World News 02 15 2010

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</td> <td valign="top" height=390 width="100%" BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <I><B>World News 02 15 2010</B></I></div> <DIV ALIGN="LEFT"></DIV> <div> <B>World News Headlines Monday February 15 2010</B></div> <div> 52nd running of the Daytona 500</div> <div> Jamie McMurray held off Dale Earnhardt Jr. to win the Daytona 500</div> <div> Jamie McMurray overcame numerous wrecks and a pair of delays that totalled well over two hours to win Sunday's Daytona 500</div> <div> <TABLE BORDER="2" CELLPADDING="10" CELLSPACING="4" WIDTH="797" BORDERCOLORLIGHT="#BF0000" BORDERCOLORDARK="#0000FF" FRAME="BOX" RULES="ALL" HSPACE="0" VSPACE="0" BGCOLOR=#EEEEEE > <tR> <tD VALIGN=TOP HEIGHT= 4109 WIDTH="330"><div> <A HREF="http://www.nytimes.com/" TARGET="_top" TITLE="http://www.nytimes.com/"><IMG SRC="101498170.gif" border=0 width="152" height="23" ALT="CLICK HERE for full Story by NY TIMES" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></A></div> <div> <B>Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis</B></div> <div> By <FONT SIZE="1" COLOR="#0000FF" FACE="Arial" >LOUISE STORY</FONT>, <FONT SIZE="1" COLOR="#0000FF" FACE="Arial" >LANDON THOMAS Jr. </FONT>and <FONT SIZE="1" COLOR="#0000FF" FACE="Arial" >NELSON D. SCHWARTZ</FONT> Published: February 13, 2010</div> <div> Culled from the <A HREF="http://www.nytimes.com/" TARGET="_top" TITLE="http://www.nytimes.com/">NY Times</A></div> <bR> <div> As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits.</div> <bR> <div> One deal created by <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >Goldman Sachs</FONT> helped obscure billions in debt from the budget overseers in Brussels.</div> <bR> <div> Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.</div> <bR> <div> The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have <I><B>pushed debt from Greece’s health care system far into the future</B></I>, <FONT SIZE="2" COLOR="#0033FF" FACE="Arial" ><B>much as when </B></FONT><FONT SIZE="2" COLOR="#0033FF" FACE="Arial" ><B>strapped homeowners take out second mortgages to pay off</B></FONT><FONT SIZE="2" COLOR="#0033FF" FACE="Arial" ><B> their credit cards.</B></FONT></div> <bR> <div> It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said.</div> <bR> <div> That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.</div> <bR> <div> Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.</div> <bR> <div> As in the American subprime crisis and the implosion of the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >American International Group</FONT>, financial derivatives played a role in the run-up of Greek debt.</div> <bR> <div> Instruments developed by Goldman Sachs, <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >JPMorgan Chase</FONT> and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.</div> <bR> <div> In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.</div> <bR> <div> Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.</div> <bR> <div> Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.</div> <bR> <div> The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.</div> <bR> <div> A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.</div> <bR> <div> While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.</div> <bR> <div> “Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.</div> <bR> <div> Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal.</div> <bR> <div> Few rules govern how nations can borrow the money they need for expenses like the military and health care.</div> <bR> <div> The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.</div> <bR> <div> “If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >International Monetary Fund</FONT>’s capital markets surveillance unit, which monitors vulnerability in global capital markets.</div> <bR> <div> Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments.</div> <bR> <div> While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.</div> <div> <IMG SRC="102abe7c0.jpg" border=0 width="190" height="124" ALIGN="LEFT" HSPACE="6" VSPACE="0">Chris Ratcliffe/Bloomberg News </div> <div> Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.</div> <bR> <div> Such derivatives, which are not openly documented or disclosed, add to the uncertainty over how deep the troubles go in Greece and which other governments might have used similar off-balance sheet accounting.</div> <bR> <div> The tide of fear is now washing over other economically troubled countries on the periphery of Europe, making it more expensive for Italy, Spain and Portugal to borrow.</div> <bR> <div> For all the benefits of uniting Europe with one currency, the birth of the euro came with an original sin: countries like Italy and Greece entered the monetary union with bigger deficits than the ones permitted under the treaty that created the currency. Rather than raise taxes or reduce spending, however, these governments artificially reduced their deficits with derivatives.</div> <bR> <div> Derivatives do not have to be sinister. The 2001 transaction involved a type of derivative known as a swap. One such instrument, called an interest-rate swap, can help companies and countries cope with swings in their borrowing costs by exchanging fixed-rate payments for floating-rate ones, or vice versa. Another kind, a currency swap, can minimize the impact of volatile foreign exchange rates.</div> <bR> <div> But with the help of JPMorgan, Italy was able to do more than that. Despite persistently high deficits, a 1996 derivative helped bring Italy’s budget into line by swapping currency with JPMorgan at a favorable exchange rate, effectively putting more money in the government’s hands. In return, Italy committed to future payments that were not booked as liabilities.</div> <bR> <div> “Derivatives are a very useful instrument,” said Gustavo Piga, an economics professor who wrote a report for the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >Council on Foreign Relations</FONT> on the Italian transaction. “They just become bad if they’re used to window-dress accounts.”</div> <bR> <div> In Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money.</div> <bR> <div> Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics</div> <bR> <div> These kinds of deals have been controversial within government circles for years. As far back as 2000, European finance ministers fiercely debated whether derivative deals used for creative accounting should be disclosed.</div> <bR> <div> The answer was no. But in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales.</div> <div> Still, as recently as 2008, Eurostat, the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >European Union</FONT>’s statistics agency, reported that “in a number of instances, the observed securitization operations seem to have been purportedly designed to achieve a given accounting result, irrespective of the economic merit of the operation.”</div> <bR> <div> While such accounting gimmicks may be beneficial in the short run, over time they can prove disastrous. </div> <div> George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005.</div> <bR> <div> The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.</div> <div> Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.</div> <bR> <div> In 2005, Goldman sold the interest rate swap to the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >National Bank of Greece</FONT>, the country’s largest bank, according to two people briefed on the transaction.</div> <bR> <div> In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >European Central Bank</FONT>.</div> <bR> <div> Edward Manchester, a senior vice president at the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >Moody’s</FONT> credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.</div> <bR> <div> Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”</div> </tD> <tD VALIGN=TOP WIDTH="407"><div> <B>If you thought the last market crash was devastating, just wait...</B></div> <div> <B>History is about to repeat itself --</B></div> <div> <B>and it could cost you a fortune!</B></div> <bR> <div> This time last year, financial experts were calling for the second Great Depression... the market was plunging to its lowest level in over a decade... and panicked investors were dumping stocks as fast as they could.</div> <bR> <div> Since then, we've witnessed an unprecedented market rebound and seen investors just like you not only fully recover, but actually build small fortunes -- simply by keeping their heads and making a few prudent decisions.</div> <bR> <div> But now, with historic unemployment rates, a ballooning federal deficit, and mounting foreign debt fears, the "experts" on Wall Street are forecasting a market crash that could make the last one pale in comparison...</div> <bR> <div> <B>"I see the potential for a 25 to 50 percent drop." </B></div> <div> -- Dan Deighen, Deighen Financial Advisers</div> <div> <B>"40% - 50% chance stocks will crash to new low."</B></div> <div> -- Gary Schilling, A. Gary Schilling & Co.</div> <div> Meaning you've got some very important decisions to make -- before it's <I>too late</I>.</div> <bR> <div> Several days ago, Mark Arbeter -- chief technical strategist at Standard & Poor's -- told <I>The Wall Street Journal </I>that "a major pullback has begun." Meaning this might be your last chance to...</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="102c7fae0.gif" border=0 width="383" height="174" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <div> This isn't the first time I've sent investors like you a warning like this...</div> <div> In fact, the last time I did was in October 2007...</div> <bR> <div> Just before the housing bubble burst... greedy Wall Street firms like Bear Sterns and Lehman Brothers began dropping like flies...</div> <bR> <div> and the stock market went into an all-out death spiral that wiped out TRILLIONS in personal wealth.</div> <bR> <div> Now -- after an unprecedented market rebound and a remarkable surge in investor confidence -- we're right back in the same boat all over again.</div> <bR> <div> But unlike all the doom and gloomers in the financial media, I'm NOT writing to warn you about another market crash...</div> <bR> <div> Instead, I am writing to clue you into the REAL THREAT facing investors like you right now...</div> <bR> <div> <B>Dollar for dollar, it's 10 times deadlier than the nastiest market crash any forecaster can predict</B>... </div> <bR> <div> And it could wreak more havoc on your personal net worth than the worst financial crisis or "bear market" imaginable. I know this, because I've seen it happen with my own eyes...</div> <bR> <div> The worst market crash since the Great Depression Back in 1987.</div> <bR> <div> A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed</div> <bR> <div> Gordon Brown can be blamed for many things, but he deserves our gratitude for at least one: keeping the UK out of the euro.</div> <bR> <div> The financial crisis has laid bare the structural weakness of the eurozone: it is one currency, but 16 different fiscal regimes, ranging from German rectitude to Greek recklessness.</div> <bR> <div> Currency union without political union, and without a budgetary mechanism to move resources from richer to poorer areas, was always a recipe for tension, as opponents of the UK joining the single currency have long pointed out.</div> <bR> <div> As it is, Britain may be pulled into the crisis indirectly if the International Monetary Fund<FONT SIZE="2" COLOR="#0000FF" FACE="Arial" > is brought in</FONT> (and it probably should be, as reforms may be more palatable coming from it than being imposed from Berlin), but we are not on the front line of a rescue package like the Germans and the French.</div> <bR> <div> The prospect of prolonged economic malaise in Europe's most debt-laden countries could undercut the continent's economy as a whole and linger for years, economists warn, even if European officials manage to solve Greece's immediate funding crisis.</div> <bR> <div> When a nation's debt rises to more than 90% of its annual economic output, as has happened in Greece, economic-growth rates are reduced on average by about one percentage point a year, according to research by Ms. Reinhart and Kenneth Rogoff of Harvard University.</div> <div>  </div> <div> In the wake of financial crises, tax revenues tend to shrink and expenditures soar as governments try to cushion the blow.</div> <bR> <div> "If [investors] start to think about medium-term prospects for the economy and level of debt, perhaps concerns could spread to Italy and Belgium," which both have high debt as a share of gross domestic product</div> <bR> <div> Even France is on the "edge" of the radar screen, the firm cautions, because it borrowed more as a share of its economy than any country in Europe except Spain, Greece and Ireland.</div> <bR> <div> A big chunk of France's outstanding debt matures this year.</div> <bR> <div> Sovereign-debt crises aren't new to international finance.</div> <bR> <div> The global economy weathered them in Russia, Mexico and Asia during the 1990s and in the last decade saw Argentina default.</div> <bR> <div> European Central Bank President Jean-Claude Trichet, who has worked on dozens of national debt crises, said that what distinguishes the current situation is that it "started at the heart of the financial markets of the West," and not in emerging markets.</div> <bR> <div> "This first real stress test of global finance has demonstrated a fragility that is absolutely unacceptable," he added.</div> <bR> <div> The nations most at risk in Europe still are countries such as Greece (expected by the European Commission to reach a debt-to-GDP ratio of 120% this year), Ireland and Portugal.</div> <bR> <div> These countries aren't outliers.</div> <bR> <div> Some of the world's largest economies, including the U.S., U.K. and Japan, are already above the 90% mark or will be soon, suggesting the economic drag from sovereign indebtedness will be global.</div> <bR> <div> For now, investors appear confident that the sheer power of these countries and their central banks' autonomy will enable them to escape the debt trap.</div> <bR> <div> Most central banks can, in a pinch, print money and buy government debt—something the ECB can't do</div> <bR> <div> Debt ratios will rise throughout Europe this year and next, analysts say, as a weak recovery and absence of inflation drain government tax revenues while spending on unemployment and other benefits remains high.</div> <bR> <div> Greek Prime Minister George Papandreou said the European Union could do more to stand by his country amid a budget crisis that threatens EU political unity and budget rules.</div> <bR> <div> "In the battle against the perceptions and the psychology of the markets, the EU was timid, at the least," Papandreou said Saturday.</div> <bR> <div> "Greece is neither a political nor an economic superpower to go it alone in this battle," he said, two days after EU leaders declined specific promises of action for the country.</div> <bR> <div> The European Union called on Greece Thursday to do whatever is necessary to reduce its skyrocketing budget deficit and agreed on an approach to help the country.</div> <bR> <div> New EU President Herman Van Rompuy did not announce a deal to rescue Greece but said European countries would be prepared to step in if needed.</div> <bR> <div> He said the European Commission, the executive body of the European Union, will monitor Greece's progress together with the European Central Bank, and will propose additional measures as needed.</div> <div> The first European assessment of Greece's progress will be conducted next month</div> <bR> <div> Around Europe, 27 nations now fly the flag of the <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >European Union</FONT> next to their own. Sixteen have ditched the drachmas, marks and other bills that symbolized their sovereignty to embrace a single currency, the euro, lending new power to their economic and trade bloc.</div> <bR> <div> All that is now being called into question, however, as European leaders struggle to prevent ruinous spending by <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" >Greece</FONT> from spiraling into a wider crisis or even breaking up the euro union.</div> <bR> <div> How they handle this problem could either propel Europe to greater economic and political clout in the decades ahead, or downgrade it to a sideshow in a global economic theater directed by China and the United States.</div> <bR> <div> For the moment, things don’t look comforting for the euro.</div> <bR> <div> As the troubles in Greece drove the currency ever lower against the dollar last week, Europe’s politicians did what everyone has by now come to expect: they talked about a bailout for Greece, then talked some more about the need to take “coordinated action.” </div> <bR> <div> Yet details of a rescue plan were put off to a future date. No mention was made of how they would prevent Portugal, Spain or other deficit-saddled economies from falling like dominoes.</div> <bR> <div> And questions about who would pay for any future blowups were answered with silence.</div> <bR> <div> “Now is the time when Europe needs to speak as one voice,” said Simon Tilford, chief economist at the Center for European Reform in London. “The crisis should lead to political unity, but it could just as easily lead to a divided Europe.” </div> <bR> <div> When the dust settles, Europe will probably still be a union with separate national parliaments and fiscal policies</div> <bR> <div> But if the politicians fail, Hugo’s vision of a <I><B>United States of Europe</B></I> would become more clouded, and Europe’s economic weight in the world would decline.</div> </tD> </tR> </TABLE></div> <div> <B>on the WWW</B></div> <div> <A HREF="http://news.cnet.com/8301-13846_3-10453426-62.html?part=rss&subj=news&tag=2547-1_3-0-20" TARGET="_top" TITLE="http://news.cnet.com/8301-13846_3-104534">Linux and Windows heat up mobile market</A></div> <bR> <div> <A HREF="http://feeds.wired.com/~r/wired/index/~3/4_AC-oJp1ZQ/microsoft-phone" TARGET="_top" TITLE="http://feeds.wired.com/~r/wired/index/~3">Microsoft Announces New Mobile OS</A></div> <bR> <div> <A HREF="http://reviews.cnet.com/8301-13970_7-10453467-78.html?part=rss&subj=news&tag=2547-1_3-0-20" TARGET="_top" TITLE="http://reviews.cnet.com/8301-13970_7-104">Ballmer banks on Windows Phone 7 for the future</A></div> <bR> <div> <A HREF="http://feeds.wired.com/~r/wired/index/~3/9cKc4raDnfs/" TARGET="_top" TITLE="http://feeds.wired.com/~r/wired/index/~3">Ski Techs Turn Fluorocarbon to Gold</A></div> <bR> <div> <A HREF="http://feeds.nytimes.com/click.phdo?i=ca9b7debe4fc350eb2190f1c0ec920d4" TARGET="_top" TITLE="http://feeds.nytimes.com/click.phdo?i=ca">Clinton Raises U.S. Concerns of Military Power in Iran</A></div> <bR> <div> <IMG SRC="102d994e0.jpg" border=0 width="665" height="334" ALT="Jamie McMurray 1" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> <B>Mac daddy of the Daytona 500</B></div> <div> Reunited with Chip Ganassi -- now at Earnhardt Ganassi Racing -- Jamie McMurray held off a last-lap charge from Dale Earnhardt Jr. to win the Great American Race.</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="102e915d0.jpg" border=0 width="145" height="93" ALT="Jamie McMurray thm" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Reunited with Chip Ganassi -- now at Earnhardt Ganassi Racing -- Jamie McMurray held off a last-lap charge from Dale Earnhardt Jr. to win the Great American Race.</div> <div> Victory Lane: An emotional celebration</div> <div> A teary-eyed Jamie McMurray talks about his road back from limbo to win Cup's biggest race.</div> <div> <A HREF="http://www.nascar.com/" TARGET="_top" TITLE="http://www.nascar.com/">CLICK HERE FOR FULL STORY >>></A></div> <bR> <div> OR SEE ON THE  www</div> <div> <A HREF="http://www.nascar.com/video/cup/2010/post_race/victory_lane/02/14/cup_day_winner.nascar/" TARGET="_top" TITLE="http://www.nascar.com/video/cup/2010/pos">Victory Lane- An emotional celebration</A></div> <bR> <DIV ALIGN="LEFT"></DIV> <div> This web site information was culled from several sources by RadioZX from around the World including The New York Times</div> <div> <A HREF="http://www.nytimes.com/indexes/2010/02/10/todayspaper/index.html" TARGET="_top" TITLE="http://www.nytimes.com/indexes/2010/02/1"><IMG SRC="101498170.gif" border=0 width="152" height="23" ALT="CLICK HERE for full Story by NY TIMES" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></A></div> <bR> </td> </tr></table></body>