear power.

In a show of strength and readiness, the Iranian Revolutionary Guards reportedly launched nine mid- to long-range ballistic missiles in the Strait of Hormuz Wednesday, and two more Thursday, including one that could reach Israel and U.S. forces stationed in the region.

But it comes as Tehran has seemed to react favorably to a new package of incentives presented by the U.S. and its European allies to halt its nuclear program, and as its top nuclear negotiator is planning to meet with European Union representative Javier Solana in the coming weeks.

Regional analysts surmise that the two approaches could indicate a real division in Tehran over how to deal with the West, but could also be an effective negotiating tactic.

by Matthew Hay Brown

Three months ago, congressional Democrats began pressing President Bush to halt new shipments to the Strategic Petroleum Reserve. Today, with gasoline prices still climbing, House Speaker Nancy Pelosi asked him to begin drawing the reserve down.

"Deploying a small portion of the resources in the SPR would provide much needed assistance to American consumers facing record prices and help our economy during a serious period of instability," Pelosi wrote to Bush. "I strongly urge you to use every available tool, including deployment of the SPR, to provide timely relief for American consumers and businesses."

Bush initially resisted the calls to stop adding 60,000 barrels of oil each day to the giant undergound caverns in Texas and Louisiana where the reserves are stored, but relented after Congress passed legislation to do so by veto-proof margins.

It's unclear whether Pelosi's current request will garner the same bipartisan support.

"The fact is, the American people expect and deserve far more than what Speaker Pelosi is proposing," House Minority Leader John Boehner said in a statement. The Ohio Republican did not indicate whether he favored drawing down the reserve.

"With her call for President Bush to release supplies from the Strategic Petroleum Reserve, the speaker is admitting yet again that increasing the supply of oil will help reduce the price of gasoline," Boehner said. "I agree that more supply is necessary, and so do my House Republican colleagues who have been arguing for decades in favor of more American energy production."

Pelosi's letter follows.

by Matthew Hay Brown

After a year and a half of pushing unsuccessfully for a timeable for a U.S. withdrawal from Iraq, congressional Democrats have found an ally in Baghdad.

Iraq's national security adviser told reporters in Najaf today that the U.S.-backed government would not agree to the security deal it is negotiating with Washington unless it included details of a pullout.

"We will not accept any memorandum of understanding if it does not give a specific date for a complete withdrawal of foreign troops," National Security Adviser Muwaffaq al-Rubaie said. His comments echoed those made by Iraqi Prime Minister Nuri al-Maliki to Arab diplomats in Abu Dhabi on Monday.

The State Department slapped the Iraqi demand down today.

"The U.S. government and the government of Iraq are in agreement that we, the U.S. government, we want to withdraw; we will withdraw," spokesman Gonzalo Gallegos told reporters. "However, that decision will be conditions-based."

But the demand has found a willing audience among the congressional majority.

"President Bush refuses to listen to Congress or the American people, but he cannot support Iraqi political reconciliation and security and ignore Iraqi Prime Minister Maliki's call for a timetable for the withdrawal," House Speaker Nancy Pelosi said.

by Matthew Hay Brown

Growing up in the West African nation of Mali, Alima Traore assumed that girls everywhere had to undergo the procedure.

"In my country, it is usually an old lady" who performs the crude surgery, the 29-year-old woman said in her attorney's office. "They have a traditional knife for it. They cut your intimate parts. This knife is used for many girls."

It wasn't until Traore came to the United States eight years ago that she learned that female genital mutilation has been condemned the world over as a human rights abuse. Now that she's here - she has been living in Maryland since 2000 - she doesn't want to go back.

Traore's fight against deportation - her student visa expired in 2003 - has put her at the center of a growing dispute between rights groups and the Bush administration over whether victims of the practice also known as female circumcision, or female genital cutting, qualify for asylum here.

Read about the debate in today's Baltimore Sun.

In considering her case last fall, the Board of Immigrations Appeals described the "infliction of FGM" as "reprehensible." But the board, a tribunal within the Department of Justice, ruled that Traore does not have a well-founded fear of future persecution if she were to return to Mali, because the damage, though permanent, has already been done.

That interpretation, which now is binding on immigration judges, has drawn criticism from rights advocates, physicians and others, who say it defies federal case law and reverses the board's own reasoning in earlier, similar cases.

by Bay Fang

While her boss, President Bush, spoke out in Japan on the eve of the G8 summit about North Korean abductions and human rights in China, Secretary of State Condoleezza Rice was fielding the press back home on a different subject - her golf game.

In interviews with both CBS News and XM radio during the AT&T National Golf Tournament, at the Congressional Country Club in Bethesda, MD Saturday, Rice confessed that her summer goal was to "get just a little bit better at chipping so that I can have a little shorter putt."

Bush got in trouble in May when he told reporters he had sacrificed his golf game for the sake of the troops. "I don't want some mom whose son may have recently died to see the commander in chief playing golf," he said in an interview with Politico. "I feel I owe it to the families to be in solidarity as best as I can with them."

(Enterprising reporters later revealed that although Bush said he made that decision after the August 2003 bombing of the UN headquarters in Iraq, his last round of golf was actually played in October 2003.)

Rice's last game was on the morning of the Fourth with her cousin and her cousin's husband, and a couple of friends in town for the holiday.

by David Nitkin

President Bush said today he wants to continue toward a diplomatic resolution to Iran's nuclear ambitions, and would not directly address reports that Israel plans a military strike to destroy Iranian uranium enrichment capabilities before the end of the year.

"I have made it very clear to all parties that the first option ought to be to solve this problem diplomatically," Bush said. "And the best way to solve it diplomatically is for the United States to work with other nations to send a focused message. And that is that, You will be isolated and you will have economic hardship if you continue trying to enrich."

Bush addressed his goals for an upcoming trip to Japan for a G8 summit during a statement in the Rose Garden, and took five questions from reporters at the conclusion of his prepared remarks. Two of the questions concerned Israel's intentions in Iran, a topic of escalating debate. But the president did not specifically mention the prospect of Israeli military attacks in his responses.

Bush said he supported a proposal from Russian leader Vladimir Putin to provide enriched uranium for an Iranian civilian nuclear power program and collect the spent fuel, "thereby negating the need for the Iranian regime to enrich at all."

Questions about Israeli intentions in Iran have swelled since last month, when more than 100 Israeli F-16s and F-15s flew more than 900 miles over the Mediterranean in an exercise that included refueling tankers and helicopters that could rescue downed pilots, the New York Times reported. The distance covered during the exercise showed that Israel jets could reach Iran's Natanz nuclear enrichment facility.

by Bay Fang

Although President Bush announced this morning that he would lift key sanctions against the North Korean regime and remove it from the US terrorism blacklist, the State Department and administration officials followed up by emphasizing that other sanctions against the regime once dubbed part of the "axis of evil" remained in place.

For one, bans remain against missile equipment, possible dual-use technology, and the assets of any designated proliferators. Any assets that were previously frozen under the Trading with the Enemy Act remain frozen. Furthermore, sanctions put in place due to the regime's "gross violations" of human rights continue to prohibit any development or security assistance to Pyongyang.

While traveling in Japan for the G-8 meeting of foreign ministers, Secretary of State Condoleezza Rice urged the North Koreans to do more on resolving the issue of abductions of Japanese civilians "We're continuing to expect the North Koreans to take this issue seriously because it is a major issue for Japan and it's a major issue for the United States," Rice said.

In his remarks this morning, Bush expressed skepticism about the regime, which the Bush administration has accused of lying about its nuclear capabilities before.

"We will trust you only to the extent you fulfill your promises," Bush said in the Rose Garden. "I'm pleased with the progress. I'm under no illusions. This is the first step. This isn't the end of the process. It is the beginning of the process."

Next up in the process is a largely symbolic, made-for-TV destruction of a 65-foot-tall cooling tower, which is currently attached to its main nuclear reactor at Yongbyon - which, under the terms of the agreement, has already been largely disabled.

Rice told reporters traveling with her in Japan that she thought the declaration was verifiable. "We believe we have ... the means by which to verify the completeness and accuracy of this document," she said.

by Bay Fang

Secretary of State Condoleezza Rice's three-country, five-day Asia tour, which starts this week, appears to be a last-ditch attempts to salvage the legacy of the Bush administration.

She will be going first to Japan for the G8 foreign ministers' meeting Thursday before heading to South Korea and visiting quake-ravaged China, but the biggest focus of the trip will be on scoring a breakthrough on the North Korea nuclear disarmament talks, which involve China, Russia and Japan, as well as South and North Korea.

But even while raising expectations of a coming declaration by Pyongyang on its full nuclear capability, which has been the sticking point in the process, Rice revealed that new intelligence could stymie the effort. Apparently, this intelligence comes from traces of uranium found on the pages of documents that were handed over by North Korea last month, which were supposed to help US officials verify the declaration that is still awaited.

Defense Department Press Secretary Geoff Morell. (Pentagon photo.)

by Frank James

At today's Pentagon briefing, Defense Department press secretary Geoff Morrell, was asked about the preparations his agency is making to continue operating in the event Congress doesn't pass the war-spending bill.

He answered by saying that officials within the department were working now to figure out who the "essential" employees are who would have to work even if the department shutdown:

...And so we are, as you know, I think, taking some prudent planning measures just in case that money doesn't come through. Deputy Secretary Gordon England sent a memo throughout the department earlier this week asking for all the departments to begin planning for a possible shutdown, and all the departments are due to report back to him by June 30th with a plan as to what they would do to shut things down. And he's additionally, I think, asked that we figure out who sort of the essential civilian personnel is that would have to remain working even without pay in the event of a shutdown.

Morrell's use of the word "essential" would likely send shivers through some at the Pentagon and cause painful flashbacks for federal employees who lived through the government shutdowns of 1995 and 1996.

That's because all federal workers like to be regarded as essential. Otherwise, maybe federal managers will get it in their heads to start downsizing their agencies.

by Matthew Hay Brown

The Democratic House leadership is preparing to stick the articles of impeachment raised by Rep. Dennis Kucinich Monday night against President Bush on the same shelf that they stuck a similar effort the Ohio Democrat filed last year against Vice President Dick Cheney.

House Majority Leader Steny Hoyer told reporters today that the 35-count indictment of Bush, which took Kucinich more than four hours to read on the House floor, would be forwarded to the House Judiciary Committee. The Democratic leadership has opposed impeachment as an unhelpful distraction; the Judiciary Committee is unlikely to pursue further action.

Kucinich, using arguments similar to those he employed last year against Cheney, says Bush misled Congress and the American people into war with tales of weapons of mass destruction in Iraq.

House leaders were caught off-guard last year when Republicans voted to take up the Cheney impeachment in order to force a debate that could have proved awkward for Democrats. They avoided that debate by sending it to the Judiciary Committee.

Hoyer said today that Kucinich had "an absolute right" to raise the issue. But he questioned whether it made sense to spend time on it during what he called "the waning months" of the Bush administration.

Hoyer said the administration has one of the worst records of any administration in his lifetime, or maybe ever. He said Congress has conducted wide-ranging oversight since Democrats took over last year.

by Bay Fang

Secretary of State Condoleezza Rice opened the 26th annual Susan G. Komen Race for the Cure this mornng with a sly joke that must have had gossip columnists momentarily salivating.

"There is a very important man in my life," she said, standing on a stage near the National Mall above a throng of tens of thousands of people wearing pink. "He is my personal trainer, Tom."

With that, she introduced Thomas Tomlo, who also acts as a fitness advisor to the Race for the Cure, who led participants in a warm-up stretch.

The cause, however, is no joke for Rice or the millions of others who run, walk or sleep in every year to raise money for breast cancer research and public health programs. Rice's mother, Angelena, was diagnosed with breast cancer in 1969, and died in 1985.

Rice, who travels next week to Paris and the Middle East, shared the stage with Ambassador Nancy Brinker, a breast cancer survivor and founder of the Race for the Cure, Sex and the City star Cynthia Nixon, and DC mayor Adrian Fenty. The event in DC, which has one of the highest breast cancer mortality rates in the US, drew nearly 50,000 people.

by Frank James

One of the most interesting stories today is the Washington Post piece on a new book which states that Benazir Bhutto, the former Pakistani premier who was assassinated last year, provided nuclear secrets back in the 1990s to North Korea in exchange for missile technology.

The book, "Goodbye, Shahzadi," which was published recently in India by author Shyam Bhatia who knew Bhutto well, states that she smuggled sensitive information on nuclear technology into North Korea in 1993 during a state visit to North Korea.

Here's a snippet of the Post story:

At the time, Pakistan was in desperate need of new missile technology that would counter improvements in India's missiles. Bhutto said she was asked to carry "critical nuclear data" to hand over in Pyongyang as part of a barter deal.

Highly enriched uranium, a fuel for nuclear weapons, is produced by cascades of centrifuges that spin hot uranium gas. Albright, who has read Bhatia's account, said the CDs probably contained blueprints of the more than 100 centrifuge components as well as general assembly drawings. "It is tricky to assemble a centrifuge," he said.

This is a fairly stunning revelation especially since it implicates Bhutto, of all people, with nuclear proliferation. It was Bhutto who the Bush Administration had hoped would regain power in Pakistan to transition the government away from President Pervez Musharraf, the nation's former top Army general who has essentially kept the nation under strongman rule.

by Mark Silva

President Bush knew that Scott McClellan's book was coming, the White House says, but he was "surprised'' by the tenor of the tome that his former longtime aide has written about "the culture of deception'' in the Bush White House.

"He is puzzled, and he doesn't recognize this as the Scott McClellan that he hired and confided in and worked with for so many years,'' said Dana Perino, the sitting White House press secretary. Bush, she said, was "disappointed that if he had these concerns and these thoughts he never came to him or anyone else on the staff that we know of.''

In voicing the suggestion that this is not the same Scott McClellan "we knew,'' the president himself, through his spokeswoman, has heeded to the script that several past and present Bush aides are following, Perino and former counselor Dan Bartlett among them. Bush will not be commenting personally, Perino said, but she had a lot to say about the book and her predecessor two press secretaries back. He hired her.

"I think it's just a sad situation,'' Perino said, aboard Air Force One en route to Salt Lake City this afternoon.

"We didn't really know what was in the book until yesterday -- well, I shouldn't say that, there are some people in the White House who get -- they get on any book chances to review, like from the legal perspective, but it was not widely distributed at all,'' she said.

Will the White House offer a line-by-line rebuttal?

"I don't think it's necessary to do that for this situation,'' she said. "You know, you can go through that, look at it yourself. I don't think it's the White House's responsibility to do a fact check of someone's memoirs, where they're rewriting what we all thought was a very different history with him at the White House.''

But, yes, the president was surprised: "I think you can fairly characterize it is as surprised, as well as he thinks it's a sad situation and was disappointed.''

Asked how McClellan's contentions might affect the public's already declining confidence in the war in Iraq, Perino said: "Look, setting aside his comments about what he now thinks about the war in Iraq, people can argue back and forth as much as they want about the ultimate decision to go to war.

"I think that the questions about the intelligence being wrong have been answered by the White House. The intelligence was wrong, and we have taken measures to make sure that intelligence failures like that don't happen again. And one of the ways we've done that is by modernizing and improving coordination amongst the intelligence agencies. And by any measure, that coordination is better than it's ever been in the United States. That doesn't mean there was anyone purposefully misled.''

See more from the Q and A with Perino on the plane here:

by Mark Silva

The Bush White House has decided how to respond to the claims of the former Bush White House press secretary that President Bush has misled the nation about the war in Iraq and even misled himself about his own past personal conduct.

"Poor Scott.''

Dana Perino, who succeeded Tony Snow, who succeeded Scott McClellan as press secretary, said today that McClellan's book about the "culture of deception'' at the White House and in Washington is a sign of deep personal disgruntlement.

"Scott, we now know, is disgruntled about his experience at the White House,'' Perino said in a statement. "For those of us who fully supported him, before, during and after he was press secretary, we are puzzled. It is sad - this is not the Scott we knew.

"The book, as reported by the press, has been described to the president,'' Perino added. "I do not expect a comment from him on it - he has more pressing matters than to spend time commenting on books by former staffers."

by Mark Silva

Among the contentions in former White House Press Secretary Scott McClellan's scathing new book about the "culture of deception'' in the White House is a suggestion that Karl Rove, the president's former chief political adviser, and "Scooter'' Libby, former assistant to the president and chief of staff to the vice president convicted of obstruction of justice in the CIA leak scandal, colluded to get their stories straight.

Of course, this is the McClellan who had to stand at the press podium of the West Wing and assert that Rove, the president's former deputy chief of staff, had no knowledge of the leaking of the name of CIA operative Valerie Plame to the press after her husband, Ambassador Joe Wilson, publicly accused the Bush administration of manipulating intelligence to make its case for the invasion of Iraq.

Seems like suitable cause for resentment.

Libby was convicted of lying to federal authorities in the probe of that leak, though the president has since commuted his prison sentence.

Rove has left the White House, but rose to defend himself against McClellan's allegations on FOX News's Hannity and Colmes.

Host Alan Colmes noted that McClellan "makes several criticisms of our own Karl Rove, who joins us once again tonight from Washington. And Karl, among the things that he says is that you and Scooter Libby had a secret meeting where you kind of decided how to handle this. He says, he was misled by you about your involvement in the Valerie Plame affair, went out there and told the American public and the press one thing, and said it was fatal to his ability to be able to speak on behalf of the president.''

Rove replied: "Well, first of all, I've just read the same small article you have, so I'm going to reserve my judgment on the greater book until somebody else buys it and gives me a copy.

"I will say this. It's a little irresponsible... if this is an accurate depiction of what's in the book. He says that following a meeting Scooter and I visited in 2005. Well, Scooter and I visited all the time. I don't know what the particular meeting in question was about. I know what it wasn't about, which was it was not about Plame and Wilson.

"Both of our attorneys told us not to talk to anybody else in the White House about anything connected with that and so we didn't,'' Rove said. "But look, Scooter and I, you know, came into contact every day -- every other day on things like the selection of judges or a particular policy issue or the vice-president's travel schedule or, you know -- a draft of a presidential speech that we were commenting on.

"He was the vice president's chief of staff, and as a result we had a lot of business, and I think it's frankly maybe a sign of irresponsibility for Scott to sort of suggest that because he saw the two of us meet and he didn't happen to be in the meeting he somehow knows what the meeting was about.''

See the rest of the interview here, from FOX News' Hannity and Colmes

by Mark Silva

This certainly was a good day to be debating the generous new GI Bill that the Senate wants to attach to the tens of billions of dollars in new war funding that the White House is demanding.

But, if you burned the backyard chicken, or overdid those burgers -- not a bad idea these days, in the era of the dice-rolling USDA -- you may have missed an extraordinary exchange between The New York Times and the White House.

Bush opposes the new educational benefits which the Senate wants to offer those who have served since Sept. 11, 2001. Heck of a stance, the Times says, for a president who has committed hundreds of thousands of men and women to five years of war.

"Having saddled the military with a botched, unwinnable war, having squandered soldiers' lives and failed them in so many ways, the commander in chief now resists giving the troops a chance at better futures out of uniform,'' the Times opined today. "He does this on the ground that the bill is too generous and may discourage re-enlistment, further weakening the military he has done so much to break.

"So lavish with other people's sacrifices, so reckless in pouring the national treasure into the sandy pit of Iraq,'' the Times continued, "Mr. Bush remains as cheap as ever when it comes to helping people at home. ''

Ouch. And you know the White House felt it.

Because early today, before we saw any disaster declarations about the plight of storm victims, we saw this e-missive from the press secretary's office:

"Once again, the New York Times Editorial Board doesn't let the facts get in the way of expressing its vitriolic opinions - no matter how misleading they may be,'' Dana Perino said in a written statement. "In today's editorial, 'Mr. Bush and the GI Bill,' the New York Times irresponsibly distorts President Bush's strong commitment to strengthening and expanding support for America's service members and their families.

"This editorial could not be farther from the truth about the President's record of leadership on this issue.''

Read on, when the dishes are done, for more of the White House's Memorial Day duel with the Times:

by Mark Silva

The hog-riding chief of staff to the president of the United States joined a procession of 10 heavy motorcycles rumbling up the South Lawn drive of the White House today, on a spectacular, cloudless afternoon.

The occasion: The 21st annual Rolling Thunder, the Vietnam War veterans who descend on the capital every Memorial Day Weekend to keep Washington focused on the plight of the families of soldiers still missing in action and the cause of veterans. Assembling in the parking lot of the Pentagon, they file into town and to the Vietnam Memorial, and for several years now a delegation has stopped at the White House for a reception by the commander-in-chief.

The lead rider today: former Army Sgt. Arthur "Artie" Muller, founder and national executive director of Rolling Thunder, He rode a Harley and wore a black beret and leather Rolling Thunder vest bedecked with military medals, flag and other insignia. The president had returned from Camp David in his own ride, Marine One.

"We just choppered in, Artie, and saw your brothers and sisters cranking up their machines and driving through the nation's capital -- many of them have got the flag on the back,'' Bush told him. "I am just so honored to welcome you back.  I want to thank you and all your comrades for being so patriotic and loving our country as much as you do.'' 

Four members of the Harley-riding Bush administration rode in with the thunder, including Josh Bolten, the president's chief of staff and motorcycle afficionado. The nation's most powerful Harley fan wore a black shirt and jeans.

Transportation Secretary Mary Peters wore a white shirt, and Agriculture Secretary Ed Schafer a blue oxford.

But it was Edward P. "Eddie to you'' Lazear, chairman of the president's Council of Economic Advisers, who arrived in full regalia: leather Harley vest and a black bandana wrapped around his head. He did confess, however, that he had borrowed his bike from a dealer in Virginia - wonder what the float on that short-term loan looks like.

"It's been a pleasure of my presidency to get to know the leaders of Rolling Thunder,'' the president said of the riders who "pay tribute to those who have died in service, to those who sacrificed, and those who serve. It's a magnificent sight.

"You're doing a lot for the country,'' Bush told the leader," and our troops appreciate you, the veterans appreciate you and your president appreciates you.''

"Thank you, Mr. President ,'' Muller said.

With thanks to Dan Eggen of the Washington Post for his Sunday pool reporting and keen fashion eye.

by Mark Silva

Has John McCain approached Condi Rice about serving as a running mate?

"I've said many times that I don't need another job in government,'' the secretary of state replies, deftly avoiding the question. "It's time for me to move on.''

The question came up at the end of Maria Bartiromo's long talk with Rice on CNBC, as the secretary toured her old stomping grounds of the Silicon Valley with David Miliband, the British foreign secretary.

"It's where, in many ways, I grew up as a professional,'' said Rice, former provost at Stanford. "I came here as a 25-year-old first. And I have hard work to do between now and the end of the administration, but I will have -- I will have served eight years.

"I will have served in a consequential time,'' Rice said. "I will have done what I can and it'll be time to give the keys to somebody else.''

For a look at a lot of other issues, ranging from energy legislation, American competitiveness and policies toward Iran and the war in Iraq, see the interview with Rice here, courtesy of CNBC's Closing Bell with Maria Bartiromo:

Polar bear mother and her two cubs in Wapusk National Park on Hudson Bay near Churchill, Manitoba, Nov. 6, 2007. (AP Photo/The Canadian Press,Jonathan Hayward)

by Frank James

It's official. Polar bears are a federally designated endangered species.

Interior Secretary Dirk Kempthorne made the announcement this very hour that the Bush Administration is declaring the bears endangered because the melting Arctic ice pack, courtesy of global warming, threatens their habitat.

The administration was racing the clock to beat a federal court order which directed the Interior Department to decide by Thursday, as in tomorrow.

There are about 20,000 polar bears roaming the Arctic, living off seals and anything else they can hunt down.

The Bush Administration last year had tried declare the fairly awesome creature merely "threatened" which wouldn't have required any more action on its part. That caused an environmental group to sue, leading to today's decision.

Environmentalists that the decision will force the federal government to be more aggressive in reducing greenhouse-gas emissions since the Endangered Species Act requires affirmative steps to change the conditions that place a species on the list.

But while conceding that the bears are endangered, Kempthorne was clear the administration didn't want environmentalist to try and use the new designation to force the government's hand on greenhouse emissions.

by Matthew Hay Brown

House Democrats are preparing another emergency war spending bill, and the antiwar movement is growing restive.

"In 2006, the voters of this country gave Congress a clear mandate to end the occupation of Iraq through a stunning Democratic electoral victory," Tim Carpenter, executive director of Progressive Democrats of America, said Wednesday.

"But now, in 2008, we're still waiting for the war to end, while conditions get worse both here and in Iraq," he said. "To put it bluntly, if this Congress won't stand up and put an immediate end to the occupation of Iraq, and start addressing our needs at home beginning with a national single payer healthcare system, then we'll elect Democratic candidates who will."

The $195 billion legislation, which could come to a vote this week, includes funds to pay for military options in Iraq and Afghanistan into next spring, with the requirement that the Pentagon begin removing combat troops within 30 days, starting a pullout that would be completed by the end of 2009.

It also would expand education funding for service members, extend unemployment insurance, suspend new rules that cut Medicaid funding for the poor and disabled, strengthen levees in New Orleans and restore funding for military base realignment.
Lawmakers will consider the bill in three separate parts, voting on the war funding, war policy and domestic spending.

President Bush has told Congress to give him the money for Iraq and Afghanistan without restrictions or add-ons; Republicans have accused Democrats of playing politics with the troops by loading up their legislation with other projects.

But some of the strongest opposition is coming from the antiwar left, where some oppose any additional war funding under any circumstances. Democrats.com is advising supporters to tell their representatives to "stop the Iraq sellout;" Progressive Democrats of America will be going door to door with its "Healthcare not Warfare" campaign.

(photo: Alex M. Lee.)

by Bay Fang

She calls it "yum-yum diplomacy," and when her press release first landed in my inbox, I thought it was a hoax. But Chicago-based installation artist Erin O'Brien really has built a model of the North Korean nuclear reactor at Yongbyon out of gingerbread, and really does plan to dismantle and eat it tomorrow as her Master's in Fine Arts thesis project.

What's more, her father, Pat O'Brien, really is in Pyongyang, overseeing the dismantling of the real version of this reactor. A retired foreign service officer, he has been stationed there since November, representing the State Department's Nonproliferation and Disarmament Fund. In a statement in his daughter's press release, he said, "It seems we have a little family legacy evolving here."

Yongbyon, 60 miles north of Pyongyang, contains a nuclear reactor, a fuel-rod factory and a reprocessing plant, where weapons-grade plutonium is extracted from fuel rods. It has been central to the efforts by US diplomats, under the auspices of the Six-Party Talks, to de-nuclearize the Korean peninsula, and under a landmark agreement reached last year, North Korea began dismantling it.

It was also featured prominently in briefings around Washington, DC a few weeks ago, when the Bush administration released details of an alleged nuclear site in Syria, bombed by the Israelis last September, that apparently had the same dimensions and layout as Yongbyon.

33-year-old Erin O'Brien has recreated the entire site in detail, doubtless with consultation with her father, down to the frosting trim on the 50-mw reactor and a cooling tower covered in chocolate. She has filled the inside with jellybeans and gumdrops, with the anticipation of breaking it open "like a piñata." She says the project is a combination of influences from her dad and her mom, who was once the pastry chef at such Washington, DC culinary institutions as Kinkead's and Citronelle.

by Matthew Hay Brown

Democrats are preparing for another confrontation with the White House over Iraq.

House Democrats have developed an emergency war spending bill that includes all the money President Bush has asked for, and much that he didn't, including spending on domestic programs that he has told Congress to leave out. The $170 billion legislation would also require the president to pull combat troops out of Iraq by the end of next year - a timetable of the sort Bush has already vetoed.

"We will address what we have consistently addressed, and that is a desire by Democrats, reflecting, we believe, the overwhelming desire of the American public, 60-percent-plus, for a change in the course that we have been pursuing in Afghanistan and Iraq," said House Majority Leader Steny Hoyer, describing the bill that could hit the House floor as early as Thursday.

Hoyer said the legislation, which has not been made public, also would " reflect things that we have talked about before in terms of redeployment, in terms of dwell time, in terms of length of stay in theater and other things along that line that we have expressed our view on, including the status-of-forces agreement that the administration seems to be pursuing, which, without Senate approval, which seeks to bind a successor administration. We don't think that is appropriate without the Congress's involvement."

Finally, he said, it would address domestic needs. Democrats have spoken of funding for veterans, investment in infrastructure and extending unemployment insurance.

"Sending $100-billion-plus to Iraq and Afghanistan may be necessary in the short term," he said. "But both in the short and long term, investing in America and Americans is also a critical priority, certainly for us."

By David Nitkin

President Bush renewed his call for increased benefits for military families on Tuesday during a White House observance of Military Spouse Day.

"I sent up some legislation -- I certainly hope congress moves on it quickly -- that will make it easier to expand access to child care, create new authorities to appoint qualified spouses into civil service jobs, provide educational opportunities and job training for our military spouses, and finally, allow our troops to transfer their unused education benefits to spouses or children," Bush said during remarks on the South Lawn. "This legislation is moving. I hope to be able to sign it as quickly as possible. It is the absolute right thing to do."

Bush also promoted the package during his January State of the Union address.

At the morning ceremony, the president recognized six military spouses who are recipients of the President's Volunteer Service Award, including Ramona Vazquez of Baltimore. Vazquez is president of the Baltimore Area Coast Guard Spouses Association, and created and maintains a Web site for Coast Guard families coming to Baltimore. She also founded a service that provides free diapers, formula, clothes and toys to military and civilian families.

Other award recipients were Colleen Saffron of Fort Hood, Texas; Laprece James and Ellen Patton of California; Dawnle Scheetz of Sharon, Penn.; and Bob Davison of Columbus Air Force Base, Mississippi.

by Matthew Hay Brown

Senate Majority Leader Harry Reid will give President Bush this much: He's one of a kind.

"Only President Bush could allow Big Oil to write our nation's energy policy, guarantee billions in oil tax breaks and refuse to stand up to OPEC or crack down on price gouging, and then shirk responsibility for gas prices that have more than doubled and oil prices that have quadrupled since he took office," the Nevada Democrat said today. "Only President Bush could be surprised to learn that gas was approaching $4 a gallon and then claim the White House is concerned about high gas prices."

Reid was responding to Bush's press conference this morning, during which the president said it was the Democratic Congress that was standing in the way of his efforts to restrain rising prices at the pump.

"One of the main reasons for high gas prices is that global oil production is not keeping up with growing demand," Bush said. "Members of Congress have been vocal about foreign governments increasing their oil production; yet Congress has been just as vocal in opposition to efforts to expand our production here at home.

"They repeatedly blocked environmentally safe exploration in ANWR," Bush said. "Congress has repeatedly blocked efforts to expand capacity and build more refineries. ... Congress continues to block provisions needed to increase domestic electricity production by expanding the use of clean, safe nuclear power."

By David Nitkin

The White House has abruptly announced a news conference in the Rose Garden at 10:31 a.m. today -- giving reporters less than two hours to prepare their questions for President Bush.

Bush will launch the news conference with an 8 minute statement, the White House says, "regarding Americans' understandable anxiety about issues affecting their pocketbooks."

According to the press office, "He will also call upon Congress to send him sensible and effective bills that will help Americans weather this difficult period and keep our country moving forward.

He will specifically reference:

1. Energy prices - Congress should pass legislation which would clear away obstacles to more affordable, more reliable energy here at home.

2. Rising food prices - Congress should reform our farm programs by passing a fiscally-responsible bill that does not impose new burdens on American consumers.

3. Mortgage payments - Congress should pass specific legislation that will help more families stay in their homes.

4. Student loans - Congress should give the federal government greater authority to buy federal student loans."

by Matthew Hay Brown

Republicans have taken to calling the 50 percent increase in gasoline prices since Democrats took over last year the "Pelosi Premium." Democrats say Republicans are looking at the wrong time frame.

"When President Bush took office, gas prices were less than half of what they are today - and oil was less than one-third," Sen. Frank Lautenberg of New Jersey says in today's Democratic radio address. "Then, seven years ago, President Bush and Vice President Cheney secretly invited executives from the big oil and big energy companies to the White House to write our national energy policy. ...

"Now, they are hauling in record profits," Lautenberg says. "We are paying record prices. And their profits are coming out of our pockets."

Republicans have been hounding Pelosi to explain the "commonsense plan" to hold down gas prices that Democrats promised two years ago.

"Two years later, they appear to have no plan other than to increase taxes on energy companies and stand in the way of increased domestic production," Senate Republican Leader Mitch McConnell said. "So what we want to know is, where is the 'commonsense plan' to lower gas prices? And what is taking them so long to unveil it? The American people are waiting--and paying more at the pump each day they wait."

In fact, Pelosi has spent a good part of the last week calling on Republicans to help pass legislation to crack down on price gouging, hold OPEC accountable for price fixing and end tax breaks for oil companies and invest the savings in renewable energy.

On Thursday, Pelosi urged Bush to halt deliveries to the Strategic Petroleum Reserve. On Friday, Democrats called on the Federal Trade Commission to use the authority recently granted by Congress to investigate prices for possible market manipulation.

The larger problem is that for a price surge linked to market speculation, unrest in the Middle East, the week U.S. dollar and growing demand from China and India, there are no easy solutions. Lautenberg's address follows.