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  1. 2007/05/31 Trade Promotion Authority (1)
  2. 2007/05/29 Heterodox Economics in the US
  3. 2007/05/29 Financial Times Report on US Subprime mortgage crisis
  4. 2007/05/28 NYT Report - US Opinion Poll about Iraq Invasion
  5. 2007/05/28 NYT Report on US Soldiers in Iraq
  6. 2007/05/18 NYT Report on Train Test between the NK and SK
  7. 2007/05/18 NYT Report on Wolfowitz's Resignation from the WB
  8. 2007/05/14 Suspicious Trading in the Wall St.
  9. 2007/05/14 NYT on Alfred D. Chandler Jr.
  10. 2007/05/09 The New Yorker Article on Intellectual Property Rights

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Trade Promotion Authority

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http://www.thomaspalley.com/?p=79#more-79

Trade promotion authority (TPA) - formerly known as fast-track negotiating authority - is set to expire on June 30, 2007. As a result, the Bush Administration and business interests are now lobbying Congress for its renewal. However, there are strong reasons to not just let TPA temporarily lapse, but also to permanently bury it.

After the November 2006 elections giving Democrats control of Congress, renewal of TPA appeared unlikely owing to the high degree of distrust and animosity toward the Bush Administration. Now, with Democrats and the Administration agreeing to include formal language on labor and environmental standards in the Peru and Panama free trade agreements, some are arguing for extending this newfound cooperation to renewal of TPA. That would be a serious mistake.

Not only would TPA renewal betray voters who no longer support the Administration, it would also miss a major opportunity to begin correcting course on globalization. Behind today’s flawed globalization lies a profoundly flawed policy process, and TPA is at the heart of that process.

The constitution gives Congress the right to decide upon trade relations with other countries. TPA has Congress ceding part of those rights by giving the President power to negotiate trade agreements that Congress can approve or disapprove but cannot amend or filibuster.

Opponents of TPA renewal have focused on two arguments. One argument is that such ceding of constitutional power is inappropriate, and Congress should reclaim this power as part of restoring a more balanced relationship between the legislative and executive branches.

A second argument is that absence of TPA would make it more difficult to sign new “free trade” agreements. This is because absent an up or down vote, agreements would get bogged down in Congressional special interest horse-trading. This is probably true, but it also constitutes a purely tactical argument for opposing TPA rather than an argument of principle.

An alternative argument for burying TPA concerns its distorting effect on trade policy. Over the last two decades the power of corporations has increased dramatically while that of labor has fallen. That power shift is reflected in the increased numbers of Washington K Street lobbyists working on behalf of corporations, which has increased corporate influence over policy and legislation. TPA plays into and amplifies this power shift.

Trade deals are negotiated by the office of the US Trade Representative (USTR), and then sent to Congress for approval. This negotiating process is stacked in favor of business. First, corporations get front seats at the negotiating table through regular detailed consultations, ensuring their interests are fully represented. Second, the trade bureaucrats who do the negotiating are subject to corrupting influences that bias negotiations.

One problem is that negotiators’ metric of success too easily becomes the number of deals signed, rather than getting good deals done. A second problem is that, as with other branches of government such as the Pentagon, there is a revolving door between USTR and business. Thus, trade negotiators who do good work for business are rewarded with plum K Street lobbying jobs, and Washington’s trade scene is crammed with persons who have followed this route. Furthermore, these lobbyists then have insider access to their former colleagues, thereby amplifying corporations’ representation advantage. The net result is business interests almost always trump those of workers.

TPA reinforces this jaundiced structure by reducing Congressional over-sight of trade, thereby short-changing the electorate’s interest. Bad agreements pass because the political costs of voting them down on account of specific problems are perceived as too high. Moreover, TPA provides individual congressmen with political cover, enabling them to retain favor with corporate sponsors without having to explain to constituents their lack of action.

The bottom line is that the balance of power and process of trade negotiation already favors corporate interests over those of ordinary people. TPA aggravates this pattern, which speaks for burying it and letting TPA rest in peace.

Copyright Thomas I. Palley

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2007/05/31 04:44 2007/05/31 04:44

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Heterodox Economics in the US

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Hip Heterodoxy

Christopher Hayes

 

It's a Friday night in January, and I am searching for a free drink among 9,000 economists. Every year a sizable portion of the nation's economists descend on some lucky city for the Allied Social Science Associations Annual Meeting, the economics field's largest gathering, a kind of carnival of suits and supply curves.

Most academic disciplines have a similar annual convention, but no other can boast the same influence on American politics and policy--after all, Presidents don't appoint a council of anthropological advisers. It doesn't take long for mainstream academic thinking to become the foundation for the government's macroeconomic policy.

In 1968 Milton Friedman, then president of the American Economics Association (AEA), devoted his presidential address to arguing against Keynesian meddling in the economy and for a monetary policy focused on restraining inflation.

A decade later, his prescriptions would be largely adopted. In 2005 onetime Reagan adviser Martin Feldstein called for Social Security privatization just as Republicans in Washington were mobilizing (unsuccessfully) toward the same end.

For more reading, http://www.thenation.com/doc/20070611/hayes

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2007/05/29 12:05 2007/05/29 12:05

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Financial Times Report on US Subprime mortgage crisis

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US subprime crisis hits house sales

By Eoin Callan in Washington

Published: May 25 2007 18:02 | Last updated: May 25 2007 18:02

 

The crisis in the high-risk mortgage market made it harder for Americans to sell their homes last month, according to real estate agents.

 

Sales of existing homes fell to their lowest level in three years with a drop of 2.6 per cent in April, data from the National Association of Realtors indicated on Friday.

 

The association said home purchases were being held back because subprime lenders were applying tighter standards following the collapse of the high-risk mortgage market.

 

The Federal Reserve does not expect the crisis to have a lasting impact on the housing market, despite increasing signs of distress among high-risk borrowers and the collapse of leading subprime lenders.

Gary Bigg, an economist at Bank Of America, said: “Prospects for future home sales remain mixed as the problems in the subprime market and tighter credit standards are partially offset by improving housing affordability.”

 

Mr Bigg said he was expecting a gradual recovery in the market for existing homes following signs this week that sales by developers of new homes were picking up after an 18-month slump.

Alan Ruskin, an analyst at RBS, said: “The latest numbers do not themselves negate the perception of somewhat better transaction trends from the new home sales. I still think housing demand has put in a bottom.”

 

The fall in sales of existing homes last month was widespread across the country and dragged the annual rate of home sales to below 6m units, compared with expectations that purchases would hold steady at a rate of about 6.15m homes.

 

Mark Zandi, an economist at Moody’s, said the increase in inventory was “the most disconcerting” element of the figures.

 

The slowdown in purchases drove the excess supply of single-family homes on the market up to about eight months’ worth of sales from seven months’ supply in March. The supply of condominiums also climbed to 9.5 months’ worth of sales from 8.8 months.

 

Economists are awaiting figures that give a fuller picture of how the housing market has performed during the crucial spring selling season when most homes are bought.

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2007/05/29 04:31 2007/05/29 04:31

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NYT Report - US Opinion Poll about Iraq Invasion

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The New York Times 

May 25, 2007

Poll Shows View of Iraq War Is Most Negative Since Start

Correction Appended

Americans now view the war in Iraq more negatively than at any time since the invasion more than four years ago, according to the latest New York Times/CBS News poll.

Sixty-one percent of Americans say the United States should have stayed out of Iraq and 76 percent say things are going badly there, including 47 percent who say things are going very badly, the poll found.

Still, the majority of Americans support continuing to finance the war as long as the Iraqi government meets specific goals.

President Bush’s approval ratings remain near the lowest of his more than six years in office. Thirty percent approve of the job he is doing over all, while 63 percent disapprove.

More Americans — 72 percent — now say that “generally things in the country are seriously off on the wrong track” than at any other time since the Times/CBS News poll began asking the question in 1983. The number has slowly risen since January 2004. Then, 53 percent said the country was “seriously off on the wrong track,” and by January of this year it was 68 percent.

Public support for the war has eroded. In December 2003, 64 percent of Americans said the United States did the right thing in taking military action in Iraq and 28 percent said the United States should have stayed out. The current numbers are nearly reversed, with 35 percent saying the United states did the right thing and 61 percent saying the country should have stayed out. In January of this year, 58 percent said the United States should have stayed out of Iraq and 38 percent said going in was the right thing.

The nationwide telephone poll was conducted Friday through Wednesday with 1,125 adults. The margin of sampling error is plus or minus three percentage points.

A majority, 76 percent, including 51 percent of Republicans, say additional troops sent to Iraq this year by Mr. Bush either have had no impact or are making things worse. Twenty percent of all respondents say the increase is improving the situation.

Most Americans support a timetable for withdrawal. Sixty-three percent say the United States should set a date for withdrawing troops from Iraq sometime in 2008.

While troops are still in Iraq, Americans overwhelmingly support continuing to finance the war, though most want to do so with conditions. Thirteen percent want Congress to block all money for the war.

Sixty-nine percent, including 62 percent of Republicans, say Congress should allow financing, but on the condition that the United States sets benchmarks for progress and the Iraqi government meets those goals. Fifteen percent of all respondents want Congress to allow all financing for the war, no matter what.

The poll found Americans are more likely to trust the Democratic Party than the Republican Party to make the right decisions about the war in Iraq. Slightly more than half of those polled, 51 percent, said the Democratic Party was more likely than the Republican Party to make the right decisions about the war.

More broadly, 53 percent of those polled say they have a favorable opinion of the Democratic Party, while 38 percent have a favorable view of the Republican Party. The Republican Party has not had a majority positive rating in Times/CBS News polls since December 2003.

As for Mr. Bush, 23 percent approve of his handling of the situation in Iraq, 72 percent disapprove; 25 percent approve of his handling of foreign policy, 65 percent disapprove; and 27 percent approve of his handling of immigration issues, while 60 percent disapprove.

On the economy, 36 percent approve of his handling of the issue, and 56 percent disapprove. In the campaign against terrorism, 42 percent approve, and 52 percent disapprove.

Correction: May 26, 2007

An article yesterday about a New York Times/CBS News poll that measured opinion about the Iraq war misstated the date of the first Times/CBS News poll that included a question about whether the United States did the right thing in taking military action in Iraq. It was December 2003, not January 2003. (The war did not begin until March 2003.)

 

 


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2007/05/28 12:38 2007/05/28 12:38

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NYT Report on US Soldiers in Iraq

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The New York Times 

May 28, 2007

As Allies Turn Foe, Disillusion Rises in Some G.I.’s

BAGHDAD — Staff Sgt. David Safstrom does not regret his previous tours in Iraq, not even a difficult second stint when two comrades were killed while trying to capture insurgents.

“In Mosul, in 2003, it felt like we were making the city a better place,” he said. “There was no sectarian violence, Saddam was gone, we were tracking down the bad guys. It felt awesome.”

But now on his third deployment in Iraq, he is no longer a believer in the mission. The pivotal moment came, he says, this February when soldiers killed a man setting a roadside bomb. When they searched the bomber’s body, they found identification showing him to be a sergeant in the Iraqi Army.

“I thought: ‘What are we doing here? Why are we still here?’ ” said Sergeant Safstrom, a member of Delta Company of the First Battalion, 325th Airborne Infantry, 82nd Airborne Division. “We’re helping guys that are trying to kill us. We help them in the day. They turn around at night and try to kill us.”

His views are echoed by most of his fellow soldiers in Delta Company, renowned for its aggressiveness.

A small minority of Delta Company soldiers — the younger, more recent enlistees in particular — seem to still wholeheartedly support the war. Others are ambivalent, torn between fear of losing more friends in battle, longing for their families and a desire to complete their mission.

With few reliable surveys of soldiers’ attitudes, it is impossible to simply extrapolate from the small number of soldiers in the company. But in interviews with more than a dozen soldiers in this 83-man unit over a one-week period, most said they were disillusioned by repeated deployments, by what they saw as the abysmal performance of Iraqi security forces and by a conflict that they considered a civil war, one they had no ability to stop.

They had seen shadowy militia commanders installed as Iraqi Army officers, they said, had come under increasing attack from roadside bombs — planted within sight of Iraqi Army checkpoints — and had fought against Iraqi soldiers whom they thought were their allies.

“In 2003, 2004, 100 percent of the soldiers wanted to be here, to fight this war,” said Sgt. First Class David Moore, a self-described “conservative Texas Republican” and platoon sergeant who strongly advocates an American withdrawal. “Now, 95 percent of my platoon agrees with me.”

It is not a question of loyalty, the soldiers insist. Sergeant Safstrom, for example, comes from a thoroughly military family. His mother and father have served in the armed forces, as have his three sisters, one brother and several uncles. One week after the Sept. 11 attacks, he walked into a recruiter’s office and joined the Army.

“You guys want to start a fight in my backyard, I got something for you,” he recalls thinking at the time.

But in Sergeant Safstrom’s view, the American presence is futile. “If we stayed here for 5, even 10 more years, the day we leave here these guys will go crazy,” he said. “It would go straight into a civil war. That’s how it feels, like we’re putting a Band-Aid on this country until we leave here.”

Their many deployments have added to the strain. After spending six months in Iraq, the soldiers of Delta Company had been home for only 24 hours last December when the news came. “Change your plans,” they recall being told. “We’re going back to Iraq.”

Nineteen days later, just after Christmas, Capt. Douglas Rogers and the men of Delta Company were on their way to Kadhimiya, a Shiite enclave of about 300,000 people. As part of the so-called surge of American troops, their primary mission was to maintain stability in the area and prepare the Iraqi Army and the police to take control of the neighborhood.

“I thought it would not be long before we could just stay on our base and act as a quick-reaction force,” said the barrel-chested Captain Rogers of San Antonio. “The Iraqi security forces would step up.”

It has not worked out that way. Still, Captain Rogers says their mission in Kadhimiya has been “an amazing success.”

“We’ve captured 4 of the top 10 most-wanted guys in this area,” he said. And the streets of Kadhimiya are filled with shoppers and the stores are open, he said, a rarity in Baghdad due partly to Delta Company’s patrols.

Captain Rogers acknowledges the skepticism of many of his soldiers. “Our unit has already sent two soldiers home in a box,” he said. “My soldiers don’t see the same level of commitment from the Iraqi Army units they’re partnered with.”

Yet there is, he insists, no crisis of morale: “My guys are all professionals. I tell them to do something, they do it.” His dictum is proved on patrol, where his soldiers walk the streets for hours in the stifling heat, providing cover for one another with crisp efficiency.

On April 29, a Delta Company patrol was responding to a tip at Al Sadr mosque, a short distance from its base. The soldiers saw men in the distance erecting barricades that they set ablaze, and the streets emptied out quickly. Then a militia, believed to be the Mahdi Army, began firing at them from rooftops and windows.

Sgt. Kevin O’Flarity, a squad leader, jumped into his Humvee to join his fellow soldiers, racing through abandoned Iraqi Army and police checkpoints to the battle site.

He and his squad maneuvered their Humvees through alleyways and side streets, firing back at an estimated 60 insurgents during a gun battle that raged for two and a half hours. A rocket-propelled grenade glanced off Sergeant O’Flarity’s Humvee, failing to penetrate.

When the battle was over, Delta Company learned that among the enemy dead were at least two Iraqi Army soldiers that American forces had helped train and arm.

Captain Rogers admits, “The 29th was a watershed moment in a negative sense, because the Iraqi Army would not fight with us,” adding, “Some actually picked up weapons and fought against us.”

The battle changed the attitude among his soldiers toward the war, he said. “Before that fight, there were a few true believers.” Captain Rogers said. “After the 29th, I don’t think you’ll find a true believer in this unit. They’re paratroopers. There’s no question they’ll fulfill their mission. But they’re fighting now for pride in their unit, professionalism, loyalty to their fellow soldier and chain of command.”

To Sergeant O’Flarity, the Iraqi security forces are militias beholden to local leaders, not the Iraqi government. “Half of the Iraqi security forces are insurgents,” he said.

As for his views on the war, Sergeant O’Flarity said, “I don’t believe we should be here in the middle of a civil war.”

“We’ve all lost friends over here,” he said. “Most of us don’t know what we’re fighting for anymore. We’re serving our country and friends, but the only reason we go out every day is for each other.”

“I don’t want any more of my guys to get hurt or die,” he continued. “If it was something I felt righteous about, maybe. But for this country and this conflict, no, it’s not worth it.”

Staff Sgt. James Griffin grew up in Troy, N.C., near the Special Operations base at Fort Bragg. His dream was to be a soldier, and growing up, he would skip school and volunteer to play the role of the enemy during Special Operations training exercises. When he was 17, he joined the Army.

Now 22, Sergeant Griffin is a Delta Company section leader. On the night of May 5, as he neared an Iraqi police checkpoint with a convoy of Humvees, Sergeant Griffin spotted what looked like a camouflaged cinderblock and immediately halted the convoy. His vigilance may have saved the lives of several soldiers. Under the camouflage was a massive, six-array, explosively formed penetrator — a deadly roadside bomb that cuts through the Humvees’ armor with ease.

The insurgents quickly set off the device, but the Americans were at a safe distance. An explosive ordnance disposal team arrived to check the area. As the ordnance team rolled back to base, they were attacked with a second roadside bomb near another Iraqi checkpoint. One soldier was killed and two were wounded.

No one has been able to explain why two bombs were found near Iraqi checkpoints, bombs that Iraqi soldiers and the police had either failed to notice or helped to plant.

Sergeant Griffin, too, understands the criticism of the Iraqi forces, but he says they and the war effort must be given more time.

 

“If we throw this problem to the side, it’s not going to fix itself,” he said. “We’ve created the Iraqi forces. We gave them Humvees and equipment. For however long they say they need us here, maybe we need to stay.”

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2007/05/28 12:34 2007/05/28 12:34

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NYT Report on Train Test between the NK and SK

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The New York Times
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May 18, 2007

North and South Send Trains Across the Korean Frontier

MUNSAN, South Korea, May 17 — Trains crossed the border between North and South Korea on Thursday for the first time in 56 years, an event both sides described as a milestone for reconciliation on the divided Korean Peninsula.

As white balloons soared into a blue sky, soldiers swung open gates topped with barbed wire shortly after noon to let the five cars of the South Korean train cross the 2.5-mile-wide demilitarized zone, the world’s most heavily armed border, and enter North Korea.

At the same time, about 144 miles east, a North Korean train trundled down the coast.

Although these were technically just one-time test runs on two short stretches of railroad that were linked through the demilitarized zone several years ago, their symbolic importance was unmistakable. The last trains that crossed the border carried refugees and wounded soldiers to South Korea from the North during the Korean War in 1951.

Photographs of the bullet-scarred, rusting hulks of wartime locomotives trapped in the demilitarized zone have symbolized a divided Korea and a conflict that has never been formally resolved, because the war ended in a truce, not a treaty.

“These are not just test runs,” said South Korea’s unification minister, Lee Jae-joung. “They mean reconnecting the severed bloodline of the Korean nation.” He spoke during a ceremony at Munsan Station, about seven miles south of the demilitarized zone. “The trains carry our dream of peace.”

His North Korean counterpart, Kwon Ho-ung, who was also in Munsan, said the trains represented the “Korean nation’s wish to gallop to the destination of reunification,” despite what he called outside forces — apparently a reference to the United States — that are “not happy with reconciliation among Koreans.”

The South Korean train, carrying 150 people from both sides of the border, pulled out of Munsan around 11:30 a.m. as fireworks exploded overhead. It traveled about 15 miles to Kaesong, a North Korean border town where South Korea runs factories employing less-costly labor from the North. The North Korean train had a similar journey, from the Mount Kumgang resort to Jejin, 15 miles to the south.

South Korea has long dreamed of building a trans-Korea railroad that would connect its trains to China and to the Trans-Siberian Railway. A route through North Korea would provide overland access to the rest of Asia.

A trans-Korea railroad would offer a faster and cheaper way for South Korea to send exports that are now shipped by sea to China and Europe. It would also provide a shortcut for Russian oil and other natural resources transported to South Korea. Such a rail system would save South Korea $34 to $50 a ton in shipping costs, said Lim Jae-kyung, a researcher at the Korea Transport Institute.

But creating such a system, transportation analysts and government officials say, would require years of confidence-building talks and billions of dollars in investment in North Korea’s decrepit rail system.

Officials acknowledge that North Korea will probably have to give up its nuclear weapons and improve its human rights record before it could attract significant investment from South Korea or international development aid. Six-nation talks aimed at ending North Korea’s nuclear weapons programs have been stalled for months.

“I cannot understand why we should give rice, flour, fertilizer and everything else the North Koreans want when they don’t do anything for us,” said Hong Moo-sun, 71, one of a dozen South Koreans protesting just outside Munsan Station on Thursday.

The protesters were calling for North Korea to return their relatives, among the hundreds of people taken to North Korea after the war and believed to be held there against their will.

Members of the Grand National Party, part of the conservative opposition, called the event on Thursday a “train of illusion” organized to draw voters’ attention in an election year.

South Korean officials say a trans-Korea railroad would invigorate inter-Korean trade, which tripled to $1.35 billion last year from $430 million in 2000. It would also bring cash to North Korea, which could collect an estimated $150 million a year in transit fees from trains that pass through its territory, Mr. Lim, the researcher, said.

But procuring international aid to renovate the rail network and letting trains from one of Asia’s most vibrant economies, carrying exports and tourists, rumble through its isolated territory could threaten the North Korean government, experts say. They say North Korea now relies on keeping its people ignorant of the outside world to maintain its totalitarian grip on power.

Both Koreas agreed in 2000 to reconnect their rail systems, which had been severed by aerial bombing during the war. It took three years to relink the tracks on the west and east ends of the border. After four more years of haggling and delays, the North Korean military agreed this month to allow the one-time test runs.

The agreement came after South Korea promised to send North Korea 400,000 tons of rice, as well as $80 million worth of raw materials for shoes, soap and textiles.

South Korea has spent $589 million on reconnecting the rail system, including $195 million worth of equipment, tracks and other material lent to North Korea.

South Korean policy makers have called for patience in working toward reconciliation with the North. They have often been accused by conservative politicians and civic groups of giving in to North Korea’s strategy of extracting economic aid for every step toward reconciliation.

“This is a precious first step for a 1,000-mile journey,” Mr. Lee, the unification minister, said Thursday.

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2007/05/18 13:05 2007/05/18 13:05

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NYT Report on Wolfowitz's Resignation from the WB

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The New York Times
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May 18, 2007

Wolfowitz Resigns From World Bank

WASHINGTON, May 17 — Paul D. Wolfowitz, ending a furor over favoritism that blew up into a global fight over American leadership, announced his resignation as president of the World Bank Thursday evening after the bank’s board accepted his claim that his mistakes at the bank were made in good faith.

 

The decision came four days after a special investigative committee of the bank concluded that he had violated his contract by breaking ethical and governing rules in arranging the generous pay and promotion package for Shaha Ali Riza, his companion, in 2005.

The resignation, effective June 30, brought a dramatic conclusion to two days of negotiations between Mr. Wolfowitz and the bank board after weeks of turmoil.

“He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that,” said the board’s directors in a statement issued Thursday night. “We also accept that others involved acted ethically and in good faith.”

In the carefully negotiated statement, the bank board praised Mr. Wolfowitz for his two years of service, particularly for his work in arranging debt relief and pressing for more assistance to poor countries, especially in Africa. They also cited Mr. Wolfowitz’s work in combating corruption, his signature issue.

Mr. Wolfowitz said he was grateful for the directors’ decision and, referring to the bank’s mission of helping the world’s poor, added: “Now it is necessary to find a way to move forward. To do that I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership.”

Mr. Wolfowitz’s negotiated departure averted what threatened to become a bitter rupture between the United States and its economic partners at an institution established after World War II. The World Bank channels $22 billion in loans and grants a year to poor countries.

But he left behind a place that must heal its divisions and overhaul a flawed, cumbersome structure that had allowed the controversy over Mr. Wolfowitz to spread out of control.

People close to the negotiations said that Mr. Wolfowitz had agreed not to make major personnel or policy decisions between now and June 30. Some bank officials said he might go on an administrative leave and cede day-to-day functions to an acting leader, but that might not be decided until Friday.

President Bush earlier in the day praised Mr. Wolfowitz at a news conference but signaled that the end was near by saying he regretted “that it’s come to this.” A White House spokesman, Tony Fratto, said, “We would have preferred that he stay at the bank, but the president reluctantly accepts his decision.”

More important for the bank’s future, Mr. Fratto said, President Bush will soon announce a candidate to succeed Mr. Wolfowitz, quashing speculation that the United States would end the custom, in effect since the 1940s, of the American president picking the bank president.

Many European officials previously indicated that they would go along with the United States’ picking a successor if Mr. Wolfowitz would resign voluntarily, as he now has.

Treasury Secretary Henry M. Paulson Jr. said Thursday that he would “consult my colleagues around the world” before recommending a choice to Mr. Bush, in what seemed to be an effort to assure allies that the United States would not repeat what happened in 2005 when Mr. Bush surprised them by selecting Mr. Wolfowitz, then a deputy secretary of defense and an architect of the Iraq war.

Leaders of Germany and France objected but decided not to make a fight over the choice and risk reopening wounds from their opposition to the war two years earlier. Some also argued that Mr. Wolfowitz, as a conservative seeking to write a new chapter in a career that had been focused on national security, might bring new support to aiding the world’s poor.

Soon after Mr. Wolfowitz took office, however, he engaged in fights in various quarters at the bank over issues including his campaign against corruption, in which he suspended aid to several countries without consulting board members, and his reliance on a small group of aides.

Mr. Wolfowitz’s resignation, while ending the turmoil that erupted in early April over the disclosure of his role in arranging Ms. Riza’s pay and promotion package, will not by itself repair the divisions at the bank over his leadership, bank officials said Thursday evening.

By all accounts, the terms of Mr. Wolfowitz’s exoneration left a bitter taste with most of the 24 board members, who represent major donor countries, as well as clusters of smaller donor and recipient countries. Most had wanted to adopt the findings of the special board committee that determined he had acted unethically on the matter of Ms. Riza.

But the closest the board came to criticizing Mr. Wolfowitz was saying in that “a number of mistakes were made by a number of individuals in handling the matter under consideration and that the bank’s systems did not prove robust to the strain under which they were placed.”

Also angered was the bank’s staff association, which had called for Mr. Wolfowitz’s resignation in early April. The bank’s internal blogs were filled with denunciations of the action on Thursday evening.

Late in the evening, the association issued a statement saying, “Welcome though it is, the president’s resignation is not acceptable under the present arrangement,” and that it “completely undermines the principles of good governance and the principles that the staff fight to uphold.”

The association represents most of the 7,000 full-time employees at the bank in Washington. Their unhappiness could be a crucial factor in the bank board’s ability to heal the wounds left by the fight over Mr. Wolfowitz. It appeared likely that after Mr. Wolfowitz’s departure there would be a departure of several top aides, including Robin Cleveland, who officials said was involved in the negotiations over the statements accompanying his departure.

During the day, as word spread throughout the institution that Mr. Wolfowitz was close to a deal, some officials said that one of the obstacles was his compensation package. But there was no information Thursday night on whether he would receive any sort of severance package or pension, or be reimbursed for legal fees from his long battle.

Mr. Wolfowitz’s pay package was $302,470 in salary as of 2004 — the bank pays any of the taxes on that sum — and $141,290 in expenses. His contract calls for him to be paid a year’s salary if he is terminated, but it was unclear whether his resignation would be considered a termination as defined by the contract.

 

Mr. Wolfowitz’s fight for vindication was led by his lawyer, Robert S. Bennett, and negotiated at the bank by the British director, Thomas Scholar, a close associate of Gordon Brown, the chancellor of the Exchequer who is to become prime minister this summer.

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2007/05/18 13:01 2007/05/18 13:01

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Suspicious Trading in the Wall St.

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May 12, 2007
Suspicious Trading on the Rise
By JENNY ANDERSON


On Wall Street, it feels like the 1980s all over again. Investment banks and
private equity firms are minting money on a binge of deal making. Buyouts
are not only back, but bigger than ever. Billionaire titans of finance are
feted at huge, glittering parties. Even leggings are back in style.

But there was a dark side to the decade, and that seems to have returned as
well. Regulators are again knee-deep in insider trading cases, with
profiteers spanning the globe, from Hong Kong to Lower Manhattan. Just this
week, United States authorities froze the account of a couple who are
suspected of insider trading on $15 million worth of Dow Jones shares,
arrested an energy banker at Credit Suisse who is charged with leaking
information on nine deals to a contact in Pakistan and accused another
couple of illegally trading on information out of Morgan Stanley’s real
estate subsidiary.

"Everything is going global, even insider trading," said Robert A. Marchman,
executive vice president and head of market surveillance at NYSE Regulation.

But unlike the scandals in the 1980s, when Wall Street stars like Ivan F.
Boesky were caught in insider trading investigations, the recent flurry of
cases have chiefly involved young bit players. And the schemes, as outlined
by regulators, are predictably similar. Wives team up with husbands;
investment bankers call friends; research executives pay off old debts with
valuable tips.

Mr. Marchman cut his teeth on the Boesky scandal, an event he says may have
receded too far into the past to scare the young guns on Wall Street today.

“You are dealing with people who don’t have a recollection of what took
place in that scandal and think they are above the law, that the regulators
don’t have the technology to detect this activity. As evidenced by the
number of recent cases, they are flat- out wrong.”

The rash of cases may be partly attributable to the surge in the number and
the size of deals. Unlike deals in the 1980s, when takeovers were often
hostile, transactions today are usually friendly, which means that there are
two groups of lawyers, bankers and company officials in possession of
valuable inside information, not just one. Deals today are also supersize,
with consortiums of private equity firms lining up seemingly every big bank
on Wall Street to finance the buyout.

At the same time that deals and the number of people involved in deal-making
have increased, the number of hedge funds has surged, with their traders
looking for any competitive edge in information. As a result, the potential,
and temptation, for information to be leaked is substantial.

“Given the incentives and the compensation in the hedge fund industry to
deliver extraordinary returns, there has to be an immense pressure on hedge
fund managers to take every opportunity they can find, even if it means
stepping over the line,” said Donald C. Langevoort, a professor of law at
Georgetown and a former special counsel at the Securities and Exchange
Commission. “That doesn’t mean they all do it, but if you think you won’t be
caught, it’s easy money.”

S.E.C. officials expressed dismay over the number of Wall Street
professionals involved in the cases, from investment bankers and advisers to
lawyers and accountants. “When we see Wall Street professionals engage in
insider trading, it’s particularly reprehensible because we rely on them to
keep the markets fair and clean,” said Peter H. Bresnan, deputy director of
enforcement at the S.E.C. After the insider trading scandals of the 1980s,
Mr. Bresnan said “insider trading moved from Wall Street to Main Street; now
it’s back on Wall Street."

Insider trading cases can originate from tips or from cooperating witnesses.
The S.E.C. generally brings about 45 of them a year. Another important
source consists of referrals from the exchanges. Through April 20, before
the recent flurry, the New York Stock Exchange had referred 45 cases to the
commission, compared with 111 for all of 2006. (Not all those referrals will
result in cases.)

The New York Exchange’s 160-member market surveillance division works in a
warren of cubicles inside the exchange. It resembles any corporate office
except for the widescreen television that lists a table of the active
stocks, along with real-time trading data. Computer systems run specialized
algorithms (co-designed by the Massachusetts Institute of Technology) that
generate alerts when stocks exceed preset trading limits.

It was in that office last fall that Ryan Hickey, a senior special analyst,
noted that the market surveillance system had flagged unusual movement in
the stock of Trammell Crow before the announcement of its acquisition by the
CB Richard Ellis Group. Ms. Hickey then opened a case in the trades,
contacting the brokerage firms that handled the transactions.

The information Ms. Hickey and her team gleaned has since grown into the
investigation of nine deals, including the $45 billion leveraged buyout of
TXU, that regulators say was leaked by the Credit Suisse banker.

Still, it is unclear whether the regulators are even touching the surface.
Technology has improved, allowing authorities to capture conversations on
e-mail and instant messaging that makes it easier to establish that
information has been passed around.

“Historically one of the challenges facing prosecutors is proving that
communication took place between the tipper and the tipee,” said Ron
Geffner, a lawyer at Sadis & Goldberg who previously worked at the S.E.C.
“Advances in technology have helped prosecutors, not hurt them. We now have
records of everything, unless it’s like ‘Goodfellas’ where everyone is
actually meeting to talk.”

But at the same time, information travels at warp speed, financial
instruments are more complex and the trading is showing more savvy.

“The way that people are engaging in insider trading is getting more
sophisticated, derivatives, trading in places that won’t come to us, the
combination of products, the combination of accounts, the use of different
prime brokerage accounts,” said David Steiner, a vice president in market
surveillance at NYSE Regulation. “The more sophisticated it becomes, the
more sophisticated we have to become.”

A case in point is that entities can trade onshore and offshore, in stocks,
derivatives, bonds and even spread betting, where traders can bet on a
percentage increase or decrease in a security without buying it.

Christopher K. Thomas, who founded a firm called MeasuredMarkets to identify
unusual trading patters, says he has not seen a drop in suspicious trading
patterns.

“Nothing so far has shown me that the tendency is decreasing,
notwithstanding all the high-profile cases and the publicity,” he said.

And yet this week alone, regulators seemed to be on a full-court press to
catch offenders. Cooperation, both domestically and internationally, is
helping, say regulators, as well as improvements in technology.

Each of the recent cases has quirky elements of intrigue. Regulators are
examining the “highly suspicious” trading of Dow Jones shares and whether a
Hong Kong couple were tipped off that Rupert Murdoch was making an offer for
the company before it became publicly known. In the Credit Suisse case, the
banker accused of leaking information on deals, made calls from his office,
investigators say.

Two separate Morgan Stanley cases put a new twist on pillow talk. Randi
Collotta, a 30-year-old former lawyer in the compliance department at Morgan
Stanley, fed tips about four deals to her husband who passed them on to a
high school friend. The friend netted $38,000; the Collottas, only $9,000.
(The couple pleaded guilty this week.)

On Thursday, the S.E.C. accused Jennifer Wang, a 31-year-old former analyst
at Morgan Stanley and her husband, Ruben Chen, 34, a former analyst in the
hedge fund group at ING of making more than $600,000 by trading on companies
advised by Morgan Stanley’s real estate subsidiary. Ms. Wang, a Princeton
graduate who was a vice president, and Mr. Chen are accused of trading
through Ms. Wang’s mother’s account. David Spears, a lawyer for the couple,
said on Thursday that they expected to plead not guilty.

But nothing yet would seem to match the audacity of what authorities said
was an insider-trading ring uncovered last year. They say that Eugene
Plotkin, a former fixed-income analyst at Goldman Sachs who graduated from
Harvard, teamed up with another onetime Goldman employee, David Pajcin, to
leak information on deals to various associates, including an aunt in
Croatia who was a former seamstress in an underwear factory. She made $2
million on one trade — setting off alarm bells that ultimately brought the
ring down. (Mr. Plotkin has pleaded not guilty and is awaiting trial; Mr.
Pajcin is cooperating with the government.)

Banks uniformly express outrage at such activity. Employees are trained and
retrained to recognize insider trading and report it. But the temptation is
still there.

“When you consider how complex and far-reaching the global securities
markets are, you see what an enforcement dilemma that provides,” Mr.
Langevoort of Georgetown Law said. “A lot more money needs to be spent on
these problems to not let insider trading be the equivalent of the H.O.V.
lane, where the chance of being caught is pretty remote.”

Michael J. de la Merced contributed reporting.

http://www.nytimes.com/2007/05/12/business/12insider.html?ref=business&pagewanted=print

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2007/05/14 11:01 2007/05/14 11:01

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NYT on Alfred D. Chandler Jr.

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May 12, 2007
Alfred D. Chandler Jr., a Business Historian, Dies at 88
By DOUGLAS MARTIN


Alfred D. Chandler Jr., an economic historian who revolutionized the writing
of business history, shunning the old debate about whether tycoons are good
or bad, and instead arguing persuasively in almost two dozen books that it
was the emergence of professional management that propelled modern
capitalism, died on May 9 in Cambridge, Mass. He was 88.

Jim Aisner, a spokesman for Harvard Business School, where Dr. Chandler had
taught, announced the death.

Fortune Magazine last year called Dr. Chandler “America’s pre-eminent
business historian,” saying that for a long-term perspective on the Fortune
500, the magazine’s ranking of the biggest corporations, “there’s really
only one person to ask.”

Before Dr. Chandler, the bulk of business histories were morality plays that
portrayed executives as heroic or damnable. He helped redirect the field
toward dispassionate analysis of the anatomy of business. He emphasized the
transformative power of technology as railroads and the telegraph spawned
big business. These corporations needed what Mr. Chandler called “a new
subspecies of economic man — the salaried manager.”

The salaried manager represented a new concept: a manager could possess
management expertise independent of the content of what he was managing.
Unlike the traditional entrepreneur, he need have no stake in the company he
managed.

Dr. Chandler developed this theme most famously in “The Visible Hand: The
Managerial Revolution in American Business” (1977), which won the Pulitzer
Prize for history and the Bancroft Prize. His thesis was that managers,
functioning as a “visible hand,” had replaced the “invisible hand” of Adam
Smith’s free market in allocating resources.

This new emphasis on organizational structure so transformed the field of
business history that some call the period before Dr. Chandler’s
publications “B.C.,” meaning before Chandler. Glenn Porter wrote in 1992 in
“The Rise of Big Business, 1860-1920”: “Virtually every work now written on
the history of modern, large-scale enterprise must begin by placing itself
within the Chandlerian analytical framework.”

Dr. Chandler’s work was distinguished by an intellectual rigor he gleaned
from the sociologist Talcott Parsons, one of his professors at Harvard. Dr.
Chandler rigorously compared earlier and later time frames to see what
changed, and, more important, what caused the change. He likened the process
to a controlled scientific experiment.

His conclusions jolted conventional wisdom. For example, he said that
America’s industrial revolution did not start in New England mills, but with
the beginning of large-scale mining of anthracite coal fields in
Pennsylvania in the 1830s and 1840s. This new power source replaced water,
wood and charcoal, facilitating the making of iron and metal products.

Alfred du Pont Chandler Jr. was born in Guyencourt, Del., on Sept. 15, 1918.
Although he was not a blood relation of the du Ponts who founded the
chemical company, his great-grandmother was raised by the du Ponts after her
parents died of yellow fever.

Alfred spent his first five years in Buenos Aires, where his father
represented an American locomotive company. When he was 11, the family moved
back to the United States and settled near Wilmington.

Family lore has it that the boy announced his intention to become a
historian by the time he was 7. He was inspired by Wilbur Fisk Gordy’s book
“An Elementary History of the United States,” a primer for sixth-graders his
father gave him. He read it 19 times.

At Phillips Exeter Academy, he won a prize for excellence in history. In
1940, he graduated magna cum laude from Harvard, where generations of his
family had studied, beginning in the 18th century. During World War II, he
served in the Navy, interpreting intelligence photos.

He enrolled as a graduate student at the University of North Carolina at
Chapel Hill to study Southern regional history. But he became captivated by
sociology, and returned to Harvard to study with Mr. Parsons.

He stumbled on his dissertation topic in old papers on the history of
American railroads written by his great-grandfather, a founder of the
financial-data company that became Standard & Poor’s. The dissertation
became a book, “Henry Varnum Poor: Business Editor, Analyst and Reformer”
(1956).

From 1950 to 1963, Dr. Chandler taught at the Massachusetts Institute of
Technology, where he helped edit the letters of Theodore Roosevelt and wrote
“Strategy and Structure,” which used General Motors, DuPont, Exxon and
Sears, Roebuck to develop his ideas on how companies employ organization
structure to further strategy.

Dr. Chandler taught at Johns Hopkins, where he edited the papers of
President Dwight D. Eisenhower, then joined the faculty of Harvard Business
School from which he retired in 1989. He was editor of the Harvard Studies
in Business History.

He was a visiting professor at Oxford and elsewhere, and president of the
Economic History Association and the Business History Conference. He was a
member of the American Philosophical Society and a fellow of the American
Academy of Arts and Sciences.

Dr. Chandler is survived by his wife, the former Fay Martin; his daughters,
Alpine (Dougie) Chandler Bird, of Annapolis, Md., and Mary (Mimi) Chandler
Watt, of Dina Powys, Wales; his son, Howard, of Maharishi Vedic City, Iowa.;
his sisters Nina Murray, of Bedford, Mass., and Nantucket, and Sophie
Consagra, of Manhattan; five grandchildren and two step-grandchildren; and
one great-grandchild.

Dr. Chandler fancied a glass of sherry with lunch before retiring to write
on yellow-lined paper in small, cramped letters. Though he did not use a
computer, he gave characteristic thought to its impact on economic change.

“All I know is that the commercializing of the Internet is transforming the
world,” he said in an interview with Newsweek last year.

http://www.nytimes.com/2007/05/12/business/12chandler.html?pagewanted=print

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2007/05/14 11:00 2007/05/14 11:00

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The New Yorker Article on Intellectual Property Rights

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The New Yorker
Free trade is supposed to be a win-win situation. You sell me your televisions, I sell you my software, and we both prosper. In practice, free-trade agreements are messier than that. Since all industries crave foreign markets to expand into but fear foreign competitors encroaching on their home turf, they lobby their governments to tilt the rules in their favor. Usually, this involves manipulating tariffs and quotas. But, of late, a troubling twist in the game has become more common, as countries use free-trade agreements to rewrite the laws of their trading partners. And the country that is doing this most aggressively is the United States.

Our recent free-trade agreement with South Korea is a good example. Most of the deal is concerned with lowering tariffs, opening markets to competition, and the like, but an important chunk has nothing to do with free trade at all. Instead, it requires South Korea to rewrite its rules on intellectual property, or I.P.—the rules that deal with patents, copyright, and so on. South Korea will now have to adopt the U.S. and E.U. definition of copyright—extending it to seventy years after the death of the author. South Korea will also have to change its rules on patents, and may have to change its national-health-care policy of reimbursing patients only for certain drugs. All these changes will give current patent and copyright holders stronger protection for longer. Recent free-trade agreements with Peru and Colombia insisted on much the same terms. And CAFTA—a free-trade agreement with countries in Central America and the Caribbean—included not just longer copyright and trademark protection but also a dramatic revision in those countries’ patent policies.

Why does the U.S. insist on these rules? Quite simply, American drug, software, and media companies are furious about the pirating of their products, and are eager to extend the monopolies that their patents and copyrights confer. These companies are the main advocates for such rules, and the big winners. The losers are often the citizens in developing countries, who find themselves subject to a Draconian I.P. regime that reduces access to new technologies.

Intellectual-property rules are clearly necessary to spur innovation: if every invention could be stolen, or every new drug immediately copied, few people would invest in innovation. But too much protection can strangle competition and can limit what economists call “incremental innovation”— innovations that build, in some way, on others. It also encourages companies to use patents as tools to keep competitors from entering new markets. Finally, it limits consumers’ access to valuable new products: without patents, we wouldn’t have many new drugs, but patents also drive prices of new drugs too high for many people in developing countries. The trick is to find the right balance, insuring that entrepreneurs and inventors get sufficient rewards while also maximizing the well-being of consumers.

History suggests that after a certain point tougher I.P. rules yield diminishing returns. Josh Lerner, a professor at Harvard Business School, looked at a hundred and fifty years of patenting, and found that strengthening patent laws had little effect on the number of innovations within a country. And, in the U.S., stronger patent protections for things like software have had little or no effect on the amount of innovation in the field. The benefits of stronger I.P. protection are even less convincing when it comes to copyright: there’s little evidence that writers and artists are made more productive or creative by the prospect of earning profits for seventy years after they die, and the historical record suggests only a tenuous connection between stronger I.P. laws and creative output.

The U.S., in its negotiations, insists on a one-size-fits-all approach: stronger rules are better. But accepting a diverse range of I.P. rules makes more sense, especially in light of the different economic challenges that developing and developed countries face. Lerner’s study found that the benefits of stronger patent laws were reduced in less developed countries. And developing countries, being poorer, obviously have more to gain from shorter patent terms for foreign innovations, since that facilitates the spread of new technology and the diffusion of ideas. Tellingly, this is the approach the U.S. takes when it comes to labor standards, arguing that we shouldn’t impose developed-country standards on developing countries. But in the case of intellectual property the government’s position is exactly the opposite. The only difference, it seems, is whose interests are at stake.

The great irony is that the U.S. economy in its early years was built in large part on a lax attitude toward intellectual-property rights and enforcement. As the historian Doron Ben-Atar shows in his book “Trade Secrets,” the Founders believed that a strict attitude toward patents and copyright would limit domestic innovation and make it harder for the U.S. to expand its industrial base. American law did not protect the rights of foreign inventors or writers, and Secretary of the Treasury Alexander Hamilton, in his famous “Report on Manufactures,” of 1791, actively advocated the theft of technology and the luring of skilled workers from foreign countries. Among the beneficiaries of this was the American textile industry, which flourished thanks to pirated technology. Free-trade agreements that export our own restrictive I.P. laws may make the world safe for Pfizer, Microsoft, and Disney, but they don’t deserve the name free trade.

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2007/05/09 12:37 2007/05/09 12:37

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